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Lending Club Portfolio Analysis: Updated for Trading Notes


Last week, Lending Club rolled out Net Annualized Return (NAR) measure for lenders trading on FOLIOfn secondary platform. As part of this latest update, lenders can now also download the traded notes details CSV file. We finally rolled out the required changes at PeerCube to incorporate this trading notes file. Below is a summary of changes you will see during analysis of your Lending Club portfolio on PeerCube.

Primary and Traded Notes CSV Files

The primary notes CSV file contains notes that were purchased on either the primary or the FOLIOfn secondary platform. Only notes missing from this file are the ones that were sold on the secondary market. The new trading notes file contains notes that were either purchased or sold only on the secondary market. Although the traded notes file maintains by-and-large the similar information and fields as the primary notes file, there are a few additional fields related to buy/sell transactions on the secondary market and some of the field entries may not be accurate.

Trading Notes File Upload

PeerCube users can upload their traded notes CSV file using the same interface as for primary notes CSV file at Lending Club / Portfolio Analysis / Manage / Upload Notes. The system automatically detects whether the uploaded file is primary notes file or traded notes file. We recommend that you upload the trading notes file first and then upload the primary notes file. This will prevent potential inaccuracies in traded notes file from overwriting the entries for duplicate notes from primary notes file. In addition, assign same account ID during upload of primary notes and traded notes files that were downloaded from one Lending Club account.

Once you upload the traded notes file or primary notes file, the site will update your previously uploaded notes in your portfolio stored on PeerCube with all the information from the uploaded file as long as your loan ID and note ID match. In addition, any new notes, such as sold notes, are added to your portfolio on PeerCube.

It is important for users to have all their notes assigned to portfolios on Lending Club. Any unassigned notes will automatically become part of Unassigned portfolio. As sold notes are not associated with any portfolio name in traded notes file, such notes are assigned to Unassigned portfolio name by default. Similarly, as sold notes don’t have loan status and FICO trend filled in traded notes file, the loan status and FICO trend for such notes are assigned as Sold by default.

Portfolio Profile

The portfolio profile overview and by attributes now also includes sold notes on the secondary market in addition to notes purchased on the primary and secondary platform.

Number of Loans and Notes

The number of loans and notes displays not only the loans and notes that are present in your portfolio but also the notes that were sold on the secondary market. In essence, the displayed information can be considered as all the loans and notes that were in your portfolio at any time in the past. The displayed count will be much higher than the actual number of loans present in your portfolio if you sold notes on the secondary market.

Gross Yield, Loss Rate, and Actual Yield

The Loss Rate is the principal outstanding at default as percentage of the average of original principal lent and the outstanding principal. The loss rate is not annualized as default is one time event.

The methodology for estimating Loss Rate remains the same. As Lending Club doesn’t allow sale of charged off notes on the secondary platform, sold notes have no bearing on loss rate. The sold notes are not included in loss rate estimate. The loss rate for notes purchased on the secondary platform considers the amount you paid to purchase the note as the amount lent and the principal outstanding at default is adjusted for difference in the amount you paid and the principal outstanding at the time of purchase.

The Gross Yield is the net total payment received after deducting the 1% service fee as a percentage of the average of the outstanding principal and amount originally lent. Only change in methodology for estimating gross yield is that now we don’t annualize the gross yield for loans with age of less than a year. For amortized loans, as majority of early payments go toward interest, annualizing the returns during early stage of loans was artificially inflating the gross yield on such loans.

The gross yield for the notes sold on the secondary market represents the total return, both from the monthly interest received before the sale and the profit/loss from sale of the note. The gross yield for the notes purchased on the secondary market also includes the premium/discount received at the time of purchase.

Portfolio Profile by Transaction Type

By uploading the traded notes file, PeerCube users now can review the performance by grouping the portfolio by transaction type, as Primary for loans purchased on primary platform, Purchase for loans purchased on the secondary market, and Sale for loans sold on secondary market. Lenders can determine effectiveness of their buying strategy at both primary and secondary market and selling strategy.

Users are also now able to filter portfolio profile by attributes pages by transaction type in addition to account ID and portfolio name.

Portfolio Notes Listing

The portfolio notes listing page now also shows the the transaction type of each note. The payment received column for sold notes includes the payments received before the sale and the sold price net of fees on secondary market.

We hope our users will find these changes useful while reviewing their Lending Club portfolios. We plan to introduce more features that leverage the information included in traded notes file, for example, performance of notes after being sold on the secondary market so that users can review the effectiveness of their selling strategy.

Please comment below or through our contact form to let us know your feedback on these features and suggestions for new features.

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