Hi Number 5,
I have the same question but some half formed opinions which I'm hoping the more experienced investors will add to. I've been playing with RBS for 6 weeks, investing £10 in things I think will fail and £100 in the ones I think will succeed and tracking everything
Please take everything I write here in the context that I am also a newbie to RBS and know very little but am speaking out loud and thinking it through and hoping for some more info on my thoughts.
I've been using Funding circle for around 5-6 years so that's my frame of reference.
Ref your question, in comparison to FS, the rates are higher flow is slower and SM rates are much higher, averaging around 4-5% on decent loans.
I tried selling at 0.5% and it sold immediately but this is probably because the auto bid feature seems limited to 0.5% mark up (it will not bid on loans with a higher mark up). I wrote and asked RBS whether this was a bug or to protect users but received no reply
My initial impressions are that you need to be much more careful in selecting loans, the rate of failures is higher and the recovery rate is worse but the interest rate is better and makes up for it.
There seems to be a feeling on the forums that more could be done with recoveries.
RBS has a structure that on the face of it is similar to the model FS used before automating everything and selling out to the stock market float (just my humble). On FS I was averaging 14% which dropped to 8.6% after automation.
As the total number of loans and overall amount is much lower, there are significantly fewer loans to choose between and so you can and should spend much more time on each, considering whether it's a good bet.
I've managed to purchase 45 different loans but half of these are to see whether they fail and how well RBS deals with the process of recoveries as there is little info I could find of defaulted loans.
On Funding Circle I achieved roughly
INTEREST £2,400, LOAN PART SALES £65 LOAN PART PURCHASES -£10 FEES -£245 DEFAULTS -£1,020 RECOVERIES £550 NET EARNINGS £1,730
This means rougly 40% default but 50% of that are recovered so 20% loss (of profit)
I haven't fully got my head round the RBS figures yet so - one of the more experience invstors pleas correct my lousy/incomplete maths
15678 total loans, 3804 total gains, 1885 total losses.
RBS appears to be running at around 50% loss of overall profits from their overall stats but offers loans at 20% interest which is a much higher rate. If I were to achieve 10% instead my overall earnings would still be higher than funding circle
The default rate tends to be calculated over the loan period (typically 5 years) so depending on when it happened the customer may have paid back a significant amount.
The secondary market is less of a no-brainer than it was with FS. It's expensive but probably for good reason. Due to the high level of defaults, it may be worth letting others take the initial risk? I haven't crunched all the numbers for average time to default, dependent on risk level etc
It's more difficult to do stats on RBS due to the lower numbers and (in my opinion) less clear data though it's early days and I've yet to crunch the numbers properly
Cheers
