LendingClub’s Renaissance: A Fintech Comedy of Cautious Virtue and Cheap Valuations

by

It is a truth, rarely acknowledged but usually lamented in polite society, that the trajectory of fintech shares often resembles a drunken waltz: dizzied by the exhilarations of post-pandemic inflation, staggered by the inelegance of regional banking calamities, and finally left clutching the wall as “Liberation Day” tariffs enter the ball. Many of their number, worn thin by successive lending crises, have executed unlamented exits. The survivors, however—LendingClub among the most urbane and calculating—may be forgiven for eyeing the punch bowl with renewed interest.

Consider the most recent spectacle: the price of LendingClub (LC) soared 21.5% in a single week, as though startled awake by the prospect of fortune after so long pretending to be dead. The ordinary observer might cry “miracle!”—but in the market, as in society, miracles tend to be the fruit of exquisite preparation undertaken while feigning indifference to vulgar circumstance. Here, management, that most unglamorous of virtues, proved itself the neglected mother of success.

Thus, let us attend to the idea that the long dusk for LendingClub is giving way, not with a noisy crash but with a refined and subtle gleam, to an upcycle as captivating as any Wildean soirée.

Loading widget...

LendingClub’s Learned Avoidance of Folly

One can scarcely improve upon Warren Buffett’s observation that banking is an excellent business, provided it is not managed with a preference for heroic failure. It is a maxim to which LendingClub clung with the tenacity of a social climber at a Mayfair ball.

As a purveyor of personal loans, LendingClub’s fortunes have always fluttered on the breeze of economic fashion and interest-rate intrigue. The acquisition of Radius Bank in 2021 furnished it with a balance sheet and—more importantly—deposits with which to amuse itself. Yet in matters of business as in Life, it is not what one has but what one does with it that counts.

When the lending party ended and buyers of loans departed in the dark, most would have scrambled for fresh capital with unbecoming haste, diluting shareholders like an over-watered cocktail. Instead, LendingClub developed a taste for asceticism, focusing on credit discipline and the restraint of costs. Like a Victorian matron renouncing excessive ornament, LendingClub forsook high-cost marketing, lavished its favors upon loyal (and, crucially, creditworthy) patrons, and traded vulgar expansion for elegant selectivity. The result was a period of declining originations and dour earnings, but such things are the amusements of shortsighted men.

Now, as the chill of inflationary rates succumbs to a more temperate climate, LendingClub finds itself the unexpected darling of the season, collecting the scattered rose petals of its delayed gratification.

Return of the Prodigal Results

Having retired into a financial slumber in mid-2022—neither hibernation nor death, merely the market’s equivalent of a society hostess’ temporary withdrawal—LendingClub stirs with remarkable vigor in the second quarter of 2025. What follows is a tableau of figures fit to rouse even the most languid investor from ennui:

Metric Q2 2025 Growth Q/Q Growth Y/Y
Originations $2,391 million 20.2% 31.9%
Revenue $248.4 million 14.1% 32.7%
Pre-provision net revenue $93.7 million 26.9% 70.4%
Diluted earnings per share $0.33 230% 153.8%
Return on Tangible Common Equity 11.8% 218.9% 131.4%

Let us not feign surprise. These results, outpacing expectations by a chasm, suggest that management’s monastic self-denial during leaner periods has left it handsomely compensated in the banquet of recovery. The leap in return on tangible equity—from 3.7% to 11.8% in a single quarter—would be audacious if it were not so elegantly executed. Those to whom management seemed priggish in caution now find it riotous in reward.

Behind every triumph stands the specter of discipline. Demand has returned from both borrowers and loan buyers—reluctant guests, perhaps, but enticed by LendingClub’s improved credit. Recoveries on older, wayward loans have exceeded expectation, and the new vintages are, so far, as unblemished as a debutante at her first ball.

Even the notoriously cautious finance team, that convent of risk-averse analysts, dares now to forecast quarterly loan originations ascending to $2.5–$2.6 billion. Where Q4s are customarily a season of declining gaiety, there is talk—sotto voce, but with unmistakable intent—of continued growth through the year’s end.

A Paean to Credit

If credit is the soul of banking, LendingClub has steered by the starlight of good credit while its peers stumbled in pursuit of gaudier illuminations. During the tempest, its focus on prudent borrowers courted revenue and minimized the vulgarity of provisions. Now, the return of outside loan buyers is not so much a surprise as an inevitability; good manners inspire invitations.

Noteworthy is the company’s recent entanglement with the most eligible of partners: Blue Owl Capital Management (with $273 billion in assets, an eligible bachelor if there ever was one), and the supreme arbiter of taste, BlackRock, whose $10 trillion in assets make it the Belgravian aristocrat of asset managers. LendingClub’s $3.4 billion agreement for Structured LendingClub Loan Certificates (SLCLCs) with Blue Owl, and its inaugural transaction with BlackRock, represent not mere transactions but social endorsements of the highest order.

To have such blue-chip connoisseurs lining up for one’s paper is not just validation; it is a triumph of propriety and good breeding over vulgar opportunism.

The Splendidly Unfashionable Size of the Opportunity

While the past quarter’s performance sparkles, we must remember that LendingClub has only now begun to re-engage the higher-cost marketing channels it once shunned. The courtesan returning to society requires time to master the latest dances; so too does LendingClub position itself, tentatively yet with design, in direct mail and other such expeditions.

Marketing spend rose 15%—but, in a flourish worthy of any spendthrift with a trust fund, the efficiency ratio fell nearly four percentage points to 62.3%. This is the paradox of discipline: to invest extravagantly in possibility, while pinching pennies in practice.

The total addressable market is a colossus: $1.3 trillion in U.S. revolving consumer debt, set against LendingClub’s own modest portfolio of $12.5 billion—a mere scented calling card at the door of opportunity.

Bargain or Masterpiece?

Despite the share’s recent acrobatics, LendingClub still languishes nearly 65% beneath its 2021 highs, and commands only 1.27 times book value. To call this a bank would be accurate; but to speak of it as a drowsy lender eking out 12% equity returns would be to miss the point entirely. ROTCE is swelling, with each fresh loan promising equity returns in the decadent range of 25–30%, and the addressable market beckons with Florentine generosity.

In such a setting, the valuation is not merely cheap; it is positively gauche. To see value unrewarded in a normal market is rare; in an almost-normal one, it is unforgivable. But then, as every Wildean analyst knows, “Only the exceedingly prudent can afford the luxury of wit—or of discount valuations.”
📈

Read More

2025-08-05 10:37