LendingClub (NYSE:LC), one of a handful of pure-play digital banks, saw its shares hit a new 52-week high yesterday before retreating towards the end of the day following its Q3 earnings announcement. Shares are trading higher again in early morning trading.
LendingClub has undergone a challenging period of transformation as it migrated from being a marketplace lender (before that, a P2P lender) to a lending-focused, federally chartered digital bank that arrived on the scene during a difficult economy. The Fintech may have turned the corner after delivering multiple quarters of growth and positive earnings.
Yesterday’s results saw the analyst at Piper Sandler reiterate an overweight rating on LendingClub while bumping up its price target to $15 from $13/share.
Jefferies, Compass Point, Keefe and Bruyette, each have a buy rating, and the consensus price target has been reported at $14.29.
So, what does LendingClub need to do to drive share prices higher? The obvious is ongoing improvements to performance, both on the top and bottom lines. The less obvious is improving the various services offered by the digital bank.
It has been widely reported that legacy banks continue to shutter brick-and-mortar operations as they seek to cut costs and lower headcount. Nobody wants to visit a bank anymore – much as incumbents try to make it more appealing – standing in line for the next teller is not that exciting. At the same time, old banks are trying to hold onto high fees and hidden charges that will eventually disappear. Multiple old banks still have ridiculous savings rates that are simply too low to ignore. Additionally, services tend to be anemic at old banks. Mostly, they are glorified ATMs. The banking world has changed.
We don’t need a bank in the center of downtown, we need a financial service firm that caters to our individual needs driving value by more for less all on our iPhone. This is where LendingBank can shine. They just need to do it by providing more services that appeal to the youth and a growing number of old people – some Millennials are now in their forties (along with boomers and, yes, Gen Xers) who see value beyond payments, savings, and credit. Think crypto, travel-related, brokerage, insurance, etc. Neobanks (banks like Fintechs that partner with chartered banks) are already offering these services. More features and functionality are the path to generating more excitement for the bank, as well as higher earnings. More excitement can drive a higher multiple for LendingClub shares – something its shareholders would welcome.
