Hunger for Liquidity – State of P2P Lending in Times of the Coronavirus

Not only the stock markets, but also the p2p lending sector is heavily impacted by the current coronavirus situation. In this article I’ll try to give an overview of what’s currently the situation.

I watched the Mintos* live webinar on the current situation for the past 90 minutes. Some screenshots of the slides shown are at the end of this post. About 800-900 Mintos investors were watching and I think they highly appreciated the time and effort Mintos took to communicate. CEO Martins Sulte spent over 45 minutes answering questions. And there are a lot of questions investors have in times like these.

My take is, that the biggest trend we saw in p2p lending in the past week is the hunger for liquidity. Both on the investor side as on the loan originator side (on those marketplaces that work with loan originators).

105 German investors participated in a poll I ran over the past two days. Of these

  • 11% say they increase their p2p lending investment, to buy and profit from loans that are available at (large) discounts on secondary markets
  • 3% say they are increasing their p2p lending investment for other reasons
  • 30% reinvest as usual
  • 26% are withdrawing money as the want to reallocate it to the stock money
  • 20% are withdrawing money as they think the risk is too high

So even in this small, non-representative poll nearly half the investors are saying they are withdrawing money.

How that impacts the p2p lending marketplaces can be observed exemplarily on Mintos* :

  • loans on offer rose and still rise sharply both on the primary market (900,000 loans) and on the secondary market (1.7 million loans)
  • as many investors scramble to exit, this is only possible for them if they offer extreme discounts on the secondary market (the highest discount for current loans on offer is currently -20.1%, resulting in YTMs of 30% and higher for the buyer)
  • Congruously the Invest&Access product of Mintos got very illiquid. Withdrawals are very delayed and partial.
  • The volume of newly financed loans on the primary market has tanked
  • Interest rates offered on the primary market rise (current maximum 21.1%, Mintos even had to adapt the range the slider in the UI could show), together with cashbacks on offer and there are also measures to tie in capital longer.

In the current situation most investors in the discussion seem to assume that elevated risks come by the potential inability of borrowers to repay the loans, due to economic downturn. That may well be, but would impact the yield mid- or long-term (weeks or months).
In my view there are two very short-term risks that many investors overlook:

  1. The currency risks for many Mintos loan originators: Many have issued loans to borrowers in weak currencies like RUB, KZT or GEL, but need to pay Mintos investors in EUR. The sharp change in exchange rates could pose major problems for the liquidity of the loan originators.
  2. Many loan originators were growing fast and required constant cashflow to finance their lending and operations as they were not yet profitable. Some were even leveraged. External refinancing might be very hard to impossible to obtain in current market conditions (see for example investors reaction on trading of the Mogo Finance bond). And as said the volume financed on Mintos primary market is slowing. Again this could pose liquidity problems to originators.

An industry insider I spoke to said he would expect at least 2-3 loan originators to fail short term. CEO Sulte acknowledged in answering the questions on the webinar that “not all” could be expected to make it in the current situation, pointing to the large number of loan originators active on Mintos.

The two cited short term problems are especially a concern on those p2p lending market places that operate with loan originators. Of course the investors are also withdrawing increased amounts on “classic” p2p lending marketplaces like Assetz Capital, Bondora, Ratesetter and Zopa, but this poses no short-term risks to the stability of these marketplaces in my view.

Other investors share this opinion, pointing to the different levels of discounts on different secondary market (for current loans: Mintos* -20.1%, Viventor* -6%, Iuvo* -5.7%, Finbee* -5%, Savy* -5%, Neofinance* -5%, Bondora* -3%)

The platforms have reacted by four ways: communication, temporarily suspending borrower repayment requirement (especially SME loans, e.g. Linked Finance, October, Neofinance* ), and stepping up marketing and increasing interest rates:

  • Bondora* runs a raffle for investors which can win a BMW, minimum investment 1 EUR required.
  • Lendermarket* has increased interest rates from 12 to 14% and offers 2% cashback for any investment increase
  • Twino* has increased interest rates to 14%
  • Swaper* increased interest rates to 14% (16% for VIP customers, 5K minimum required)
  • Robocash* increased interest rates to 14%
  • Estateguru* interest rates have increased slightly

Below are screenshots of some of the slides shown in the Mintos webinar today:

mintos corona

mintos corona

mintos corona

mintos corona questions

Funding Circle Closes Offices in Berlin and Amsterdam

Funding Cirlce LogoFunding Circle today announced that it will close the offices in Amsterdam and Berlin laying off 125 employees. The German operations in future will focus purely on brokering loan request leads and will be managed from employees in London.

The announcement is not surprising as Funding Circle Germany failed to gain traction over the past years and struggled with default rates that exceeded expectations.

Funding Circle stock has gone down from over 440 pence at IPO to about 57 pence currently.

International P2P Lending Volumes February 2020

The table lists the loan originations of p2p lending marketplaces for last month. Mintos* leads ahead of Zopa and Ratesetter*. The total volume for the reported marketplaces in the table adds up to 660 million Euro. I track the development of p2p lending volumes 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 platforms. This month I added Bulkestate*.

Investors living in national markets with no or limited selection of local p2p lending services can check this list of international investing on p2p lending services. Investors can also explore how to make use of current p2p lending cashback offers available. UK investors can compare IFISA rates.

p2p lending statistic february 2020
Table: P2P Lending Volumes in February 2020. Source: own research

Note that volumes have been converted from local currency to Euro for the purpose of comparison. Some figures are estimates/approximations.

Links to the platforms listed in the table: Ablrate*, Archover*, Assetz Capital*, Bondora*, Bondster*, Bulkestate*, Colectual*, Credit.fr*, Crowdproperty*,  Dofinance*, Estateguru*, Fellow Finance*, Finansowo*, Finbee*, Folk2Folk*, Geldvoorelkaar*, Growly*, Grupeer*, Investly*, Iuvo Group*, Kameo*, Klear*, Landlordinvest*, Linked Finance*, Look&Fin*, Mintos*, MyTrippleA*, Neofinance* , October*, Peerberry*, Proplend*, Ratesetter*, Rebuilding Society*, Savy*, Smartika*, Soisy*, Sourced*, Swaper*, TFGcrowd*, ThinCats*, Twino*, Viainvest*, Viventor*, Zopa*.

Notice to p2p lending services not listed: Continue reading

International P2P Lending Volumes January 2020

The table lists the loan originations of p2p lending marketplaces for last month. Mintos* leads ahead of Zopa and Ratesetter*. The total volume for the reported marketplaces in the table adds up to 690 million Euro. I track the development of p2p lending volumes 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 platforms. I removed Boldyield as the platform has paused lending and repayed all investors (including accrued interest).

Milestones in cumulative volume lent crossed this month:

Investors living in national markets with no or limited selection of local p2p lending services can check this list of international investing on p2p lending services. Investors can also explore how to make use of current p2p lending cashback offers available. UK investors can compare IFISA rates.

p2p lending statistic january 2020
Table: P2P Lending Volumes in January 2020. Source: own research

Note that volumes have been converted from local currency to Euro for the purpose of comparison. Some figures are estimates/approximations.

Links to the platforms listed in the table: Ablrate*, Archover*, Assetz Capital*, Bondora*, Bondster*, Colectual*, Credit.fr*, Crowdproperty*,  Dofinance*, Estateguru*, Fellow Finance*, Finansowo*, Finbee*, Folk2Folk*, Geldvoorelkaar*, Growly*, Grupeer*, Investly*, Iuvo Group*, Kameo*, Klear*, Landlordinvest*, Linked Finance*, Look&Fin*, Mintos*, MyTrippleA*, Neofinance* , October*, Peerberry*, Proplend*, Ratesetter*, Rebuilding Society*, Savy*, Smartika*, Soisy*, Sourced*, Swaper*, TFGcrowd*, ThinCats*, Twino*, Viainvest*, Viventor*, Zopa*.

Notice to p2p lending services not listed: Continue reading

International P2P Lending Volumes December 2019

The table lists the loan originations of p2p lending marketplaces for last month. Mintos* leads ahead of Ratesetter* and Zopa. The total volume for the reported marketplaces in the table adds up to 594 million Euro. I track the development of p2p lending volumes 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 platforms. This month I added Boldyield*. I removed Landbay (institutional only now) and Lending Works (monthly data not available anymore).

Milestones in cumulative volume lent crossed this month:

  • Iuvo*: 100M EUR
  • Zopa 5000M GBP

Investors living in national markets with no or limited selection of local p2p lending services can check this list of international investing on p2p lending services. Investors can also explore how to make use of current p2p lending cashback offers available. UK investors can compare IFISA rates.

p2p lending statistics december 2019
Table: P2P Lending Volumes in December 2019. Source: own research

Note that volumes have been converted from local currency to Euro for the purpose of comparison. Some figures are estimates/approximations.

Links to the platforms listed in the table: Ablrate*, Archover*, Assetz Capital*, Boldyield*, Bondora*, Bondster*, Colectual*, Credit.fr*, Crowdproperty*,  Dofinance*, Estateguru*, Fellow Finance*, Finansowo*, Finbee*, Folk2Folk*, Geldvoorelkaar*, Growly*, Grupeer*, Investly*, Iuvo Group*, Kameo*, Klear*, Landlordinvest*, Linked Finance*, Look&Fin*, Mintos*, MyTrippleA*, Neofinance* , October*, Peerberry*, Proplend*, Ratesetter*, Rebuilding Society*, Savy*, Smartika*, Soisy*, Sourced*, Swaper*, TFGcrowd*, ThinCats*, Twino*, Viainvest*, Viventor*, Zopa*.

Notice to p2p lending services not listed: Continue reading

Thin Cats Calls it a Day For Retail Investors – Puts Loans in Run-Off

British p2p lending marketplace Thin Cats* announced that it will cease to offer new loans to retail investors. Thin Cats had facilitated about 556 million loans to UK business clients on its marketplace.

UPDATE: The headline has been edited compared to an earlier version to clarify that the company only stopped to offer retail p2p loans. This confusion resulted from the fact that the announcement below made no mention that the company will focus on institutional clients in future.

The Thin Cats announcement reads:

You have probably noticed that the number of new loans for investment
on the P2P platform operated by Business Loan Network Limited (BLN),
one of the ThinCats Group companies, has fallen significantly over the
last two years.

Following a thorough review, we have concluded it is no longer cost
effective and practicable to raise funds in this way, so have decided to
close the P2P platform to new business and initiate a run-off process
for existing investors.

This proposal has been discussed with the Financial Conduct Authority
(FCA) and we have made a voluntary request to the FCA that the
permissions to operate an electronic platform be closed to new business.

Our decision to initiate the ThinCats P2P Platform run-off has had the
following impacts which became effective at 12.01am on 9 December 2019.

No new loans will be offered on the ThinCats P2P Platform
The secondary market has closed and any loan parts listed for sale at the time of closure have been cancelled
No new accounts, including ISA accounts, can be opened
No new lender deposits can be accepted

Please note that investors can continue to log in to their account(s) in
the usual way until such time as their account closes as part of the
run-off process.

Crucially all of our existing systems and controls will remain in place
to ensure investors’ interest and capital is collected when due or
otherwise actively recovered. Investors can continue to withdraw any
cash balances to their nominated bank account following the usual lender
withdrawal request process. It is no longer possible to add new funds
to your account(s), although loan repayments collected on your behalf
will continue in the normal way.

The effect on different categories of investor is detailed below:

1. Lenders holding performing loans

Lenders with status “A” loans that are performing as expected will
continue to receive interest and capital repayments in line with the
original loan schedule. We would encourage you to withdraw your cash
balances periodically.

Following the closure of the secondary market, you can no longer buy or
sell any loan parts and any loan parts currently listed for sale will be
cancelled.

For any performing loans that may subsequently become non-performing, these will be treated as described in section 2 below.

2. Lenders holding non-performing loans

For lenders with loans that are not performing in line with the original
loan schedule, we will continue to endeavour to maximise the returns to
lenders through our normal monitoring and recovery process. There will
be no additional impact from the introduction of a run-off period and we
will continue to email you with updates on specific non-performing
loans.

Once we have secured the maximum value from non-performing loans,
lenders will be asked to withdraw any remaining cash balances and close
their account.

3. Investors in Diversified Loan Portfolios (DLPs)

DLPs have a minimum Target Term, typically two years, during which it is
not possible to sell underlying loan parts. Following the closure of
the secondary market, performing loans within DLPs will no longer be
offered for sale via the secondary market towards the end of the Target
Term. Payments from these loans will, instead, continue until the loan
matures.

We will contact you separately with the proposed run off schedule for
each DLP that you hold and you will continue to receive DLP statements
on a quarterly basis.

Any non-performing loans within a DLP will be treated as described in section 2 above.

4. Registered investors with funded accounts but not holding loan parts

For investors that have cash balances in their ThinCats account(s) but
do not hold any loan parts, we encourage you to withdraw your cash to
your nominated bank account as soon as possible in the usual manner.

Once your account has a zero balance we will close your account. If you
do not withdraw any remaining cash balances, we will contact you again
to remind you of the need to transfer all monies out of your account.

5. ISAs

If you hold a loan or DLP within a ThinCats ISA, we will contact you
separately with details of the options open to you. It is no longer
possible to open a ThinCats ISA for the current tax year.

6. ThinCats Lending Clubs (“TLC”)

All TLCs have now come to the end of their term and those that remain
open are still to receive future realisations from non-performing loans
in each portfolio.

Once all possible realisations have been achieved the respective TLC will be closed and you will be notified accordingly.

In summary

The main impact of the platform run-off process is that no new loans
will be offered on the ThinCats P2P Platform and it is no longer
possible to open a new account.

In most other aspects, other than the closing of the secondary market,
the platform will continue very much as now: you will continue to
receive interest and capital repayments for performing loans and we will
continue to monitor loans and invoke recovery procedures in the normal
way. You will be able to log in to your account in exactly the same way.

We are committed to treating all customers fairly during the run-off
process and recognise it may raise a number of questions with investors.