beagle
Investor in ratesetter, funding circle, lendy (lesson learnt) and AC
Posts: 670
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Post by beagle on Jun 29, 2020 18:06:52 GMT
whatever they do say it will be:
50% guess (educated) 20% luck, 30 % current data
The best they can do is be prudent as heck and stay bleak in forecast.
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wapping35
Member of DD Central
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Post by wapping35 on Jun 30, 2020 15:33:28 GMT
I think we now have the June numbers. That is valid as at June 1, 2020. So despite the cash coming in from the 50% interest rate hair cut the coverage ratio continues to fall. From 73% to 67%. And the cash holding with the PF has fallen from £7.82m to now £6.71m so down £1.11m. (looking back I see they burnt through £2.67m cash in April, so £1.11m is better I guess) It would be good if RS could provide a commentary since given this is post hair cut, this looks to me like the hair cut is not severe enough.
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Post by RateSetter on Jun 30, 2020 15:36:51 GMT
Good afternoon. We have completed the usual monthly update of data on the statistics page, and alongside we have published the monthly Provision Fund commentary which can be found in the RateSetter Notices section of your account and is copied below for reference: The RateSetter Notice also contains a table showing the movements set out above.
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Post by frustratedp2p on Jun 30, 2020 15:37:25 GMT
Yea would make sense to cut further to 0, surprised they didn't start with it.
Getting most of the money back is what I would be happy with as a result
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johnt
Investing in Ratesetter, Zopa and Assetz Capital since 2013
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Post by johnt on Jun 30, 2020 15:37:30 GMT
June's provision fund stats are available now: www.ratesetter.com/invest/statisticsNot surprisingly it's the worst state it's ever been in. Here's hoping it doesn't get (much) worse.
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Post by frustratedp2p on Jun 30, 2020 15:44:05 GMT
'This does not take into account the temporary interest reduction announced on 4 May to take the Interest Coverage Ratio back to 100%.'
Find this weird. So it's at 100% currently for the reduced rates or not? Not sure how coverage ratio b dropped but this statement is the same
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wapping35
Member of DD Central
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Post by wapping35 on Jun 30, 2020 15:44:39 GMT
Glad to see now we have a commentary (it came seconds after posting above) but I do not fully understand the statement:
"The Interest Coverage Ratio is now at 67%, from 73% last month. This does not take into account the temporary interest reduction announced on 4 May to take the Interest Coverage Ratio back to 100%." (my red ink)
=========
Given the update is up to June 1, 2020 then surely, some of the May 4th interest rate reduction would be expected to be taken into account in both the cash holding and ratio position reported, 27 days after May 4th.
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Post by james91 on Jun 30, 2020 16:14:01 GMT
Glad to see now we have a commentary (it came seconds after posting above) but I do not fully understand the statement: "The Interest Coverage Ratio is now at 67%, from 73% last month. This does not take into account the temporary interest reduction announced on 4 May to take the Interest Coverage Ratio back to 100%." (my red ink)
========= Given the update is up to June 1, 2020 then surely, some of the May 4th interest rate reduction would be expected to be taken into account in both the cash holding and ratio position reported, 27 days after May 4th. The way I read it is that interest is covered at 50% of advertised rates, but if you assumed it was still at 100%, then only 67% would be covered.
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Post by RateSetter on Jun 30, 2020 16:17:35 GMT
Glad to see now we have a commentary (it came seconds after posting above) but I do not fully understand the statement: "The Interest Coverage Ratio is now at 67%, from 73% last month. This does not take into account the temporary interest reduction announced on 4 May to take the Interest Coverage Ratio back to 100%." (my red ink)
========= Given the update is up to June 1, 2020 then surely, some of the May 4th interest rate reduction would be expected to be taken into account in both the cash holding and ratio position reported, 27 days after May 4th. Hi wapping35 , we can clarify that the sentence you've highlighted refers to the future effect of the temporary interest reduction. The text is now amended in our post above and in the RateSetter Notice itself to make this clear. Thank you.
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wapping35
Member of DD Central
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Post by wapping35 on Jun 30, 2020 16:27:54 GMT
I think RS really need to answer, given this update is post (a month ago) the interest rate hair cut, why has both the cash holding fallen by £1.11m and the CR by 6%.
EDIT: The £1.11m cash burn is of course concerning since at that rate the £6.71m will be gone in 6 months.
If the hair cut was sufficient you would expect the numbers to at least stabilise (if not improve). I did not expect them to reach 100% immediately, but RS are saying the hair cut is until Dec 31, 2020 so a movement upwards not downwards would be expected.
To me it just looks like delaying a further hair cut for 1 or perhaps 2 or 3 months.
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Post by shanghaiscouse on Jun 30, 2020 16:43:25 GMT
The haircut was never going to be enough. It could be the case that they did not want to prompt an even bigger stampede at a time they are trying to sell the business, so kept rates positive. If they could not even beat national savings where your money is 100% guaranteed then what would be the point? So I guess that's why they settled at the 50% cut rather than stop interest payments altogether, which would have been prudent.
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beagle
Investor in ratesetter, funding circle, lendy (lesson learnt) and AC
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Post by beagle on Jun 30, 2020 22:28:25 GMT
I think RS really need to answer, given this update is post (a month ago) the interest rate hair cut, why has both the cash holding fallen by £1.11m and the CR by 6%. EDIT: The £1.11m cash burn is of course concerning since at that rate the £6.71m will be gone in 6 months. If the hair cut was sufficient you would expect the numbers to at least stabilise (if not improve). I did not expect them to reach 100% immediately, but RS are saying the hair cut is until Dec 31, 2020 so a movement upwards not downwards would be expected. To me it just looks like delaying a further hair cut for 1 or perhaps 2 or 3 months. Well the situation changes by the day, Bojo says something, stores go into administration etc etc. the 50% at the time was applicable to the situation at the time (they have now a more revised outlook from Oxford eco) and now it is bleak. i think ratesetter has no ability to predict what happens and uses it current data. i dont think in fairness anyone can tell if a reduction is needed now or tomorrow. we and them are all in the dark
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jlend
Member of DD Central
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Post by jlend on Jul 1, 2020 7:55:46 GMT
I think RS really need to answer, given this update is post (a month ago) the interest rate hair cut, why has both the cash holding fallen by £1.11m and the CR by 6%. EDIT: The £1.11m cash burn is of course concerning since at that rate the £6.71m will be gone in 6 months. If the hair cut was sufficient you would expect the numbers to at least stabilise (if not improve). I did not expect them to reach 100% immediately, but RS are saying the hair cut is until Dec 31, 2020 so a movement upwards not downwards would be expected. To me it just looks like delaying a further hair cut for 1 or perhaps 2 or 3 months. I think that is a very fair question for RS. Are the numbers worse or better than expected at this time even at this early stage? Certainly I expected the PF cash to get worse before it got better over the 8 month interest rate cut but I really dont know if these figures are good or bad. I expected the cash to follow a curve at best even with the rate cut. It depends somewhat on - how many of the borrowers on forebearance restart some or all payments and when - how many more borrowers require forebearance I don't think anyone can know that yet. RS thought they needed to divert 10.4m to the PF. We will just have to see if this is enough. I haven't looked at the model, am not sure what assumptions it includes? If they do see the numbers start to stabilise in a few months they could extend the 8 month haircut if needed. That is a big if though.... I don't expect the next set of figures will stabilise. I expect at best it will take longer. They did consider zero interest for 4 months rather than 50% reduction for 8 months. They had to start somewhere and see what happens
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wapping35
Member of DD Central
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Post by wapping35 on Jul 1, 2020 8:20:50 GMT
Well the situation changes by the day, Bojo says something, stores go into administration etc etc. the 50% at the time was applicable to the situation at the time (they have now a more revised outlook from Oxford eco) and now it is bleak. i think ratesetter has no ability to predict what happens and uses it current data. i dont think in fairness anyone can tell if a reduction is needed now or tomorrow. we and them are all in the dark The Oxford Economics projection of unemployment peaking at 5.4% was way out of all other projections made at the time. I pointed that out back on May 4th. The Bank of England at the time was projecting 9-10% and unlike RS has not had to change that projection. RS was an outlier in projecting a very mild down turn. And they have revised that to reflect what the regulators are saying. Given the mild down turn generated the 50% hair cut (which they have now revised to a severe down turn) and the PF CR and cash balance is deteriorating so quickly all that is asked is an explanation as to why they are also not altering the hair cut. i.e. Even it's current data (the cash balance falling £1.11m in May) shows the hair cut is inadequate. In the end we need RateSetter to answer this. I doubt however they will.
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Post by diversifier on Jul 1, 2020 9:03:58 GMT
Glad to see now we have a commentary (it came seconds after posting above) but I do not fully understand the statement: "The Interest Coverage Ratio is now at 67%, from 73% last month. This does not take into account the temporary interest reduction announced on 4 May to take the Interest Coverage Ratio back to 100%." (my red ink)
========= Given the update is up to June 1, 2020 then surely, some of the May 4th interest rate reduction would be expected to be taken into account in both the cash holding and ratio position reported, 27 days after May 4th. The way I read it is that interest is covered at 50% of advertised rates, but if you assumed it was still at 100%, then only 67% would be covered. I agree. I think they are also implying, that *if* things turn out as they forecast, the ICR should drift upwards to 100%+ over the next six months, because every months additional 1.5% contribution to the PF is then a “positive surprise”. Also as long as the ICR remains above 50%, they won’t have to cut the interest rate further. So, it is then extremely disappointing that ICR has drifted downwards this month instead of upwards. Entirely coincidentally, ICR = 50% threshold happens to correspond to zero cash in the PF, with £20.3m expected inflows, and £40.3m expected future losses. Clearly, with zero cash, the PF physically *can’t* pay out even capital losses. Ratesetter got into this (future-interest-leveraged) situation because it didn’t envisage sharp shock changes to default rates, rather gradual shifts. If the same thing happens for the next couple of months (£1m+ cash drain), they will be forced to cut interest rates to zero, well before PF cash hits zero. An extra 1.5% of £800m would give them £1m extra per month going into PF, which looks as if it should stabilise it, if the economic situation gets no worse. But the PF still wouldn’t be recovering, that isn’t a six-month recovery plan, it’s permanent wind-down, although it would take ages to admit that. I’m *still* hoping for no capital loss, but that’s an optimistic (although realistic) scenario.
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