FinTech LendingClub is purchasing Radius Bancorp for $185 million in cash and stock, according to a report by CNBC.
LendingClub provides personal lending online, and it wants access to funding that is more stable and not as expensive. Radius is based in Boston and has in the neighborhood of $1.4 billion in assets. The bank is one of a few smaller lenders that has teamed up with FinTechs who need services only an FDIC-regulated institution can provide.
This is the first time a FinTech has purchased an actual bank. Other FinTech startups, like Robinhood and Square, are looking into becoming banks so they can improve their profits and offer customers bank-like products, including checking accounts.
Recently, Varo Money, a mobile bank, got FDIC approval to accept consumer deposits.
LendingClub was part of a wave of early FinTech firms that was geared toward marketplace lending, while others matched borrowers with lenders. It had a huge initial public offering (IPO) in 2014, with an $8.5 million valuation. In 2016, the company faced a setback when its founder, Renaud Laplanche, was fired for irregular loan practices. The company’s shares have never since returned to their peak. However, the FinTech wants to reestablish itself in the market as a full-fledged bank.
With the deal, LendingClub is going to be able to offer new products to customers and stop relying on institutional funding sources.
“What a bank charter does for LendingClub is it allows us to take what is the leading digital loan provider online and combine it with a leading digital deposit gatherer,” said LendingClub CEO Scott Sanborn. “It totally changes the earnings profile of this business.”
The deal, Sanborn said, is going to help save LendingClub $40 million per year in funding expenses and bank costs, and it will help the company get a spread on balance sheet loans, a key aspect to making money for banks.