This story is the first in a two-part series on digital lender GreenSky and its banking partnership model. The second part is available here. Birmingham, Ala.-based regional bank has made a „strategic decision“ to reduce its indirect credit programs, likely the decision not to extend its partnership with GreenSky when it expires in the fourth quarter, the lender said in its quarterly bid published on May 15. Although there was no „definitive proclamation“ of the regions, Executive Director Gerald Benjamin stated that GreenSky believed that a warning would be included in the bid, given that dialogue with the bank had been ongoing for six months. „We don`t necessarily consider the loss of a banking partner to be catastrophic, but it has clearly revealed the company`s financing weaknesses and concentration risk,“ Compass Point analyst William Ryan said in a May 16 statement. That is because the other big banks are paying attention elsewhere. „GreenSky maintains its financing commitments with a number of banks on hold,“ said David Zalik, CEO of GreenSky. „This announcement, however, reflects a significant extension of GreenSky`s historic bank financing agreements, with the 5th Alliance comprising both proprietary technology and distributor cross-selling activities. It is a multi-faceted alliance that today will benefit not only all parties, but also customer-focused innovation in the years to come. GreenSky Inc. has probably lost funding to one of its largest banking partners, and one analyst fears others could follow. Ryan said management „clearly downplayed“ the subject during J.P. Morgan`s presentation. The analyst said he had many questions about the apparently inadequate returns and the future of GreenSky`s other banking partnerships.
He called the loss of regions, a major banking partner, „clearly worrying“ for the digital lender. The entity is in the final stages of concluding an agreement to sell stakes with an existing banking partner necessary for access to financing under the SPV mechanism. The company expects the SPV mechanism to be operational by May 2020. The fifth third bank also signed a separate Memorandum of Understanding for licensing GreenSky`s leading technology platform and its integration into its online and mobile banking channels and some 1,200 financial centres, to improve the speed of response to lending decisions and increase overall lending with improved credit ratios. Almost immediate credit decisions will be available to existing customers of 2.2 million euros. Less than $150 million of Regions Financial Corp.`s financing commitment was unused on the quarterly filing date. The $4.5 billion has been supported, which is not being used by the commitment of all partners. GreenSky had maximum financing commitments of $11.8 billion from its banking partners, including $2 billion from regions.