LendingClub Scoops Up AI Fintech Bargains to Build a Digital Bank Trading Below Book Value

This Fintech Is Building an AI-Powered Bank on the Cheap — and Trades for Less Than Book Value

LendingClub has been quietly acquiring the technology assets of bankrupt AI fintech startups that struggled amid rising interest rates since 2022. By integrating these technologies with its own resources, LendingClub is shaping a modern, digital, AI-powered bank with strong growth potential. Despite this, its stock remains undervalued, trading below book value.

Acquiring Valuable AI Technology from Failed Startups

Several promising AI fintech startups have folded due to economic shifts and higher interest rates. LendingClub seized this opportunity by purchasing the intellectual property of two such companies: Cushion and Tally.

• Tally: This platform consolidates debt and credit card payments in one place, showing interest rates and providing insights like payoff timelines based on minimum payments. Many consumers aren't aware of their credit card interest rates or how long it takes to pay off balances. LendingClub uses Tally's tools to help users manage and automate debt payments, which also supports its personal loan offerings designed for credit card debt consolidation.
• Cushion: Cushion analyzes bank transactions to give users a comprehensive view of their spending habits. Its AI-driven insights help users optimize their financial obligations. Following the acquisition, Cushion’s founder joined LendingClub as Senior Director of Product, Digital Engagement.

Both technologies are being integrated into LendingClub's evolving DebtIQ platform. Early results indicate that users engaging with DebtIQ features log in 60% more often and generate 30% more loan issuances.

Building Customer Loyalty and Improving Financial Metrics

LendingClub is not just attracting borrowers; it’s increasing the number of full banking customers. This boosts deposits, enabling LendingClub to hold more loans on its balance sheet and reduce funding costs.

Recently, LendingClub replaced a large, costly legacy deposit account with new checking and savings accounts, reducing funding costs by 83 basis points—from 4.74% to 3.91%. This improvement helped net interest margins rise to 5.97%, up from 5.75%.

Creating a Growth Cycle with Lower Costs and Higher Margins

With an improved ecosystem, LendingClub is cutting costs, which leads to higher margins and opens doors for growth. Loan sale prices have improved for five straight quarters, allowing the company to re-enter marketing channels it had paused for several years.

In the first quarter, LendingClub exceeded its origination goal, issuing $2.0 billion in loans versus a target range of $1.8 billion to $1.9 billion, with revenue growing 20% year-over-year.

Net income fell slightly due to two factors: LendingClub held more loans on its balance sheet than initially planned, which increased its Current Expected Credit Loss (CECL) provision. This accounting treatment affects short-term profits but benefits long-term earnings. Secondly, LendingClub prudently added an $8.1 million qualitative provision due to economic uncertainty following recent tariffs, despite strong underwriting performance. Charge-offs actually declined to 4.7% from 8.1% the previous year.

Without that additional provision, net income would have risen by 61% compared to the prior year.

A Significant Opportunity in U.S. Credit Markets

The U.S. revolving credit market totals $1.32 trillion, presenting a large opportunity for LendingClub and competitors to refinance consumer debt at lower rates. LendingClub’s current servicing portfolio stands at $12.2 billion, leaving plenty of room to grow.

With its expanding AI-powered ecosystem, focus on low-cost deposits, disciplined underwriting, and renewed interest from loan buyers, LendingClub remains undervalued, trading at just 94% of book value.

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