The move on the part of Puerto Rico’s largest bank to acquire E-Loan for about $300 million gives added credibility to the consumer-direct online lending model, E-Loan’s founder said.
Popular Inc., a Puerto Rico-based full services financial services provider with 130 branches in the United States, is the 34th largest institution in the U.S. and has $45 billion in assets, Chris Larsen, founder of E-Loan, said in an interview this morning.
“We’re very excited to be a part of the team,” Larsen said, speaking from New York. The transaction, announced this morning, “is a vote of confidence in the future of financial retailing and lending directly to consumers,” Larsen said.
“We’ve always believed this is the way all consumers are going to be getting loans. It’s transparent and efficient. That’s a long-term enduring trend that Popular has clearly seen,” Larsen said.
Larsen characterized his company’s direct-to-consumer approach as “the clear trend.”
E-Loan originated more than $5 billion in mortgage, home equity and auto loans last year. The company, which will keep its brand and most of its employees, will become a wholly owned subsidiary of Popular after the not-yet-closed acquisition. The acquisition is expected to close in the fourth quarter pending E-Loan shareholder approval.
E-Loan said it would benefit from Popular’s strength in financial and capital markets, and from Popular’s promotion and integration of its products.
Mark Lefanowicz, chief executive officer and president of E-Loan, will continue to serve as president.
“The spirit they have is similar to the E-Loan way,” Larsen said, and “very much respectful to the consumer. That’s something that really struck us in the way they have grown over their long history.” Popular Inc. is 110 years old.
Popular has established the largest Hispanic-owned financial services franchise in the United States.
“Broadly speaking, the Internet is a powerful tool for consumers who in the past didn’t have full access to the products that were available or knowledge about how the process worked,” Larsen said.
Shares of E-Loan had jumped $1, or 32.36 percent, to $4.09, at 11 a.m. Eastern time today, while Popular was holding steady at $26.32.
This has been a good year for E-Loan. In May, the company reported first-quarter earnings of $2.2 million, or 3 cents a share, compared to a loss of $1.1 million, or 2 cents a share, in the same period a year ago.
A group of Wall Street analysts polled by Thomson First Call had predicted that the company would break even, neither losing nor gaining. E-Loan exceeded these expectations with its $2.2 million profit.
In January, E-Loan announced plans to work with eBay to provide its consumers with financing for automobiles and motorcycles purchased on eBay Motors, an automotive Web site that delivers $11.1 billion in worldwide annualized gross merchandise volume.
Privacy is a cornerstone of E-Loan’s corporate culture. Employees not only hear about the company’s privacy policy all the time, but they also sign pledges saying they’ll uphold it. Unlike most policies, E-Loan’s requires customers to opt in, meaning they must consent before their information can be shared.
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