LendingClub buys Radius Bank for $ 185 million

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NEW YORK (Reuters) – LendingClub Corp on Tuesday agreed to buy U.S. digital lender Radius Bank in a $ 185 million cash and stock deal as it seeks access to a source cheaper financing and to offer a wider range of banking services.

FILE PHOTO: A Lending Club banner hangs on the facade of the New York Stock Exchange in New York, New York, United States, December 11, 2014. REUTERS / Brendan McDermid / File Photo

The San Francisco-based online lender, which previously revealed it was seeking a national banking charter, said the acquisition will allow it to diversify its revenue streams and improve its resilience.

Boston-based Radius has more than $ 1.4 billion in assets and offers online checking and savings accounts.

“It’s a no-brainer,” LendingCorp chief executive Scott Sanborn said in an interview. “Adding the capabilities of a banking charter to the LendingClub mix is ​​a real game-changer, both in terms of what we can do for our clients and what we can do for shareholders. “

The deal, which marks the first time a U.S. fintech company has bought a bank, requires approval from U.S. federal banking regulators, but LendingClub believes the process will be faster than applying for a new banking charter, said the leaders.

The company has been in talks with regulators for more than a year and expects the approval process to take 12 to 15 months, Sanborn said on a call with analysts.

LendingClub is known as a pioneer in peer-to-peer lending, a model that connects consumers looking for loans online with individuals or institutional investors such as banks.

Unlike banks, which tend to have less expensive and more stable deposits, online lenders rely on market funding which can be harder to find in times of stress and more expensive.

LendingClub said the deal would save it $ 40 million a year in bank charges and financing fees.

Like many of its peers, over the past few years LendingClub has faced questions from investors about its ability to grow rapidly while keeping the quality of its loans under control. Its shares have fallen more than 88% in the past five years.

The acquisition comes as other fintech companies, such as payment processor Square Inc, seek domestic banking licenses, a lengthy and cumbersome process. Online banking start-up Varo Money said last week it had obtained approval from the Federal Deposit Insurance Corporation, the latest step in a multi-year effort.

LendingClub’s deal will allow the company to offer checking accounts, making it the latest fintech to enter online banking. The company believes it will be better positioned than its competitors because it already has an established consumer credit franchise, Sanborn said.

Separately, the online lender reported better-than-expected fourth quarter profit on higher loan origination.

LendingClub is forecasting revenues of $ 790-820 million for 2020, lower than the analysts’ average estimate of $ 869.6 million. The company said it expects to post adjusted net income of $ 17 million to $ 37 million for the year, the midpoint of which is below expectations of $ 34.5 million.

LendingClub shares were down 1.4% in after-hours trading.

Reporting by Anna Irrera in New York and Abhishek Manikandan in Bengaluru; Editing by Shailesh Kuber and Christopher Cushing


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