Year-End Review of my Mintos Results in 2018 and Outlook for 2019

I started investing on the p2p lending marketplace Mintos* in January 2015. Nearly 4 years have passed. Most of the time my strategy was buy-and-hold, that is I invested in loans with the intention to hold them till maturity. That’s also what I had been doing at the majority of other p2p lending platforms. In the beginning of the year I had a large chunk of high-interest, longer-term Mogo car loans, together with some mid/longer-term loans of other originators on Mintos. After many of the Mogo loans were bought back in summer I decided to switch to a completly different strategy on Mintos*. Thereafter I concentrated on trading, that is buying loans on the secondary market and selling them at a higher price on the secondary market again, usually holding these loans only for a short time frame.

When Mintos* introduced the Secondary Market Autoinvest Feature in October my strategy got a boost.

So how did it go?

Mintos Account Statement
Summary of my account statement for 4th quarter 2018 – click on image for larger view

As you can see in the screenshot above I made 712.80 EUR profit from trading (buying and selling) loans in the fourth quarter. Compare that to the 127.14 EUR (101.74+25.40) interest earned. Obviously trading has been much more profitable. I consider it not much riskier than my previous buy and hold strategy as I was able to maintain a reasonable level of diversification over several investors. But of course investing on Mintos is high risk anyway.

Which loans did I select for trading?

It all comes down to buying cheap and selling at a higher price. My experience is that this works best with mid-term, EUR BB loans. With short term or very long term loans the impact of premiums und discount is to high / to low on the YTM for a good turn-around of inventory.

Below is a snapshot of the loans currently in my Mintos* portfolio today – of course the composition changes very frequently with this strategy. It can be observed that loan ranges between 18 and 42 months dominate my portfolio, which consists of 478 indiviudal loan parts. Also loans with 13% and higher interest rates are overweighted.

Mintos Account Statement

This trading strategy worked very well for me in the past quarter. It would probably not scale, if an investor tried to deploy much more capital, as loan supply that matches my criteria for buying is limited and competition is increasing.

The Net Annual Return (NAR value) Mintos displays for my return has been constantly increasing this quarter and today is at 14.74%. Remember this is calculated for the whole time since I started investing, so since January 2015. If I would calculate this figure only for this quarter results, it would be much higher.

Net annual return Mintos
Screenshot Dec. 28th, 2018

So what to expect in 2019?

Interest rates on Mintos* have been fluctating over the past years. In the last months they have risen considerably. Possibly a seasonal effect. I have no idea whether they can rise a little further still, or have peaked and will fluctate back in the other direction for a few month. Also the economic cycle might turn.

I will stick to my buying and selling strategy for now and for this strategy supply and demand on the secondary market is much more important than whether the interest rates are 1 or 2% higher or lower as most of my result is generated from secondary market gains rather than interest earned.

Also I am acutely aware of the risk that the huge number of originators pose. Even if Mintos does a good job of vetting and monitoring the originators, the sheer number of originators statistically means that chances that one of them might get into financial trouble are not neglectabe. For indivual investors the only viable measure to have some protection (and to reduce losses in that case) is diversification across several originators.

I do hope that 2019 will be a very profitable year for Mintos* investors!

New investors signing up via this link on Mintos*, get 1% cashbark on all investments they make in the first 90 days after registration.

Mintos to Provide Debit Cards and IBAN Accounts to Investors

Mintos LogoP2P lending marketplace Mintos* has raised 5 million EUR in a Series A. The money is earmarked to provide new features for investors.

Mintos will be magnifying its role in the financial services sector by adding personal IBAN accounts and debit cards to its established global lending marketplace in the near future. The IBAN personal accounts will give investors the ability to make and receive payments from around the world, including receiving a salary directly to their Mintos account. Meanwhile, the Mintos card will allow investors to make transactions around the world or online and withdraw money at ATMs.

This will be made possible by the e-money licence Mintos is applying to receive. As an Electronic Money Institution, Mintos will protect money held by investors under the European PSD2 legislation.

Martins Sulte, Mintos CEO and co-founder: “Providing customers with a personal IBAN account and debit card will mark a major leap in our services and significantly improve the user experience. Soon, everybody with their own IBAN accounts will be able to give the account details to their friends, companies or customers to get paid, to pay using a debit card, and to continue using Mintos for investing in loans around the globe and earning great returns. Our upcoming mobile app will make it even more convenient.”

The fintech startup has a fast-growing customer base of 87 000 investors from 71 different countries, with plans to open doors to more users in additional locations. With 100 000 registered investors forecasted by the end of the year and 300 000 by the end of 2019, Mintos will be focusing efforts on investor acquisition and expanding to additional global markets. To accomplish this, Mintos plans to significantly invest in doubling the size of its team.

The 5 million EUR series A funding comes from existing investors Grumpy Investments (previously, Skillion Ventures), Riga based venture capital firm that is focused on investing in technology companies.

Clearly Mintos attempts to position itself away from a pure investment offer to a broader financial service.

Configuring the new Mintos Secondary Market Autoinvest for a Test

Mintos* has announced a new feature – the autoinvest can now be used to buy loan parts on the secondary market too. I am setting up a new autoinvest to test it and am curious how many loan parts I will be able to acquire with this new feature. Just like on the primary market there are many selections adjustable.

Mintos Auto Invest Secondary market
Screenshot Mintos Auto Invest Secondary Market

Mintos will roll out the new feature to all investors on Dec. 3rd. Only selected investors will be unlocked earlier. Mintos* says investors can deposit an additional 5,000 EUR to add to their balance to get early access. Also investorswhich have invested at least 50,000 EUR will have early access.

Mintos Auto Invest Secondary Market Details
Screenshot: Further details of Mintos Auto Invest Secondary Market

For the further details of the test, I set the secondary market auto invest to buy loans with at least 10% YTM, a maximum loan term of 30 month and at least 0.5% discount. I left the interest rate open, as the restriction is not really necessary for me in this case in conjunction with the YTM and the discount.. For ‘Do you want to reinvest’ and ‘Include loans already invested in’ I choose ‘Yes’. I deselected ‘Diversify across loan originators’ as I want to buy all loans that match these conditions.


No surprise – no loans match my selection. Loans with these criteria selected by me have been bought up fast in the past, even before the introduction of this new autoinvest. I do wonder, which investor will get priority in case there will be autoinvests of multiple investors matching a new loan up for sale. I expect this new autoinvest will be a popular feature amongst Mintos* investors.

Not many but a few other p2p lending platforms offer autoinvests for their secondary markets too.

 

 

Lower Interest Rates on Mintos – How do Investors React?

Compared to the beginning of July the interest rates for newly issued EUR loans on Mintos are much lower now. While investors enjoyed interest rates of up to 13-14% for loans issued in the first half of the year, typical rates are 8-11% now, with a 12-13% for more exotic loans mixed in.

Cause of the change in market condition was that Mogo, one of the larger loan originators on Mintos, issued a bond worth EUR 50 million, with an annual interest rate of 9.5% (ISIN XS1831877755) on June 25, 2018 and Mogo announced that starting from July 13, 2018, Mogo would partially repurchase loans from investors on Mintos using their call option as stipulated in the assignment agreement. During July, Mogo plans to gradually repurchase in total up to EUR 16 million net of loans issued to borrowers in Bulgaria, Estonia, Latvia, Lithuania, Poland, and Romania.

Following the repurchase, the interest rates for newly issued EUR loans were sharply lower not only for Mogo loans but also for loans of the other originators on the Mintos platform.

This left most investors with a lot of cash in their accounts, as commonly 1/3 to 2/3 of all the Mogo loans in their portfolios had been repurchased and their previously configured autoinvests did not match any loans any more at their set interest rates.

To find out how investors reacted to the situation P2P-Kredite.com conducted a survey among German speaking Mintos investors. Here are the preliminary results (48 respondents):

  • 35% say they withdraw uninvested cash and invest it on other p2p lending platforms
  • 21% say they continue to invest on Mintos primary market
  • 17% say they just wait, the interest rates will rise again
  • 15% say they withdraw uninvested cash and invest it in other asset classes (e.g stock)
  • 12% say they buy on the Mintos secondary market now, instead of using the primary market

For continental European investors looking for high yield alternatives here are 5 platforms that survey respondents liked:

  1. Bondora
    Bondora is a long established Estonian company offering consumer loans in Estonia, Finland and Spain. Investors can choose between their new “Go&Grow” product (up to 6.75% interest) or the self-select autoinvest options with individual loans yielding much higher (nominal) interest rates
  2. Estateguru
    Estateguru is a marketplace for property secured loans mostly in the baltic countries. Typical interest rates are 10-12%. Investors pick individual loans or enable autoinvest
  3. Grupeer
    Grupeer is a young Latvian platform gaining popularity among the German investors. They list business and development loans in several countries (e.g. Latvia, Russia, Belarus, Norway, Poland). Typical interest rates are 14-15%
  4. Peerberry
    Peerberry is a young Latvian platform listing consumer and property loans in several countries (e.g. Lithuania, Poland, Czech Republic, Ukraine). Typical interest rates are 11-13%
  5. Robocash
    Robocash is a Latvian platform listing consumer loans in Kazachstan and Spain. Typical interest rates are 14-14.5%.

This selection is based on the likings of German speaking investors that voted in August for best p2p lending platform in a P2P-Kredite.com survey:

Best p2p lending platforms by German investor survey
51 respondents, platforms that got no votes are not shown

The survey shows that Mintos is still rated number one in investor opinion among the queried audience, but the others are catching up (compared to similar surveys in the past).

My own Mintos portfolio shrank to less than 40% of its previous size as only  less than 1/3 of the Mogo loans I had in early July are still in my portfolio. I withdrew a lot of cash and have transfered it to other p2p lending market places. Of course I’ll hold on to the my remaining Mogo loans as nearly all of them are at 13-14% interest rate.

Mintos Adds First Loan Originator From the UK

P2P lending marketplace Mintos has added 1pm as new loan originator on the platform. 1pm is an FCA accredited non-bank finance provider which is publicly listed on the AIM market on the London Stock Exchange. The company provides various loan types to SMEs in Britain. On Mintos 1pm offers business loans for investment in GBP, with an interest rate of up to 11%.

1pm was founded in 2000 and listed on the London Stock Exchange in 2006. The company is dedicated to helping the United Kingdom’s economy grow by providing finance to businesses. It offers many finance solutions to SMEs within the United Kingdom including asset and vehicle finance, hire purchase, commercial loans and invoice financing.

1pm currently operates from eight sites across the United Kingdom. The company employs 170 people and has more than 16,000 small businesses as clients.

“An important part of our strategic growth plan is to harness the benefits of financial technology. By joining the Mintos marketplace, we will now be able to accelerate the amount of loans that are originated by our business and to access retail global investors efficiently, a funding source that would be unavailable to us without this digital capability,” says CEO of 1pm plc Ian Smith.

1pm business loans from the United Kingdom on Mintos range from GBP 3 000 to 50 000. The repayment period is from 3 months to 5 years. .

1pm has a total lease, loan and invoice finance portfolio of GBP 130 million. The interim financial results for the six-month period that ended on 30 November 2017 for 1pm plc showed the group’s revenue increased by 74% to GBP 13.9 million. Profit before tax for the group increased by 77% to GBP 3.6 million.

“The United Kingdom has one of the largest alternative finance markets in the world. We are very excited to have expanded Mintos into this geography by launching 1pm on the marketplace. The company is a great addition and offers investors on Mintos a new geography and further opportunities in GBP investments. We look forward to this partnership with 1pm and to seeing further partnerships arise in this market,” says Martins Sulte, CEO and Co-founder of Mintos.

Investing on the Mintos Secondary Market – Hint 2 – Buying overdue loans at discount

On the p2p lending marketplace Mintos there is a very large and active secondary market. In my previous article I described that the YTM calculation shown on the secondary market is based on the assumption that the buyer holds the loan part till regular end of term and the buyer will achieve a higher yield, if he buys at discount and the loan is repaid prematurily.

In the article I will look into a possible strategy on the Mintos secondary market: buying overdue loans at discount.

In a first step I sort/filter the buyback loans to only have those at discount that are very late (31-60 days overdue).

Mintos Screenshot
Click on image for larger view

I get a result of 349 loans with various discounts and an YTM of up to 14%. Not surprising for me, many of the loans listed at the top are Mogo loans. These are less attractive for buyers with this strategy. Why? Because they actually have a lower probability of defaulting. The paradox of this strategy is that the buying investor actually wants a high probability that the loans he buys default because that will boost his yield.

So in the next step I sort/filter to exclude Mogo loans. I also exclude loans that have a low YTM. This, because there is a chance that they do payup and then the buyer might be stuck with the loans for longer than 30 days.

Mintos Secondary Market
Click for larger view

Finally let’s change the filter to require a minimum discount of 0.3% and there are 21 results:

Mintos Secondary Market Strategy
Click for larger image

What would a buyer get?

If these loans do pay up and then run till regular maturity date, then he recieves a yield of 12.4% to 13.8%. Decent, but not very high compared to other Mintos loans.

However there is a chance of at least 50% that these loans will default and are bought back within the next 30 days. If that happens to a loan, that a buyer bought at 0.3% discount, it will boost his yield very roughly by more 3.6% (0.3% for 30 days multiplied by 12 to get annual effect). Likely it is more because the next payment date will be less than 30 days away. But even taking 3.6% the yield will be around 17%.

Looking at it, it is obvious that discounts as high as possible are preferable. The loan with the 0.6% discount would mean a boost of very rougly 7.2% yield on top (0.6*12). So that could lead to about 20% yield.

I have taken the screenshots for this article just at a random point in time. Higher discounts do happen and discounts of around 1% are not a rarity.

This is certainly not a strategy for a beginner at Mintos and it requires time and monitoring, but it is a frequently used strategy when investing on the Mintos secondary market.

Not yet investing on Mintos? Get cashback!

Mintos is offering 1% cashback on all investments made in the first 90 days after registration if you use this link to signup: Mintos registration. Currently there is an additional cashback offer for new and existing investors of 4-5% cashback on Mogo loans with loan durations of 48 month or more. Need to enroll once (click banner in dashboard after you finished registration). Expires Feb. 16th. The 4-5% roughly equals 1% increased yield.

More cashback offers are listed on the P2P-Banking p2p lending cashback list.