Online lender Marlette reports profit, then takes jabs at the competition

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Marlette Funding, which offers personal loans under the Best Egg brand, resembles numerous other online consumer lenders, except for one characteristic: It reports earning steady profits.

The Wilmington, Del., company said Friday that its net income was positive in the fourth quarter, as it has been since the second quarter of 2017.

Unlikely publicly traded firms, the privately owned Marlette is not required to share its quarterly results, and the few bits of information that the company released do not offer anything close to a full picture of its financial performance.

Marlette was vague about just how much money it earned during the quarter, saying that its net income, calculated using generally accepted accounting principles, was in the double-digit millions. The firm also said that its profitability was 79% higher than in the year-earlier period.

In an interview, Marlette CEO Jeffrey Meiler drew a contrast between his company’s recent track record and that of other online lenders that specialize in the consolidation of consumer credit card debt.

Meiler noted that Prosper Marketplace has lost a total of $135 million in the last six quarters that it has reported results. He also pointed out that LendingClub has lost nearly $240 million over the same span.

Marlette, which began in March 2014, has facilitated loans totaling more than $7 billion over the last five years. Its loans are similar to those from a raft of competitors. They range from $2,000-$35,000, and they carry annual percentage rates of between 5.99% and 29.99%.

Meiler said that borrowers have been repaying his company’s loans at a consistent rate, which has enabled Marlette to borrow funds at comparatively low rates.

He pointed to relatively low expenses as another reason that the firm is profitable, saying that Marlette places work in Buffalo, N.Y., and St. Joseph, Mo., that competitors conduct in downtown San Francisco.

Spokespeople for LendingClub and Prosper, both of which are based in San Francisco, declined to comment.

LendingClub announced in November that it plans to open a new office in Salt Lake City, part of an effort to improve the company’s operating efficiency. Prosper has an office in Phoenix. Neither company has released its fourth-quarter results yet.

Before founding Marlette, Meiler was a U.S. credit card executive at Barclays, where he worked with several of his current colleagues.

In the interview Thursday, Meiler pooh-poohed the efforts of some banks to compete in the booming personal loan business. “The startup mentality you get because it’s do or die. It’s your own money at play,” he said.

He also took a jab at Goldman Sachs for its declaration in May that it has invested $600 million in Marcus, its 2-year-old consumer banking unit, including both capital spending and operating losses.

“My perspective was, you shouldn’t be bragging about that,” Meiler said. “That’s a lot of money.”

A Goldman spokesman declined to comment.

In a report last month, analysts at S&P Global Ratings wrote that the credit cycle is incrementally closer to a turn in 2019, and they flagged personal loans as one key area of concern with respect to credit performance.

Meiler acknowledged that the credit cycle is in its later stages, but he said that Marlette’s approach to underwriting loans was built to withstand recessions. He also said that the company plans to roll out new loan products this year, though he declined to provide details.

Marlette's loan volume increased by 27% year over year in the fourth quarter, and it plans to continue expanding lending in 2019.

“We don’t see anything in our performance that concerns us,” Meiler said.

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Marketplace lending Consumer lending Fintech Credit quality Expense management Lending Club Prosper Marketplace Goldman Sachs