Fintech pioneer LendingClub snaps up Radius Bank for $185m

LendingClub has bought online bank Radius Bancorp in a $185m deal in cash and stock. The fintech company who pioneered online personal loans is buying the Boston-based bank to expand its operations and have access to a cheaper and stable source of funding.

LendingClub has been involved in the new wave of peer-to-peer lending which connects lenders with borrowers. It began operations in 2006 and has grown steadily in assets and popularity.

Radius, founded in 1987, offers online banking services and has amassed $1.4bn in assets.

LendingClub making history

When the deal concludes, it will be a remarkable achievement as it’s the first time a fintech company in the US has acquired a bank. Other Fintech companies, such as Square and Robinhood, have been seeking a license to move into the banking sector because it would afford them the opportunity of issuing new products such as checking accounts. It will also help them increase their profit margins.

The fintech is regarded as the largest provider of its type providing personal loans in the US. The firm wants to continue in its peer-to-peer lending services, but also wants to move into the banking sector to offer certain banking services.

LendingClub chief executive Scott Sanborn said: “By combining with Radius, we will create a category-defining experience for our members that will dramatically enhance the resilience and earnings trajectory of our business.”

Radius president and chief executive Mike Butler added: “LendingClub has always been a fintech innovator, and I look forward to leveraging the strengths of both of our talented teams as we usher in a new era in banking.”

LendingClub launched the biggest IPO in 2014  hitting a $8.5bn valuation. However, 2016 was its worst year when there were loan practice irregularities. The company’s founder, Renaud Laplanche, was also ousted at the time, and its shares never recovered.

The deal will help the company provide new services to its clients, which will enable it to diversify its earnings.

Sanborn said the move will change the way the company does business. It will also improve the profit potential of the company as more products are offered to clients.

The deal would save $40 million in operational cost

Sanborn also reiterated that when the deal completes, it will help the company save around $40m a year in funding cost and bank fees.

Both companies expect the deal to conclude within 15 months. However, break-even is not expected for two to three years after the close of the deal.

In a related development, mobile bank Varo Money received FDIC approval to float a banking service that will enable it to accept consumer deposits.