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Post by gravitykillz on Nov 5, 2019 7:35:17 GMT
Unofficially their provision fund is already depleted. Regardless of what they state officially or however they manipulate their figures.
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Post by gravitykillz on Nov 5, 2019 9:11:29 GMT
This is not a platform which can handle six figure losses. I do not have any funds in gs since August but I would suggest moving funds to ratesetter just to be on the safe sides. As any further losses (which could happen) could bankrupt the business. I’m not in Growth Street, never have been, never looked at it and and until this post was unlikely to ever look at it or invest in its loans. Thanks for putting it on my radar as something I should look at more closely if I ever have time to spare ;-) Your conclusion might turn out to be right but nothing you state provides enough evidence or analysis to support your conclusion. Ditto with Funding Circle Dont like funding circle I think that may possibly fail in the coming year as the share price has collapsed and investors run as there is a 4 month wait on withdrawals! Again this is my personal opinion. And people are free to invest wherever they wish. But I believe it is better to be safe than sorry. And yes funding circles well publicised share price crash marked with the fact that people have been waiting around 4 months to withdraw funds also sends alarm bells ringing.
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rogedavi
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Post by rogedavi on Nov 5, 2019 9:48:46 GMT
I think their provision fund can handle six figure losses - it is holding 1.3mln in cash after all. The question is how many. Whilst they dont operate at anywhere near the diversification levels of comparable platforms that utilise the provision fund model, they do to be fair, hold higher provision fund cash as a %age of outstanding loans (3.87%) than equivalents at LW (0.64%), RS (1.3%) & AC (who knows really but probably <1%). All of which could be open to FC style liquidity collapse if their PFs deplete/exhaust.
In that light GS does compare favourably, however the question here is concentration risk. Unfortunately we dont have a full breakdown of the portfolio but based on the statistics page the average facility size is £237k, of which 75% is actually drawn down (£180k per borrower). Looking a bit deeper at the sectoral breakdown we can see the highest average facility by sector is £750k - concentrated in 5 borrowers in the services sector. Those numbers are a little out of date and presumably include the 2x 1m+ loans somewhere in those numbers so the overall, and at least one of the sectoral averages, should be lower now.
We also know based on their revised credit policy they cannot go over 1m to a borrower now - this is a welcome development, as would continued growth/further diversification of the loanbook. Still set against the provision fund size of 1.3mln they are quite exposed to idiosyncratic events in the near term. The PF can survive 5-6 normal sized defaults (3% of borrowers - which isnt that many) or 2 large defaults if they are particularly unlucky going forward. It should be noted these would have to be instantaneous/clustered defaults as the PF in theory should be getting borrower contributions that at least match the forecasted bad debt rate if they have that calculation calibrated correctly.
That being said, a small stress test would tip it over the edge (just like what has just occurred), and ultimately it all depends really on how willing GS will be to keep topping up the provision fund in those events to maintain the PF. Given the current environment they could do a lot to give investors confidence by pre-emptively remediating the PF ratios (either by additional GS contributions, increasing future borrower contributions or by diverting investor interest into the pot). To put it all in context a bank would be holding something like 8% of the book as capital (read PF) to protect depositors (read investors) against stressed performance of the loan book over the cycle. When banks that don't maintain this and their capital ratios decline, confidence collapses and the stampede for the exit occurs (FC?), even if things wont be that bad.
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ceejay
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Post by ceejay on Nov 7, 2019 11:10:12 GMT
... Again this is my personal opinion. And people are free to invest wherever they wish. But I believe it is better to be safe than sorry. And yes funding circles well publicised share price crash marked with the fact that people have been waiting around 4 months to withdraw funds also sends alarm bells ringing. That's an entirely valid viewpoint, but perhaps not one consistent with investing in any form of P2P?
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Ukmikk
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Post by Ukmikk on Nov 7, 2019 14:15:28 GMT
Again this is my personal opinion. And people are free to invest wherever they wish. But I believe it is better to be safe than sorry. Do you know of any 'safe' P2P investments?
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Post by gravitykillz on Nov 7, 2019 22:21:31 GMT
There are no completely safe p2p investments. But some p2p providers are more stable than others eg ratesetter or funding circle. Assetz or growth street.
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zlb
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Post by zlb on Nov 7, 2019 23:26:37 GMT
Unofficially their provision fund is already depleted. Regardless of what they state officially or however they manipulate their figures. what's your source of info? I'm interpreting the urgent tone of your posts = you know something but can't say what. So their pf isn't really 1.3m?
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Post by p2plender on Nov 8, 2019 1:05:33 GMT
Gravity has always been anti GS. Not sure whether he's a disgruntled ex employee or something else. Perhaps needs to be careful what he writes though.
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rogedavi
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Post by rogedavi on Nov 8, 2019 9:22:41 GMT
Unofficially their provision fund is already depleted. Regardless of what they state officially or however they manipulate their figures. what's your source of info? I'm interpreting the urgent tone of your posts = you know something but can't say what. So their pf isn't really 1.3m? I think he is basically saying that their PF would have been exhausted had they not taken a management action to take the loans on to their own balance sheet. But they did - so it isn't. For now.
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m2btj
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Post by m2btj on Nov 8, 2019 10:04:45 GMT
There are no completely safe p2p investments. But some p2p providers are more stable than others eg ratesetter or funding circle. Assetz or growth street. I wouldn't call FC stable! Their share price has dropped like a stone since the over inflated IPO.
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ceejay
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Post by ceejay on Nov 8, 2019 10:17:27 GMT
There are no completely safe p2p investments. But some p2p providers are more stable than others eg ratesetter or funding circle. Assetz or growth street. I wouldn't call FC stable! Their share price has dropped like a stone since the over inflated IPO. I think you may have misread Gravity's post - he also has them down as unstable. I also think you're both wrong - FC are well capitalised and backed, whatever their share price might be doing, and although I wouldn't personally touch them with a bargepole as a lender any more (I'm just watching my defaults pay me back a handful of pennies every month) I would still back them to be among the survivors. GS, as a much smaller platform, are a lot less secure although I still like the way they work and I would really like them to keep going: only time will tell whether their adjustments over the last week will do the trick.
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rogedavi
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Post by rogedavi on Nov 8, 2019 10:58:41 GMT
I have to agree regarding FC - they are very likely to be the long term survivor. i think that's its fairly likely that their growth strategy to expand their offering/AUM will at some point supplement organic growth with acquisitions, either by purchasing loan books and integrating them or creating side offerings in new product segments via acquisition (e.g. invoice financing).
that may well be the exit strategy for the smaller platforms such as GS/LW etc. they'd have to be a going concern of course and not simply a recovery play...
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m2btj
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Post by m2btj on Nov 8, 2019 16:55:57 GMT
I wouldn't call FC stable! Their share price has dropped like a stone since the over inflated IPO. WOT! Not even FC do shut the stable door after the horse has bolted and have money to buy another horse From a lender perspective the inflated IPO was the best thing FC have ever done. It put five or six years or more years of cash burn on the balance sheet. Not many platforms have much chance of being around in five years come what may. FC have a higher probability than most. And as for the share price that is second order relevant and won’t be an primary issue for lenders for another four years. And even then it’d not necessarily be terminal. It might make an equity rights issue difficult and highly dilutive or alternatively if the share price is unjustifiably low might lead to FC being taken private. I’d put FC in the top half dozen SME platforms. [post crossed with ceejay] Try selling a loan on FC! I've been in a very long queue of investors looking for the exit door since July!
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Post by p2plender on Nov 9, 2019 5:46:22 GMT
Not sure I'd want to invest in FC anymore. Maybe they have some balance sheet strength post IPO, but little point using that as a reason to invest what appears to be a never ending stream of poor quality loans. Definitely a change of tone this last 6/12 months as far as p2p lending is concerned. Wonder how grim things will look once the next recession is upon us which will probably be very soon.
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