LendingClub posts smaller-than-expected loss, shares soar

Online lending platform operator LendingClub Corp reported a smaller-than-expected loss and said an investor had agreed to buy $1.3 billion in loans, sending its shares soaring as much as 20 percent.

The company, which matches borrowers and lenders via an online marketplace, had been struggling to bring banks back to its platform following revelations of lending improprieties, the ouster of founder and ex-CEO Renaud Laplanche and a U.S. Department of Justice probe.

"Virtually all our bank partners are back," CEO Scott Sanborn said on a call on Monday.

National Bank of Canada will invest $1.3 billion to buy loans on the company's platform through its U.S. unit Credigy over the next 12 months, LendingClub said.

Banks accounted for 15 percent of origination volumes in September, Sanborn said, adding that LendingClub aimed to raise that ratio to 25 percent in the fourth quarter.

"We actively re-engaged with investors of all types to deliver on our plan and enable $2 billion in loan originations," Sanborn said.

LendingClub reported a net loss of $36.5 million, or 9 cents per share for the quarter. Excluding items, it lost 4 cents per share, compared with analysts' average estimate of a loss of 7 cents, according to Thomson Reuters I/B/E/S.

The results showed LendingClub's progress in revitalizing its business despite investor skepticism about its ability to rebound from the scandal, BTIG analyst Mark Palmer wrote in a note.

NOT OUT OF THE WOODS

Loan originations, a key metric indicating the volume of loans processed, fell 11.8 percent to $1.97 billion in the third quarter ended Sept. 30.

LendingClub raised interest rates for some of its loans this year and tightened its credit policy, resulting in some high-risk borrowers being denied loans.

It seems like LendingClub is being proactive and maintaining the ability to predict credit losses, but it's hard to say if this is enough, KBW analyst Jefferson Harralson told Reuters.

"I don't think they're out of the woods just yet."

The company's operating expenses jumped by nearly a third to $151.25 million.

Net revenue fell 1.5 percent to $114.56 million, beating estimates of $103.65 million.

LendingClub said it expected a fourth-quarter net loss of $38 million-$48 million. That compares with a profit of $4.57 million a year earlier.

The company's shares were up 18.6 percent at $6.08 in afternoon trading. Up to Friday's close of $5.13, LendingClub's stock had fallen 53.6 percent this year.

(Reporting by Sweta Singh and Richa Naidu in Bengaluru; Editing by Martina D'Couto, Sai Sachin Ravikumar and Shounak Dasgupta)