Risk vs. reward for buyback personal loans
Feb 24, 2017 7:31:07 GMT
JamesFrance, captainconfident, and 10 more like this
Post by southseacompany on Feb 24, 2017 7:31:07 GMT
I have done a comparison of risk levels of different originators offering a buyback guarantee for personal unsecured loans. Since there is virtually no information available on the borrowers, we can only do due diligence on the originators. I've looked at all originators on Mintos as well as Twino and VIA SMS (of Viainvest fame). I use equity to assets ratio as proxy for risk level; in simplistic terms, my idea is that shareholders' equity is the only item on the balance sheet ranked lower than p2p investors' claims. The colour of each circle indicates the date of balance sheet the data is drawn from, and the size of each circle indicates company size (circle area is proportional to total assets).
This analysis suggests that the originators with most volume on Mintos offer relatively poor value, especially in the case of Creamfinance's Georgian loans. After doing this exercise I've decided to exit the Georgian originators on Mintos completely. Risk is more complex than a single number and everyone's situation is different, so I am not making any recommendations for anyone else.
Let me know if you spot any mistakes in the chart.
Caveats apply, including the following:
This analysis suggests that the originators with most volume on Mintos offer relatively poor value, especially in the case of Creamfinance's Georgian loans. After doing this exercise I've decided to exit the Georgian originators on Mintos completely. Risk is more complex than a single number and everyone's situation is different, so I am not making any recommendations for anyone else.
Let me know if you spot any mistakes in the chart.
Caveats apply, including the following:
- I have ignored loan duration. In principle a longer dated loan is higher risk and investors should demand higher returns for it.
- Important: In the case of Creditstar, the published financials are for the parent company but the assignment agreements are with a different group company (Creditstar Poland Sp.zo.o.). Hence risk level may be much higher than implied by the chart.
- For Creamfinance, financials for Georgian unit only are used, hence it's labeled "Creamfinance GE" in the plot. The assignment agreement for Georgian loans is with them, not with the parent company. Mintos does not have financial reports for Creamfinance group companies in other countries.
- I would like to include Lendo and Swaper but cannot since they have never published a balance sheet.
- For Aventus Group, financials of its parent company Kontex Trade International are used. According to Mintos support, the originator in the assignment agreements is Kontex. I own none so I cannot verify if that is correct. Note that Aventus hasn't issued new loans on Mintos for a few months now.
- For Twino I use 13% as the best interest rate. Twino actually offers 14% on Russian loans, but due to high demand, those are more or less impossible to get in quantity. Even 13% is now somewhat difficult to get. If you use 14% Twino looks like exceptionally good value. At 12% or below it is in line with the competition.
- I originally had a fitted regression line in the plot but removed it as I felt it's too simplistic to separate the good from the bad in that way.
- In economics terms, the efficient frontier (Pareto-optimal front) contains only two originators, namely Aventus Group and Twino, and therefore investing with any other has sub-optimal returns. In practice however, diversification is very important, and in any case loan availability from both of those is limited.
- I may have made mistakes, the financial statements may contain mistakes, or they may have been deliberately Enronized. Do your own due diligence.