Post by RateSetter on Dec 31, 2020 18:23:16 GMT
Good evening all. We have published the monthly Provision Fund commentary in a RateSetter Notice, which is copied below in full for ease of reference. The usual monthly update of data on the statistics page will be completed after the New Year's Day bank holiday weekend.
Monthly Provision Fund update
We update the Provision Fund numbers every month following the monthly Credit Committee and while the interest reduction is in place, we are providing a monthly commentary. The statistics webpage will be updated after the New Year’s Day bank holiday weekend.
Portfolio performance continues to be in line with expectations. In November we completed a debt sale of loans that had already been charged-off to the Provision Fund, receiving proceeds of £3m. This had the effect of boosting Provision Fund cash balances by bringing forward recoveries that were expected in the future. This has a positive impact on the coverage ratios. The recently announced sale of the property finance portfolio also has a positive impact on the coverage ratios and it is included in this month’s Provision Fund update.
In October, we changed the Provision Fund ‘charge-off’ procedure for consumer loans to help manage the Provision Fund’s cashflow (see the RateSetter Notice on 2 October 2020 for details). In view of the Provision Fund cash balance at November month end, on 17 December we reverted to our previous charge-off procedure, which will apply going forward. This has a positive impact on the coverage ratios. We monitor the Provision Fund cash balances closely and if required may reintroduce the new charge-off procedure in the future.
The overall impact is that the Interest Coverage Ratio rose from 68% to 92% while the Capital Coverage Ratio rose from 149% to 166%. This means that investors’ capital continues to be fully covered.
We update the Provision Fund numbers every month following the monthly Credit Committee and while the interest reduction is in place, we are providing a monthly commentary. The statistics webpage will be updated after the New Year’s Day bank holiday weekend.
Portfolio performance continues to be in line with expectations. In November we completed a debt sale of loans that had already been charged-off to the Provision Fund, receiving proceeds of £3m. This had the effect of boosting Provision Fund cash balances by bringing forward recoveries that were expected in the future. This has a positive impact on the coverage ratios. The recently announced sale of the property finance portfolio also has a positive impact on the coverage ratios and it is included in this month’s Provision Fund update.
In October, we changed the Provision Fund ‘charge-off’ procedure for consumer loans to help manage the Provision Fund’s cashflow (see the RateSetter Notice on 2 October 2020 for details). In view of the Provision Fund cash balance at November month end, on 17 December we reverted to our previous charge-off procedure, which will apply going forward. This has a positive impact on the coverage ratios. We monitor the Provision Fund cash balances closely and if required may reintroduce the new charge-off procedure in the future.
The overall impact is that the Interest Coverage Ratio rose from 68% to 92% while the Capital Coverage Ratio rose from 149% to 166%. This means that investors’ capital continues to be fully covered.