jo
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Post by jo on Nov 30, 2016 14:22:39 GMT
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Post by Deleted on Nov 30, 2016 14:26:10 GMT
The stench emanating from RateSetter is finally starting to get noticed...
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wapping35
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Post by wapping35 on Nov 30, 2016 14:41:10 GMT
I have c/pasted RS's reply a few days ago (Nov 28) and confirms what the FT is saying. I note the PF page has not yet been updated although they said it would be Nov 30th.
================= Dear Chris, Thanks again for your questions and apologies for the delay in responding. The 2014 default rate rose on November 2016 due to the correction of a temporary error. To answer your second question, the 2.8% figure actually reflects the expected liabilities to the Provision Fund as a percentage of all outstanding lending. The figure for all outstanding lending includes loans which are not covered by the Provision Fund (institutional investors are not covered by the Provision Fund), and therefore I agree with you that it is not the best figure to use on this page. Removing loans which are not covered by the Provision Fund gives the correct figure, which is approximately 3.1%. This is clearly a more useful figure for retail investors so we are updating this as a priority, and expect to get it resolved with our next set of changes on Wednesday 30 November. To be clear, we are not using the 2.8% figure to inform our Provision Fund calculations – this figure is calculated based on actual expected loss figures for each cohort, which in turn are based on actual loss rates for similar loans in earlier cohorts. The reason for the discrepancy between the 3.1% figure and projected lifetime bad debt rates by cohort is that the former is a mix of both relatively new and also mature loans. Generally, loss rates diminish over time (for example, a 5 year loan which has only 6 months left is less likely to default than a newer loan, all other things being equal). The two metrics aren’t like-for-like. I hope these answers are useful. Thanks and kind regards, Danny (removed surname)
6th Floor, 55 Bishopsgate, London, EC2N 3AS
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Post by ruralres66 on Nov 30, 2016 14:48:37 GMT
The stench emanating from RateSetter is finally starting to get noticed... I am a so called "expert" RS Lender,( we have interrogated this before). Truth is I am an interested novice but like to show due diligence. I glean information and advice from where ever I can. If I can't, or can make no sense, I will go to someone who might. So I emailed Kadhim at the FT and asked him to give this a once over for us. Looks like he is true to his word and has delivered the goods! Well someone has to look at this independently for us as RS seem a tad shy of late.
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Post by Deleted on Nov 30, 2016 15:02:41 GMT
Honestly, thats pretty admirable due diligence there.
Ask a simple question, and be relentless until you get an answer...
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Post by ruralres66 on Nov 30, 2016 15:24:50 GMT
Being relentless until I get a straight answer is what sadly I do in my "day job" capacity within the voluntary sector. I am renown for it!
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Neil_P2PBlog
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Use @p2pblog to tag me :-)
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Post by Neil_P2PBlog on Nov 30, 2016 15:52:41 GMT
RateSetter seem to be cutting it as finely as possible with their provision fund. On a positive note, this means there is less idle money sat there not working and they can offer a slightly higher return for investors. But to do this you can't rely on data that has been up to 11% off (one year's historic provision fund usage variance in the FT article).
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mark123
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Post by mark123 on Dec 30, 2016 14:08:21 GMT
Hi, I would be grateful if somebody could help me understand RS bad debt data. The first 4 rows of the table below shows data in £000 published by RS here. I have multiplied the actual and expected debt rate by the total lent to estimate the debt in £000. The last row shows the "expected debt" less the "actual debt", which should be the debt still to materialise. And the last column expresses these three rows as a percentage of the total amount lent ... a weighted average of the percentages by year RS publish. Year | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 YTD | Total | Percent of total | Lent
| 11,813
| 32,805
| 104,781
| 293,405
| 517,987
| 600,244
| 1,561,036
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| Actual debt
| 0.58% | 0.90%
| 1.76%
| 3.31%
| 2.51%
| 0.70%
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| Expected debt | 0.59%
| 0.92%
| 1.93%
| 3.92%
| 3.65%
| 3.43%
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| Actual debt % x lent
| 69
| 295
| 1,844
| 9,712
| 13,001
| 4,202
| 29,123
| 1.87%
| Expected debt % x lent
| 70
| 302
| 2,022
| 11,501
| 18,907
| 20,588
| 53,390
| 3.42%
| Expected - actual
| 1
| 7
| 178
| 1,790
| 5,905
| 16,387
| 24,267
| 1.55%
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So my questions are: 1. What do RS mean by "Expected bad debt rate <2.8%" - is it the expected debt in total (which appears to be 3.42%) or the debt which yet to materialise (which only 1.55%) or something else? 2. What do RS mean by "Expected losses £18,690,301" as they appear to have already suffered 29,123 and expect another 24,267 to come. Just to be clear, I do not doubt the accuracy of the figures RS quote. I am trying to understand what the figures published on the Provision Fund Data page represent. Thanks, Mark I said I would update this post from time to time. Here are the year end figures : 30-Dec-16 £000 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | Total | Amount lent | 11,813 | 32,805 | 104,781 | 293,405 | 517,986 | 667,200 | 1,627,992 | Actual bad debt percent | 0.58% | 0.89% | 1.74% | 3.38% | 2.64% | 0.78% | 1.90% | Actual bad debt | 68 | 291 | 1,823 | 9,917 | 13,674 | 5,204 | 30,979 | Projected lifetime bad debt percent | 0.59% | 0.92% | 1.93% | 4.00% | 3.75% | 3.43% | 3.47% | Projected lifetime bad debt | 69 | 301 | 2,022 | 11,736 | 19,424 | 22,884 | 56,439 | Projected less actual | 1 | 9 | 199 | 1,819 | 5,749 | 17,680 | 25,459 |
RS has updated the Provision Fund page from "Expected bad debt rate: <2.8%" to "Expected bad debt rate: <3.1%". I understand this is to account for lenders who are not protected by the provision fund. Maybe they also account for the difference between the bottom right figure of £25,459,686 and the RS "Expected losses: £18,718,496". It would be nice to know. Although RS never responded to the original post, it was soon afterwards that they noticed the original <2.8% needed updating. So, as a lender, I am unsure of the cover offered by the provision fund, given the current level of transparency and communication. It is clear that, over the last few months, rates have dropped significantly while the provision fund cover has decreased and short-term lending is funding long-term borrowing. Happy New Year and good luck Mark
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jlend
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Post by jlend on Jan 26, 2017 8:42:53 GMT
I see the coverage ratio has dropped to 116%.
I think that is the lowest I have ever seen since I have been with ratesetter through all the changes to the calculation methodology
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Post by ruralres66 on Jan 26, 2017 9:59:58 GMT
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wapping35
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Post by wapping35 on Jan 26, 2017 10:26:11 GMT
The Market Data page is also worth a look. www.ratesetter.com/aboutus/statisticsI see the 2014 projected defaults are now 4.06%, 2015 3.89% & 2016 3.53%...Each well up on the Nov and Dec levels. Of note is the 2016 number which is now already higher than the projection RS made when they issued the loans. RS did indicate to me when they emailed that they had taken action to reduce defaults in 2016 and that was why they set the PF default rate at 3.1%, well below the 3.43% 2016 projected default rate (they computed). Thus far their own statistics are not supporting that statement. It will be interesting to see if / when they update (usually quarterly) the PF default rate from that 3.1% figure. If it is increased towards 3.4% that brings the coverage ration down to 3.1/3.4 x 116% = 106%. Cutting it a bit close springs to mind. W35
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mark123
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Post by mark123 on Jan 28, 2017 15:41:04 GMT
The downward trend on the provision fund continues. It is further below the RS coverage target of 125% to 150%. Date | 26 Oct 2015 | 21 Sep 2016 | 1 Nov 2016 | 28 Jan 17 | Provision fund contributions | £16m | £17m | £16m | £15m | Contractual future income | Nil | £6m | £6m | £7m | Expected bad debts | £10m | £18m | £18m | £19m | Coverage "contributions" | 160% | 100% | 90% | 80% | Coverage total | 160% | 130% | 120% | 116% |
I have changed my previous wording "provision fund cash" to RS terminology "provision fund contributions". I wonder exactly what this term means and whether this amount is sitting somewhere fully available for use as and when it is needed? Good luck, Mark
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mark123
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Post by mark123 on Mar 8, 2017 16:15:40 GMT
The latest update on the downward trend on the provision fund as it drops further below the RS coverage target of 125% to 150%. Date | 26 Oct 15 | 21 Sep 16 | 1 Nov 16 | 28 Jan 17 | 8 Mar 17 | Provision fund contributions | £16m | £17m | £16m | £15m | £14m | Contractual future income | Nil | £6m | £6m | £7m | £7m | Expected bad debts | £10m | £18m | £18m | £19m | £19m | Coverage "contributions" | 160% | 100% | 90% | 80% | 74% | Coverage total | 160% | 130% | 120% | 116% | 113% |
I guess that the "contributions" are cash in the fund which may drop in the transition to the future income model as bad debts are covered. It is more difficult to understand why the "contractual future income" is not growing in line with the increasing volume of loans. Good luck, Mark
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robski
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Post by robski on Mar 8, 2017 18:33:27 GMT
You need another decimal place, the transition of a £1M movement on a number as low as 6-7 is a significant % The future income is going up, just not at a fast rate (relatively)
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Post by beniamino on Mar 9, 2017 9:43:44 GMT
mark123 --- thanks for posting these figures. They are really helpful, and ratesetter themselves were unwilling to provide a history of provision fund coverage ratio when I asked them. From your numbers, it seems that the coverage ratio has been decreasing at ~3% per month over a long period (worst -7.5% per month; best -1.4% per month; recently -2.3% per month). If this continues, the ratio will reach 100% in approximately 4 months, leading to capital being locked up and interest payments being reduced. One thing I don't understand: According to www.ratesetter.com/invest/everyday-account/protection, "RateSetter actively manages the Provision Fund, by determining how much borrowers pay into it. If the Provision Fund was falling significantly in value, it’s likely that RateSetter would increase contributions into the Provision Fund. This is not reflected in the chart." The provision fund is falling significantly in value, but RateSetter has not increased contributions enough to stop the fall. Why not?
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