Consumer lending efficiency: commercial banks versus a fintech lender

Hughes, Joseph P.; Jagtiani, Julapa; Moon, Choon-Geol

doi:10.1186/s40854-021-00326-1

Financial Innovation

Table 9 NPL ratio and its decomposed components by size groups of unsecured consumer loans: 2016 and 2013

From: Consumer lending efficiency: commercial banks versus a fintech lender

Year of data	2016			2013
Whether to control loan volume in the stochastic frontier model		No volume controls	Volume controls		No volume controls	Volume controls
Variable	N	Mean	Mean	N	Mean	Mean
LendingClub
Unsecured consumer Loans*	1	*8,597,596	*8,597,596	1	*1,916,960	*1,916,960
Observed NPL ratio	1	0.0416	0.0416	1	0.0216	0.0216
Noise-adjusted NPL ratio	1	0.0416	0.0416	1	0.0215	0.0215
Best-practice NPL ratio	1	0.0055	0.0376	1	0.0065	0.0089
Excess NPL ratio	1	0.0361	0.0040	1	0.0150	0.0126
Lending inefficiency ratio	1	0.8666	0.0955	1	0.6940	0.5813
Avg. contractual interest rate	1	0.1586	0.1586	1	0.1756	0.1756
< $10 million in unsecured consumer loans
Observed NPL ratio	111	0.0230	0.0230	300	0.0354	0.0354
Noise-adjusted NPL ratio	111	0.0230	0.0230	300	0.0355	0.0355
Best-practice NPL ratio	111	0.0035	0.0035	300	0.0042	0.0041
Excess NPL ratio	111	0.0195	0.0195	300	0.0313	0.0314
Lending inefficiency ratio	111	0.7223	0.7231	300	0.7726	0.7740
Avg. contractual interest rate	111	0.0688	0.0688	300	0.0737	0.0737
> $10 million and < $100 million in unsecured consumer loans
Observed NPL ratio	196	0.0301	0.0301	273	0.0341	0.0341
Noise-adjusted NPL ratio	196	0.0301	0.0301	273	0.0341	0.0341
Best-practice NPL ratio	196	0.0028	0.0028	273	0.0039	0.0038
Excess NPL ratio	196	0.0273	0.0273	273	0.0302	0.0302
Lending inefficiency ratio	196	0.8307	0.8296	273	0.8132	0.8133
Avg. contractual interest rate	196	0.0600	0.0600	273	0.0701	0.0701
> $100 Million and < $1 billion in unsecured consumer loans
Observed NPL ratio	57	0.0314	0.0314	60	0.0411	0.0411
Noise-adjusted NPL ratio	57	0.0314	0.0314	60	0.0411	0.0411
Best-practice NPL ratio	57	0.0021	0.0023	60	0.0033	0.0036
Excess NPL ratio	57	0.0293	0.0291	60	0.0377	0.0375
Lending inefficiency ratio	57	0.8913	0.8849	60	0.8567	0.8466
Avg. contractual interest rate	57	0.0501	0.0501	60	0.0600	0.6000
> $1 Billion and < $10 billion in unsecured consumer loans
Observed NPL ratio	14	0.0591	0.0591	14	0.0658	0.0658
Noise-adjusted NPL ratio	14	0.0591	0.0591	14	0.0659	0.0659
Best-practice NPL ratio	14	0.0021	0.0062	14	0.0036	0.0061
Excess NPL ratio	14	0.0570	0.0529	14	0.0623	0.0599
Lending inefficiency ratio	14	0.9252	0.8184	14	0.8861	0.8146
Avg. contractual interest rate	14	0.0560	0.0560	14	0.0627	0.0627
> $10 Billion in unsecured consumer loans
Observed NPL ratio	9	0.0586	0.0586	8	0.0633	0.0633
Noise-adjusted NPL ratio	9	0.0586	0.0586	8	0.0632	0.0632
Best-practice NPL ratio	9	0.0036	0.0385	8	0.0048	0.0451
Excess NPL ratio	9	0.0550	0.0202	8	0.0584	0.0182
Lending inefficiency ratio	9	0.9312	0.2895	8	0.9188	0.3031
Avg. contractual interest rate	9	0.0797	0.0797	8	0.0879	0.0879

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