Fitch Rates LendingClub Rated Notes Issuer Trust 2025-P1

Published: 2025-06-23 06:46:14 ET LC

Published on 06/23/2025 at 06:46

Fitch Ratings has assigned ratings and Rating Outlooks to the ABS issued by LendingClub Rated Notes Issuer Trust Series 2025-P1 (LENDR 2025-P1) as listed below.

RATING ACTIONS

Entity / Debt

Rating

LENDR 2025-P1

AA+sf

New Rating

AA-sf

New Rating

A-sf

New Rating

BBBsf

New Rating

BBsf

New Rating

Bsf

New Rating

Page

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VIEW ADDITIONAL RATING DETAILS

Transaction Summary

LendingClub Bank (LendingClub) is the sponsor of the transaction. LendingClub established the LendingClub Rated Notes Issuer Trust, a master trust, to facilitate the issuance of series notes, certificates and retained interests. Series LENDR 2025-P1 is a new series issuance out of this larger master trust. The LENDR 2025-P1 trust is backed by a static pool of unsecured consumer loans originated by LendingClub.

KEY RATING DRIVERS

Solid Receivable Quality: The LENDR 2025-P1 pool consists of 100% prime loans categorized by LendingClub's internal risk grades: P1 (49.99%), P2 (31.26%) and P3 (18.76%). P1 represents the highest credit quality/lowest risk, followed by P2 and P3. The LENDR 2025-P1 pool has a weighted average (WA) FICO score of 722.4; 27.85% of the borrowers have a FICO below 700, with a minimum FICO of 662. The obligors in the pool have a WA debt-to-income ratio (DTI) of 19.70%. The WA interest rate of the pool is 12.27%, and the pool has a WA remaining term of 48.45 months with close to negligible seasoning.

Stabilizing Default Rate Trends: LendingClub's go-forward approved default rates for its prime loan portfolio (P1, P2 and P3 risk grades), which collateralizes the capital structure, began to increase early in vintage year 2021 and saw a notable rise by vintage year 2022. The cumulative gross default (CGD) rate in vintage 1Q21 was approximately 4.9% and peaked at approximately 9.6% in vintage 2Q22. However, since initiating corrective measures that included cutting originations to higher-risk grades, performance in subsequent 2023 vintages has been improving qoq.

Fitch's WA base case default assumption (the default assumption) for LENDR 2025-P1 is 10.80%. The default assumption was established based on data stratified by LendingClub's proprietary risk grade and loan term. In setting the expected case (default assumption), Fitch considered performance trends from vintage year 2021 and recognized the improving default curves in vintage year 2023 and continuing in 2024.

Credit Enhancement Mitigates Stressed Losses: Credit enhancement (CE) consists of overcollateralization (OC) and subordination for the senior tranche. Initial hard CE totals 33.4%, 28.8%, 18.9%, 14.8%, 6.9% and 4.18% for class A, B, C, D, E and F notes, respectively. Although the transaction does not have a reserve account, initial CE is sufficient to cover Fitch's stressed cash flow assumptions for all classes.

Fitch applied a 'AAAsf' rating stress of 4.25x the base case default rate for prime loans. The stress multiples decrease for lower rating levels, according to Fitch's 'Consumer ABS Rating Criteria.' The default multiple reflects the absolute value of the default assumption, the length of default performance history for the loans, WA borrower FICO scores and the WA original loan term, which increases the portfolio's exposure to changing economic conditions.

Adequate Servicing Capabilities: LendingClub has a strong track record of servicing consumer loans since launching its online lending marketplace platform in 2007. LendingClub performs pre-charge-off loan servicing activities in-house, along with outsourcing post-charge-off activities to third parties. The bank is the lead servicer on all its securitization transactions. The trust has assigned CardWorks Servicing, LLC as the back-up servicer.

RATING SENSITIVITIES

Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade

Unanticipated increases in the frequency of defaults or charge-offs could produce loss levels higher than the base case and would likely result in declines of CE and remaining net loss coverage levels available to the notes. Decreased CE may make certain ratings on the notes susceptible to potential negative rating actions, depending on the extent of the decline in coverage.

Fitch conducts sensitivity analysis by stressing a transaction's initial base case default assumption an additional 10%, 25%, and 50% and examining rating implications. These increases of the base case default rate are intended to provide an indication of the rating sensitivity of the notes to unexpected deterioration of a trust's performance.

During the sensitivity analysis, Fitch examines the magnitude of the multiplier compression by projecting the expected cash flow and loss coverage levels over the life of the investments under higher than initial base case default assumptions. Fitch models cash flow with the revised default estimates while holding constant all other modeling assumptions.

Current Ratings: 'AA+sf'/'AA-sf'/'A-sf'/'BBBsf'/'BBsf'/'Bsf'.

Rating sensitivity to increased defaults (class A/class B/class C/class D/class E/class F):

Increased default base case by 10%: 'AA-sf'/'A+sf'/'BBB+sf'/'BBB-sf'/'Bsf'/'CCCsf';

Increased default base case by 25%: 'A+sf'/'Asf'/'BBBsf'/'BB+sf'/'CCCsf'/'NRsf';

Increased default base case by 50%: 'A-sf'/'BBB+sf'/'BB+sf'/'BBsf'/'NRsf'/'NRsf'.

Rating sensitivity to reduced recovery (class A/class B/class C/class D/class E/class F):

Reduced recovery base case by 10%: 'AAsf'/'AA-sf'/'A-sf'/'BBB-sf'/'BB-sf'/'B-sf';

Reduced recovery base case by 25%: 'AAsf'/'A+sf'/'BBB+sf'/'BBB-sf'/'B+sf'/'CCCsf';

Reduced recovery base case by 50%: 'AAsf'/'A+sf'/'BBB+sf'/'BBB-sf'/'B+sf'/'CCCsf'.

Rating sensitivity to increased defaults and reduced recovery (class A/class B/class C/class D/class E/class F):

Increased default base case by 10% and reduced recovery base case by 10%: 'AA-sf'/'A+sf'/'BBB+sf'/'BBB-sf'/'Bsf'/'CCCsf';

Increased default base case by 25% and reduced recovery base case by 25%: 'A+sf'/'A-sf'/'BBB-sf'/'BBsf'/'CCCsf'/'NRsf';

Increased default base case by 50% and reduced recovery base case by 50%: 'A-sf'/'BBBsf'/'BB+sf'/'B+sf'/'NRsf'/'NRsf'.

Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade

Stable to improved asset performance, driven by steady delinquencies, would increase CE levels and lead to a potential upgrade. If defaults are 20% lower than the projected base case default rate, the expected ratings for the class B and C notes could be upgraded by up to one or two notches, respectively.

Rating sensitivity from decreased defaults (class A/class B/class C/class D/class E/class F):

Current Ratings: 'AA+sf'/'AA-sf'/'A-sf'/'BBBsf'/'BBsf'/'Bsf'.

Decreased default base case by 20%: 'AAAsf'/'AA+sf'/'A+sf'/'BBB+sf'/'BB+sf'/'BBsf'.

USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10

Fitch was provided with Form ABS Due Diligence-15E (Form 15E) as prepared by PricewaterhouseCoopers LLP. The third-party due diligence described in Form 15E focused on a comparison and recalculation of certain characteristics with respect to 100 randomly selected statistical receivables. Fitch considered this information in its analysis, and the findings did not have an impact on its analysis.

REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING

The principal sources of information used in the analysis are described in the Applicable Criteria.

ESG Considerations

The highest level of ESG credit relevance is a score of '3', unless otherwise disclosed in this section. A score of '3' means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Fitch's ESG Relevance Scores are not inputs in the rating process; they are an observation on the relevance and materiality of ESG factors in the rating decision. For more information on Fitch's ESG Relevance Scores, visit https://www.fitchratings.com/topics/esg/products#esg-relevance-scores.

Additional information is available on www.fitchratings.com