The Peer-to-Peer Loan Industry Has Been Getting Slammed
By Tracy Alloway for Bloomberg.com
So far, 2016 has not been a good year for peer-to-peer, or marketplace, lenders.
Shares of LendingTree, an online market for mortgages and other loans, were wilting on Wednesday, falling as much as 27.8 percent following a management presentation at a conference. Just yesterday, the company announced it would exceed its previous guidance for the fourth quarter and full year of 2015, with revenue forecast to inch up to $253.5 million, compared with a previous forecast of $252.5 million.
The company told Bloomberg News it was unaware of any reason behind the decline. SunTrust analyst Robert Peck had more salient theories about the fall, citing concerns about the impact of rising interest rates, slowing mortgage origination, and “robustness” in personal lending, but he then went on to say that all those worries appear to be unfounded.
Doubts regarding the longevity of some “P2P” players’ business models have been around for a while, with many investors and analysts criticizing some of the companies for never having experienced a full credit cycle. In a worst-case scenario, rising interest rates could restrict some of their funding at the same time that defaults begin to jump.
LendingTree may be the starkest example of investors taking the air out of the lending industry’s collective tires in recent months amid tightening monetary conditions and jumpy markets, but other companies have also fared poorly.
On Deck Capital, which specializes in business loans, fell as much as 10.8 percent on Wednesday. Meanwhile, LendingClub, the country’s biggest marketplace lender, declined 5.5 percent. In fact, specialty finance companies in general have been falling, with the Dow Jones Specialty Finance Index down 2.5 percent on Wednesday.
The article first appeared in Bloomberg.com