Countries

High Fluctuation of Discounts and Markups on the Secondary Market of Bondora

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One advantage of Bondora is that this p2p lending market makes a lot of data available for download to investors. Recently Bondora added data on ‘Secondary market transaction history‘. In this article I will

  • analyse the data
  • use some examples to show how volatile the prices of traded loan parts can be
  • discuss some of the potential reasons for the inefficiency of the market
  • conclude with my opinion.

The basics of the Bondora secondary market

Bondora (at that time Isepankur) launched the secondary market in March 2013.

Sellers can list any current and overdue loan parts for sale as long they are not 60+ days overdue. Loan parts stay listed until they are sold or cancelled by seller for a maximum of 30 days. Loan parts are traded at principal value. Any unpaid accrued interest, overdue interest, overdue principal and unpaid late charges are disregarded for the sales prices and will – provided the borrower pays up anytime after the transaction – cause a windfall profit for the buyer. The seller can impose a discount or markup on the principal. The discount ca go as low as -99% whereas the possible markup was limited to 5% until July 24th, 2014 and increased to a maximum of 40% thereafter.

If a transaction occurs Bondora charges the seller and the buyer a 1.5% transaction fee each.

Using the data download

The download file I used had 159.7K data lines. This includes 66K cancelled listings and 35K failed listings. For the further analysis I used the 59.4K successful transactions.

On first look the market seems efficient: 8.3% of loan parts sold within 15 minutes. 20% sell within the first hour. But I felt the aggregate data might not tell the full story and I started to look how pricing (discount and markups) developed on individual loans.

First example is a 10,000 Euro A900 loan originated to an Estonian borrower on May 2013. This loan defaulted in October 2013 which ended the possibility to trade loan parts. In this short timespan 62 loan parts with a principal value of 1,748 Euro were traded (that’s out of 356 that were listed).

I took the transactions and spread them out over time on the x-axis and graphed the discount rate (blue line, left y-axis).


Chart 1: Example loan 1 (see larger image).

As you can see the price fluctuates widely from -10% discount to 5% markup, while the basic condition – the loan was overdue since begin of August did not change. I also added the orange line that shows how many days the loan was overdue when the seller listed it (DebtDaysAtStart) and the red line that shows how many days the loan was overdue when the transaction actually took place (DebtDaysAtEnd). At those times where the loan was overdue the distance between the two lines shows how long it took for a listed loan part before it sold (see green mark as example). Continue reading →

P2P Lending Service Lendico Launches in Dutch Market

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Lendico entered its 6th national market and launched Lendico.nl  in the Netherlands today. Lendico CEO Dominik Steinkühler commented: ‘Especially in countries with a well developed banking system Lendico is successful. The Lendico users include those who are dissatisfied with banks and do not understand why they should pay for bankers’ bonuses, glass towers, business class flights and more benefits to bankers. Our target audience is looking for alternatives, that offer them better returns or cheaper loans.’

(Source press release; own translation from German)

International P2P Lending Services – Loan Volumes August 2014

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In August Prosper, Bondora and Thincats showed big growth of newly originated loan volume. For most other services it was a slow month. I added one more new service to the table.  I do monitor development of p2p lending figures for many markets. Since I already have most of the data on file I can publish statistics on the monthly loan originations for selected p2p lending services.

Table: P2P Lending Volumes in August 2014. Source: own research
Note that volumes have been converted from local currency to Euro for the sake of comparison. Some figures are estimates/approximations.

Notice to p2p lending services not listed:
If you want to be included in this chart in future, please email the following figures on the first working day of a month: total loan volume originated since inception, loan volume originated in previous month, number of loans originated in previous month, average nominal interest rate of loans originated in previous month.

Lending Club IPO Filing Published Today

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P2P Lending Service Lending Club Filed a preliminary prospectus today with the SEC to prepare the IPO. Lending Club aims to raise 500 million US$ in the public offering. The document does not set a share price or a company valuation, which will happen later on in the process. The underwriters are Goldman, Morgan Stanley, Citi, Stifel, BMO, Allen & Co., William Blair, and Wells Fargo. In the first half oof 2014 Lending Club had a revenue of 87.3 million US$ and a net loss of 16.5 million US$. S. The company had 2.33 billion US$ in p2p loans on its balance sheet as of June 30.

This is a huge boost for p2p lending and will raise lots of awareness in the US and internationally for the innovative industry.


Rapid growth of Lending Club’s loan volume since launch in 2007

(Sources: press release and prospectus)

P2P Lending Service Investly Launched Today

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P2P lending service Investly launched today offering business loans to companies financed by both private and institutional investors. All investment opportunities offered have undergone a thorough pre-screening process including business plan validation, financial analysis as well as credit evaluation.

Once the requested loan amount is filled Investly uses an reverse auction with investors underbidding each other and lowering the interest rate for the business until the auction ends.

The first investment opportunity Investly has live is the chance to lend to Sepapaja OÃœ, a blacksmith who is planning to use the investment to scale up up their business by purchasing a larger pneumatic hammer, lathe and various other tools. According to Stig Paju, the manager of Sepapaja OÃœ, they decided to use the service because: ‘by using Investly we are able to enhance our production, widen our product portfolio and serve more clients. As a positive by-product, our investors will help us to spread the word and gain even more customers.’. The interest rate offered is 15% p.a., but may sink if investor demand is higher than the loan amount. The loan is rated credit grade A by Investly.

Investly is open to international investors from the European Union and Switzerland. I was able to test-drive the platform during the just ended closed alpha. Transfering money in via a SEPA transfer and bidding was fast and easy.

To accelerate the development of the service, Investly will be participating in the BusinessTech accelerator run by Startup Wise Guys – a technology accelerator with a global reach based in Tallinn, Estonia. Investly was chosen from among 150 applicants to part-take in the program alongside 10 other teams from all over the world. Over the next 3 months, they will go through an intensive mentoring, service development and marketing process; ending with investor days both in Tallinn, Estonia and London.

Siim Maivel, CEO of Investly told P2P-Banking.com:  ‘Building on the launch in Estonia, we have ambitious expansion plans with preparations under way to enter new markets, with the UK to follow later in the year.’.

Lendit Conference comes to Europe in November

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LendIt Europe will be held in London on November 17th, 2014. LendIt is the major conference for the p2p lending industry. I was not able to attend the event when it took place in the US in the past year, but I will certainly fly to London in November. The San Francisco event last autumn was attended by over 950 people.

LendIt Europe will be held at 155 Bishopsgate, a state of the art new conference venue in the heart of London’s financial district.

Registration is now open (use discount code wiseclerkvip on the payment page and you get a special 15% discount on the ticket price, which I obtained for readers of P2P-Banking.com). Earlybird price will end on Aug. 31st.

LendIt Europe will bring together the leaders and pioneers at the forefront of the p2p and online lending industry in Europe. In addition to the leading lending platforms, LendIt Europe is expected to draw institutional investors, financial analysts, private wealth managers, family offices, individual investors, and media representatives from across the globe. Agenda, speakers, and sponsors will be announced in the coming weeks.

“Europe is the birthplace of p2p lending and in many ways, it leads the world,” said Peter Renton, Co-Founder of LendIt and Founder of Lend Academy. “For this reason, we decided to create a European version of our popular LendIt Conference to bring the European leaders in our industry together so we can learn from each other.”

The one-day conference will feature keynotes from the CEOs of the leading UK platforms, as well as interactive panel sessions with leaders from across Europe. The Exhibit Hall will feature both new and established platforms as well as service providers, allowing attendees to get a complete snapshot of the industry. There will also be a pre-conference cocktail party held the night before at the Andaz Hotel on Liverpool Street.