r00lish67
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Post by r00lish67 on Apr 25, 2019 9:10:07 GMT
Hi chaps, a genuine question for the statistically minded on the RS stats. Go the table entitled "Loss rates on Provision Fund covered loans". This table shows the expected lifetime loss rate at the point the loans were written versus the latest projected lifetime loss rate. As I read it, this table shows that from 2016-2019, the expected lifetime loss rate at the point loans were written is higher than the current forecast (or the same, in the case for 2019) i.e. the loss rate is now better than RS first envisaged when writing the loans. My question is this - if the loss rate is generally better than RS were expecting for the last few years, then why is the provision fund not well over it's 125% target (or indeed 150% given that that was the target in 2016-2018), and instead actually below it? Or to relate it to the stats visible on the page, in the table below (provision fund usage), it shows the 2016 cohort is now projected to use 106% of the provision fund. This despite the expected lifetime loss rate at the point of origination being higher than it is forecast to be now (3.4% vs 3.3%). This doesn't make sense to me. What it seems to say is "We're doing a little better than we expected with defaulting loans. Oh, btw, the provision fund is haemorrhaging cash". Were they planning to fail? What am I missing? |
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benaj
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Post by benaj on Apr 25, 2019 11:04:35 GMT
The average loan term is 27 months on RS. So the good news is highest actual PF usage haven't exceeded 118%, 2015 PF usuage is 118%. RS can increase PF coverage by raising fee from borrowers as an option but it may not increase expected future PF inflows if lending volume goes down. As an Investor on this platform, I do want to know what the current PF coverage is and what plan RS has to keep PF coverage above KPI. Last update was 1st March.
The interest bits:
- auditor fees for RATESETTER TRUSTEE SERVICES LIMITED increased to 36k (2018) from 14k (2016)
- Profit before tax for RATESETTER TRUSTEE SERVICES LIMITED is £482k
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aju
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Post by aju on Apr 25, 2019 11:47:38 GMT
Perhaps like many big companies when the DB pension funds look quite juicy they seem to take pension fund breaks etc. BT did this for a while in the early 90's I think. Trouble is later on they then had a massive pension deficit and have been bolstering it ever since 500M or more a year I think at last glance. Not saying it's the same thing but as r00lish67 says does seem a bit suspicious/odd and benaj has provided some interesting thoughts too from the company information - I think. Mind you it's always amazing how the magicians can rearrange the smoke and mirrors to cover most things!. |
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r00lish67
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Post by r00lish67 on Apr 25, 2019 11:53:06 GMT
It just seems implicit to me that if the RS loan default rate is as expected or better, then the provision fund should be doing the same.
Otherwise, you have a situation where overperformance is required just to sustain the provision fund, and poor performance would totally decimate it. I may genuinely have the wrong end of the stick though, hence the question.
Btw, although interesting, benaj's point doesn't really address my question unless I've misunderstood that too!
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aju
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Post by aju on Apr 25, 2019 13:45:10 GMT
The average loan term is 27 months on RS. So the good news is highest actual PF usage haven't exceeded 118%, 2015 PF usuage is 118%. RS can increase PF coverage by raising fee from borrowers as an option but it may not increase expected future PF inflows if lending volume goes down. As an Investor on this platform, I do want to know what the current PF coverage is and what plan RS has to keep PF coverage above KPI. Last update was 1st March. The interest bits: - auditor fees for RATESETTER TRUSTEE SERVICES LIMITED increased to 36k (2018) from 14k (2016) - Profit before tax for RATESETTER TRUSTEE SERVICES LIMITED is £482k Okay so where are the RS KPI's that I can refer to?. There is an interesting comment on the RS KPI's from a commentor on this site youngfiguy.com/p2p-lending-a-review-of-the-market/The 4th commenter makes this statement. Not sure if they are correct or not but if they are lags and any PF changes being a month in arrears seems to suggest this, then none of us will know the damage until it may be too late. That said I'm not sure it's anything to do with what you are both saying.
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benaj
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Post by benaj on Apr 25, 2019 13:53:11 GMT
Okay so where are the RS KPI's that I can refer to?. The figures can be found in the accounts doc on Companies House
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aju
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Post by aju on Apr 25, 2019 14:35:46 GMT
Okay so where are the RS KPI's that I can refer to?. The figures can be found in the accounts doc on Companies House Thanks my access to company check does not seem to tell me which doc I want and as there are quite a few I'm not sure my free 5 will be enough to get the right document. Thanks anyway. Do you know what the kpi says for the PF fund by chance anyway - perhaps. Sadly I'm good with a computer but not with company docs, misspent youth i guess. Also there seems to be 5 different companies listed against them - although I think I know which one might have the info perhaps, but my free access only allows me 5 per year. Edit: I pulled the latest Annual report and Financial Statement but nothing in that for KPI as far as I could tell - its not searchable (just a scanned document). Edit: Okay I'm reading about possible KPI's, they are not like the ones I had a an employee but I get what they might be now - this doc helped enormously in terminology terms. I get it now the Restricted assets in the AR&FS on page 14 seems to refer to the PF.
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benaj
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Post by benaj on Apr 25, 2019 14:51:30 GMT
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aju
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Post by aju on Apr 25, 2019 15:05:09 GMT
That's useful they are free on there. I used one of my 5 credits a year on companycheck to get that same document. I'm still trying to understand what the KPI is for the PF (Restricted Assets in the document says it " represents the capital held to compensate investors against potential risk of borrower default") One of these days i'll get the hang of it all. Thanks for the steer, time will tell if I get anything out of it.  edit: Sadly its way before the PF fund seems to have gone south though. One interesting thing on page 18 - Note 9 is ...
Restricted Investments increased by 26k from 3.468M
Restricted cash reduced by 3M from 11.327M
not sure I can see how this relates to the PF yet figures though as they seem much larger in RS docs.
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aju
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Post by aju on Apr 25, 2019 15:21:05 GMT
Apologies r00lish67 i seem to have gone off at a tangent from your original question. Its benaj fault for giving me something to do when I should have been doing my personal accounts - Mrs Aju went shopping this morning. Thanks for the steers benaj |
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Post by propman on Apr 26, 2019 12:03:16 GMT
Re OP. The figures quoted for "expected loss rate at point loans were written" is nothing of the sort. It was actually the expected default at the end of the year concerned! As I have pointed out before, ever since the defaults have been occuring significantly above the expected rate, the increased bad debt forecasts have been confined to earlier periods and the overall impact offset by expectations of lower utilisation of the more recent period (the period with the highest amount of loans outstanding and the lowest crystalisation of actual bad debts). As the year proceeds, the actual bad debts have always been higher than earlier predicted and so the expected bad debts at the year end are significantly higher than were anticipated when the loans were entered into.
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jlend
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Post by jlend on Apr 26, 2019 14:34:05 GMT
Hi chaps, a genuine question for the statistically minded on the RS stats. Go the table entitled "Loss rates on Provision Fund covered loans". This table shows the expected lifetime loss rate at the point the loans were written versus the latest projected lifetime loss rate. As I read it, this table shows that from 2016-2019, the expected lifetime loss rate at the point loans were written is higher than the current forecast (or the same, in the case for 2019) i.e. the loss rate is now better than RS first envisaged when writing the loans. My question is this - if the loss rate is generally better than RS were expecting for the last few years, then why is the provision fund not well over it's 125% target (or indeed 150% given that that was the target in 2016-2018), and instead actually below it? Or to relate it to the stats visible on the page, in the table below (provision fund usage), it shows the 2016 cohort is now projected to use 106% of the provision fund. This despite the expected lifetime loss rate at the point of origination being higher than it is forecast to be now (3.4% vs 3.3%). This doesn't make sense to me. What it seems to say is "We're doing a little better than we expected with defaulting loans. Oh, btw, the provision fund is haemorrhaging cash". Were they planning to fail? What am I missing? I can think of a few potential reasons that RS have mentioned in the past, for example: 1. Higher or earlier than expected early loan redemptions on performing loans. This means less money going into the PF than expected over the lifetime of an annual cohort of loans. Even if the defaults are as expected, the percentage use of the reduced PF fund increases. 2. Earlier than expected defaulted loans. Hence this default cohort has made a corresponding reduced payment into the PF than expected prior to defaulting. Hence the PF is smaller than expected. There may be other reasons and I don't know if the above examples actually happened. There was quite a bit of discussion around this when RS switched from upfront PF funding to some funding of the PF over the lifetime of loans as borrowers made their regular monthly payments. You may be able to get some idea about what is going on from looking at a copy of the loan book spreadsheet that until recently was available to download. RS might email you the last copy they published before removing it if you ask them.
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