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Online lending platform LendingClub Corp. on Thursday said it would lay off 225 employees, or 14% of its staff, as higher interest rates discourage demand for loans, and the company forecast fourth-quarter revenue that was below expectations.
The decision follows “reduced marketplace revenue following the Federal Reserve’s historic pace of interest-rate increases,” company executives said in a statement.
Shares of LendingClub
LC,
rallied 3.4% in after-hours trading. The stock finished regular trading 2.2% higher.
As a result of the layoffs, management said they expected to take non-recurring, pre-tax charges of around $5.7 million. They said $4.4 million of that was expensed in the fourth quarter. Executives expect the job cuts to produce savings, in compensation and benefits, of roughly $25 million to $30 million this year.
LendingClub also forecast fourth-quarter sales of $260 million to $263 million, compared with FactSet forecasts for $263 million. For the full year, management said they expect sales between $1.185 billion and $1.188 billion. FactSet estimates call for $1.188 billion.
LendingClub tries to help people find lower-cost loans and other financial services. However, the Federal Reserve’s interest-rate hikes — an effort to cool off the economy and in turn put a lid on rising prices — have pushed up rates on credit cards, auto loans and other forms of credit.
LendingClub executives, during the company’s quarterly earnings conference call in October, said they expected “more tempered loan volumes and marketplace revenue” in the second half of 2022 as higher rates affect investors’ demands for loans.
The company targets high-income, high-credit-score customers, and most of its members use the platform to consolidate credit-card debt. LendingClub draws revenue from origination fees from borrowers, as well as servicing fees on loans sold to investors.
LendingClub stock has slid 63% over the past 12 months. By comparison, the S&P 500 Index
SPX,
is down around 16% over that time.
