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Lending Club pumped out more loans to consumers in the fourth quarter – surviving a key test of investor demand despite rising losses and lingering fears over its business model.

Analysts said they’d be looking at the top-line figure very closely to see how well the San Francisco-based firm rebounded after its governance scandal last May, which exacerbated general fears over the quality of assets produced by the new breed of online lenders.

Loans originated via Lending Club’s platform rose only fractionally from the second quarter to the third, despite a big rise in incentives, fuelling fears that the company would struggle to remain in growth mode.

In the fourth quarter originations came to $1.99bn, the company announced on Tuesday, rising from third quarter’s $1.97bn.

“Last quarter we accomplished the foundational work required to prepare Lending Club for the growth to come,” said Scott Sanborn, the company’s chief executive officer. “With a diverse, stable and scalable mix of investors, and an enhanced control environment, we are entering 2017 in a stronger position than ever to serve the needs of our customers.”

Lending Club and others such as Prosper and Avant say they are on a mission to transform the banking system by making loans more affordable to consumers, while providing investors with access to instruments with relatively high risk-adjusted yields. Hundreds of platforms have sprung up in the past few years, prompting Goldman Sachs, the giant investment bank, to launch a rival venture last October known as Marcus.

But as competition became fiercer, many platforms reached down the risk spectrum to sustain the pace of growth. Losses were greater than forecast, raising questions about the quality of data-crunching and prompting many investors, both individual and institutional, to put buying programmes on hold.

Figures from Orchard, a technology firm based in New York, shows that volumes across US consumer-loan platforms slipped for a third successive quarter between July and September, dropping 21 per cent to $1.86bn. That was less than half of the peak in the fourth quarter last year.

About 14.5 per cent of Lending Club’s free-floated shares are currently held by investors expecting the price to fall, according to Bloomberg data. That is almost 12 times the average “short interest” in stocks on the S&P Financials index, which have been buoyed by hopes of higher interest rates, lower taxes and lighter regulation following the Republicans’ sweep of the White House and Senate in November.

Canaan Partners, which bought into the company in 2007 when it was little more than a Facebook app, sold out completely towards the end of last year.

“The bear case for Lending Club is rooted in the view that credit deterioration among risky borrowers on its platform could cause investors to lose confidence in its underwriting model at a time when the future trajectory of investor demand for its loans remains in question,” said Mark Palmer, analyst at BTIG, before the release of Tuesday’s figures.

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