By Elzio Barreto
HONG KONG (Reuters) – Online lender Upgrade, launched by former LendingCLub Corp CEO Renaud Laplanche in April, expects to grow its loan volumes and add new asset managers to its roster of buyers in coming months, Laplanche said in an interview on Monday.
Upgrade has been testing its credit quality and risk management systems, compliance framework and other operations, as well as building up its infrastructure to deal with rising volumes before ramping up the service, Laplanche added. The company has signed up six asset managers who are already buying or plan to buy loans originated by the company, including Jefferies LLC and an unnamed Hong Kong firm, he said.
“We’re getting towards the end of that test plan and we’ll soon be able to focus on growing the business and driving loan volume,” Laplanche told Reuters.
“We’re moving out of testing and increasing volume already. We’re ramping up volume over time as we learn more and get more comfortable with risk management, operating efficiency and marketing efficiency.”
Laplanche, who founded and took LendingClub public, sent shockwaves through the emerging online lending industry with his resignation last year, after the company acknowledged a series of loan malpractices. The company and Laplanche are now facing shareholder litigation accusing them of concealing material weaknesses in the online lender’s ability to monitor its operations.
San Francisco-based Upgrade has hired about 100 people, split between its headquarters, an engineering centre in Montreal and in Phoenix, where it has an credit operations centre to handle customer service, collections and loan servicing, Laplanche said.
Upgrade will take on some balance sheet risk, buying about 5 percent of all the loans it originates and selling the remainder to the institutional buyers it lines up.
“Something we heard loud and clear was investors telling us they would be more comfortable knowing that we share the risk,” Laplanche said. “There’s alignment of interests between us and investors, so they know if the loans don’t perform it’s going to have a financial impact on us as well.”
The company is also looking to attract more non-U.S. institutional investors to its platform as asset managers look to boost returns and diversify into dollar assets. Chinese investors have been particularly keen on investing in overseas assets in a bid to counter potential weakness in the yuan.
“European investors have already started investing at scale into U.S. consumer loans and we’ve seen some Asia based investors doing the same thing,” Laplanche said. “We will see more of that happening. The idea is you can sometimes get higher risk adjusted returns with U.S. consumers and it’s also a dollar denominated investment, which some investors in Asia are really excited about.”
(Reporting by Elzio Barreto, editing by David Evans)