Santander said close to selling $1B of LendingClub loans

NEW YORK – Santander Consumer USA Holdings Inc. is close to selling about $1 billion of unsecured consumer loans that it bought from LendingClub Corp., according to three people with knowledge of the matter.

Deutsche Bank AG is managing the sale, said the people, who asked not to be identified because the matter is private.

Santander, which is controlled by Spain’s largest bank, announced plans in October to sell its portfolio of consumer loans originated by other companies and refocus on its main auto-lending business. Chief Executive Officer Jason Kulas has been reviewing his predecessor’s strategies, including programs to buy loans originated online by LendingClub and retailer Bluestem Group Inc.

Representatives for Santander, Deutsche Bank and LendingClub declined to comment.

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Santander, already one of the largest subprime auto lenders in the U.S., had been buying personal loans to boost results. Its portfolio of personal loans was about $2.2 billion at the end of September.

Attractive yields

Santander reported a fourth-quarter loss of $232 million this week on its unsecured personal loan portfolio, $123 million of which came from borrower defaults and $109 million that was related to market discounts on the loans held for sale, according to company filings.

“In light of the damage that the personal loan portfolio inflicted on Santander’s income statement in 4Q15, we will be relieved when Santander is out of this business,” Chris Donat, a company analyst at Sandler O’Neill & Partners, said in a report on Thursday.

The agreement with LendingClub in March 2013 allowed Santander to purchase as much as a quarter of the debt that was originated by the online lender for three years. Those loans consisted primarily of lower prime and non-prime credit. Investors, including banks, have been enticed by attractive yields on the debt, and, in some instances, the ability to bundle loans into securities that can be sold to other buyers.

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