Santander and BlackRock work on first rated P2P securitisations

Santander and BlackRock are working to create the first rated securitisations of peer-to-peer loans from Lending Club and Prosper in the latest sign of the nascent “P2P” industry’s growing acceptance on Wall Street.

Peer-to-peer lenders, also known as “marketplace lenders”, use internet technology to connect borrowers directly with lenders. To date, the sector has focused on consumer loans made to high-quality borrowers, but peer-to-peer lenders are expanding rapidly in size and style thanks to an influx of professional cash.

The “holy grail” for bankers keen to capitalise on the fast-growing industry is a bond deal comprised of peer-to-peer consumer loans originated through Lending Club or Prosper - the two biggest P2P lenders in the world - that would carry an official stamp of approval from a credit-rating agency.

Obtaining such a rating would open the sector up to a wider array of investors, including insurers and pension funds who are traditionally more restricted in the type of assets they are allowed to buy.

It is unclear whether any securitisation of peer-to-peer loans will ultimately come to market or will be able to gain an official designation from a rating agency, many of which are taking a cautious approach to evaluating new asset classes in the aftermath of the financial crisis, which saw them accused of handing out “triple-A” ratings to undeserving bonds.

Critics caution that the P2P industry remains relatively young and untested and has yet to go through a full economic cycle, including a scenario of rising interest rates.

But the possibility of two big financial names coming up with landmark deals will probably be viewed as a further boost for the already rapidly expanding P2P sector.

According to people familiar with the respective projects, Santander is working on securitising loans originated through Lending Club, while BlackRock’s funds group is considering a deal comprised of loans originated through Prosper.

Spokespeople for BlackRock and Prosper declined to comment. Spokespeople for Lending Club and Santander did not immediately return a request for comment.

So far there have been a handful of mostly unrated P2P securitisations in the market.

The hedge fund Eaglewood Capital was first to securitise P2P loans with a $53m unrated deal sold last year. In July, SoFi, a P2P lender that specialises in student loans, scored a major win for the industry when it received an investment-grade rating from Standard & Poor’s but the industry awaits a deal comprised of consumer loans.

A host of start-ups beyond peer-to-peer lenders are applying technology and digital data to disintermediate big banks and the way they underwrite loans, raise capital and process payments.

On Monday investment bank Liberum and AltFi Data launched the first equity index to track what they called “the world’s leading financial services disruptors”.

The index includes 28 P2P and alternative financing companies including Paragon Group, the specialist lender, and mobile payments company Monitise Plc.

The index has jumped about 170 per cent since September 2011, its earliest available date.