LendingClub cuts 225 employees, including C-suite executive

LendingClub is laying off 225 employees, or 14% of its staff, to make up revenue as rising interest rates squeeze one of its core lines of business.

The San Francisco-based company, which primarily refinances credit card debt, joins the list of fintechs that are slashing their workforces by at least 10%, including Chime, Upstart, Stripe and Varo. LendingClub is cutting staff as it shifts its long-term strategy to lean harder on its bank charter, and mitigate negative effects of a tightening economy.

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"It's never easy to part with people who are not just outstanding contributors but also teammates and friends," LendingClub CEO Scott Sanborn said in a prepared statement. "We are working to help all our impacted teammates transition. We are providing bonus/incentive pay, making accommodations for foreign nationals on employment visas, providing ongoing support and more." 

LendingClub said in an email that after the staff reduction, the company will have about the same number of employees as it did at this time last year, and expects to save $25 million to $30 million in compensation and benefits in 2023. 

The layoffs include Chief Capital Officer Valerie Kay, effective Feb. 25, according to a Securities and Exchange Commission filing. Kay was hired by LendingClub in 2016 after spending nearly 30 years at Morgan Stanley, where she maintained relationships with institutional investors. At LendingClub, she has been primarily responsible for bringing in and retaining marketplace investors. The company is eliminating her position.

LendingClub's marketplace business, in which it sells loan originations to investors, has been central to its model for the last several years. However, rapidly rising interest rates have raised costs for investors who would buy LendingClub's loans, and increasing inflation has added more risk to those investments, meaning the loans aren't as attractive to investors.

"Some of the pressure that the industry has been seeing as the Fed has continued to raise rates … that has put a lot of pressure on investors in the marketplace — those who buy our loan originations," Chief Financial Officer Drew LaBenne said in an interview in December.

Facing a more challenging marketplace, the company has also continued to hold more prime loans on its balance sheet, an advantage of the banking charter it acquired in 2021. In the third quarter it held 33% of loan originations, and LaBenne said he expected that upward trend to continue.

The company also bought more than $1 billion in personal loans from the parent company of MUFG Union Bank in December to help mitigate the marketplace revenue slowdown.

LendingClub said on Thursday that it expects fourth- quarter revenue of about $260 million to $263 million and net income of $21 million to $24 million, down from third quarter revenue of $304.9 million and net income of $43.2 million. Wedbush analyst David Chiaverini wrote in a Friday morning note that he still thought LendingClub would outperform compared to other neobanks, thanks to its ability to tap into deposit-based funding. He added that the company's news shows that macroeconomic factors are straining consumer lenders. The fintech's stock had remained relatively even, as of Friday midmorning .

LaBenne, who started at LendingClub as CFO in September, said in the interview last month  that he hoped to make the company more resilient amid a turbulent capital markets environment. He said there's an opportunity to use the company's bank charter to offer a broader set of solutions to customers outside of lending.