The shares of LendingClub (NYSE: LC), an online lender and nascent digital bank, have been surging recently.
Last week, LendingClub reported an adjusted net loss of $(22.1) million in the fourth quarter, compared to an adjusted net income of $7.0 million the same quarter last year. Online lending has been hampered by the ongoing COVID-19 health crisis. LendingClub did discuss its vision of its shift to a digital bank or a “marketplace bank.” At the end of last year, LendingClub learned that its acquisition of Radius Bank had gained regulatory approval and thus the Fintech can now operate as a nationally chartered digital bank. Importantly, by having access to deposits, LendingClub’s cost of borrowing should drop dramatically making its lending operations more viable.
Since its earnings report, shares in LendingClub have been hitting new 52 week highs. Today, LendingClub is bouncing around $20 a share. At the beginning of the year, LendingClub was trading at half that price.
While the push into digital banking certainly helps the story of the Fintech more than likely it is institutional money that sees opportunity in an undervalued stock.
Cathie Wood, of ARK Invest, has been a buyer of LendingClub shares. Other institutional firms like Morgan Stanley are doing the same.
Digital banking has emerged as a hot sector of Fintech as banking transitions from brick and mortar outposts to the new and improved bank app on your iPhone. Some industry observers see incumbent banks as being slow to innovate and saddled with expensive branches and affiliated employees. This means digital banks may have an advantage.
Additionally, LendingClub Bank is now one of just a handful of Fintechs that hold a national bank charter. While expectations are for LendingClub to offer a host of new features and services the competition is queuing up to be intense. Only time will tell if LendingClub will become a successful digital bank but it appears that Cathie Wood believes this will be the case.