- Financial technology company LendingClub announced it is buying Radius Bank for $185 million in order to provide the online personal loan company with access to a cheaper source of funding
Financial technology company LendingClub announced it is buying Radius Bank for $185 million in order to provide the online personal loan company with access to a cheaper source of funding, according to CNBC. As part of the deal, LendingClub is paying $185 million in cash and stock for Radius Bancorp as revealed in documents viewed by CNBC.
Radius Bancorp is a Boston-based online bank with $1.4 billion in assets. And the bank has been one of the few lenders that have partnered with financial technology companies that need the services of an FDIC-regulated institution.
This is the first time that a U.S. based financial technology company has acquired a bank. Robinhood and Square both applied to become banks in order to have the option to issue new products like checking accounts.
LendingClub ― which is known as the largest U.S. provider of personal loans ― went public in 2014 and its market valuation jumped to about $8.5 billion at the time. However, the stock price took as the company co-founder Renaud Laplanche was ousted.
By owning a bank, it will enable LendingClub to offer new products for clients and diversify earnings.
“What a bank charter does for LendingClub is it allows us to take what is the leading digital loan provider online and combine it with a leading digital deposit gatherer,” said LendingClub CEO Scott Sanborn via CNBC. “It totally changes the earnings profile of this business.”
Sanborn pointed out that this deal will help save $40 million per year in bank fees and funding costs. Plus it will enable LendingClub to earn a spread on the loans kept on the balance sheet, which is similar to the way that banks generate revenue.
This deal is expected to close in about 12 to 15 months. And it will hit break-even for LendingClub about two years after that. In order to become a regulated bank, the company asked its largest shareholder Shanda to trade its 22% stake in LendingClub for nonvoting shares.
Earlier this week, LendingClub said it expects full-year revenue to be between $790 million and $820 million.
“This is a perfect marriage, with LendingClub bringing the leading digital asset-generation platform, and Radius contributing a leading online deposit-gathering platform, to position the combined company for long-term success,” added Radius Bank President & CEO Mike Butler in a statement.
JPMorgan Chase & Co. served as a financial adviser to LendingClub while Sullivan & Cromwell LLP provided legal counsel. And Broadhaven Capital Partners LLC and Piper Sandler Cos. advised Radius, while Hogan Lovells worked on legal matters.
