LendingClub Gains After Naming BlackRock Veteran as Capital Chief
CORRECTION: This article, originally published at 11:02 a.m. on July 18, 2016, has been corrected to show that Patrick Dunne's title is chief capital officer.
LendingClub (LC) - Get Report has appointed BlackRock veteran Patrick Dunne to lead its investor group as the lender works to restore investor confidence following the ouster of the CEO amid irregularities in the sale of a small number of loans
Dunne previously headed BlackRock Asset Management International Inc., a division of BlackRock Inc. (BLK) - Get Report , served as chief operating officer for Barclays (BCS) - Get Report European investor services unit and holds a master's degree in management from Stanford.
Early results are promising: LendingClub rose about 2.5% to $4.60 per share after the announcement on Monday.
"The resume and pedigree look good, and having a big hire is good," analyst Bob Ramsey of FBR Capital Markets said in an interview.
According to LendingClub, Dunne will manage the company's investor group, which includes individual investors, retail partners, banks and other institutional investors.
His "wealth of experience and diverse background across capital markets, strategy, portfolio management, product development and client service will help us drive the next phase of Lending Club's growth," Scott Sanborn, president and CEO, said in a statement.
Dunne will replace Jeff Bogan, who worked as capital chief for less than a year and left around the same time that former CEO Renaud LaPlanche resigned after an internal investigation showed a violation of the company's business practices.
LendingClub's shares have fallen 40% since news broke in early May that the company sold loans to Jefferies that didn't fit specific criteria. A Department of Justice investigation into the company's lending practices is ongoing.
Recent reports that Jefferies is considering selling bonds on LendingClub's marketplace, however, has caused share prices to rally slightly. "If that's accurate, that could be a real positive on the perception front," Ramsey said. "That says a lot."
Still, Ramsey said, Dunne will likely face challenges beyond those left behind by LendingClub's former leaders.
The online lending platform market was already under pressure from investors as the young fintech industry, which leverages the Internet and data-analysis algorithms to evaluate borrower applications quickly and typically doesn't keep loans on its own balance sheets, grapples with concerns that it may not prove profitable.
"The challenge right now for LendingClub's platform is figuring out how you fund loan volume," Ramsey said. "That's the challenge or the job of their new hire here."
Companies like Prosper and Avant, both privately held but operating within the same market, have reduced staff by at least a third to cope with the challenging environment, Ramsey said.
"If you can't fund loans, you can't make loans," Ramsey said. "You have to show that your model can be profitable."
So what does it take for an online lending platform to succeed?
For one, the companies need to demonstrate that their lending practices are appropriate. That, though, isn't all they must do.
"At the end of the day if you can prove that the underwriting works and that the quality is reasonable, you'll succeed," Ramsey said. "Companies need to focus on improving profitability and cost structure."
LendingClub, which has a market cap of $1.76 billion, could not immediately be reached for comment.