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Post by gravitykillz on Jul 24, 2019 9:23:35 GMT
Thanks for the feedback. Just to be on the safe side I have cancelled my active loans. Not too sure about the future especially with Boris running the country. Reducing my p2p holdings til things improve.
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benaj
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Post by benaj on Jul 24, 2019 10:28:33 GMT
Ever heard the phrase 'past performance is no guarantee of future success'? I'm not sure why you would pick 'double digits' as a target for concern in any case. LW's estimate for bad debt in 2017 at the point of origination was 3.4% and they're now forecasting 6.8%. Is a 100% overshoot not concerning enough in itself? Why does it need to be a 200% overshoot? Sorry, I'm a right doomster this morning  However, what I'm talking about is all right there in statistics. It's okay to have different views. I am not really worried about shield at the moment, it doesn't mean no one else are not concerned about LW latest stats. At least for my part, the shield is still here. The truth is, we have learnt lately the worst in p2p lending is the platform risk, much greater than default risk. The recent product change in LW shows their willingness to stay in the market for long term. www.p2pfinancenews.co.uk/2019/07/23/lending-works-rebrands-product-suite/
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r00lish67
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Post by r00lish67 on Jul 24, 2019 10:38:57 GMT
Ever heard the phrase 'past performance is no guarantee of future success'? I'm not sure why you would pick 'double digits' as a target for concern in any case. LW's estimate for bad debt in 2017 at the point of origination was 3.4% and they're now forecasting 6.8%. Is a 100% overshoot not concerning enough in itself? Why does it need to be a 200% overshoot? Sorry, I'm a right doomster this morning However, what I'm talking about is all right there in statistics. It's okay to have different views. I am not really worried about shield at the moment, it doesn't mean no one else are not concerned about LW latest stats. At least for my part, the shield is still here. The truth is, we have learnt lately the worst in p2p lending is the platform risk, much greater than default risk. The recent product change in LW shows their willingness to stay in the market for long term. www.p2pfinancenews.co.uk/2019/07/23/lending-works-rebrands-product-suite/It might be argued that in the case of LW and RS, default risk (of the PF) is pretty darn close to platform risk..
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benaj
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Post by benaj on Jul 24, 2019 10:50:48 GMT
At least LW gives me a better feeling that investments are better perform than Z / FC and with 0 maintenance. The 0 maintenance feeling is an big plus in p2p these days.
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Post by propman on Jul 24, 2019 12:15:47 GMT
At least LW gives me a better feeling that investments are better perform than Z / FC and with 0 maintenance. The 0 maintenance feeling is an big plus in p2p these days. Its primarily been better performing because of the PFs. They have both been using the contributions from current loans to pay the costs of past loans. This will work while growth continues, but growth of high quality loans may be reduced by investors and PF demands pushing up the costs.
As i said before, LW credit assessment performed really poorly. It is great that they moved much more quickly thatn RS to increase contributions and that they acknowledge the expected size of the issue. I have only a small amount in LW and consider it higher risk than RS, but the reality is that I expect both will be required to make haircuts in any significant recession. I have written at length about what I think would be necessary for either to survive a haircut but I am not certain they would be as radical as required and so I consider platform failure a very real risk. I expect the vast majority of loans to pay out in full, so providing the living wills work, losses should be manageable IMHO.
- PM
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r00lish67
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Post by r00lish67 on Jul 24, 2019 12:26:39 GMT
At least LW gives me a better feeling that investments are better perform than Z / FC and with 0 maintenance. The 0 maintenance feeling is an big plus in p2p these days. Its primarily been better performing because of the PFs. They have both been using the contributions from current loans to pay the costs of past loans. This will work while growth continues, but growth of high quality loans may be reduced by investors and PF demands pushing up the costs.
As i said before, LW credit assessment performed really poorly. It is great that they moved much more quickly thatn RS to increase contributions and that they acknowledge the expected size of the issue. I have only a small amount in LW and consider it higher risk than RS, but the reality is that I expect both will be required to make haircuts in any significant recession. I have written at length about what I think would be necessary for either to survive a haircut but I am not certain they would be as radical as required and so I consider platform failure a very real risk. I expect the vast majority of loans to pay out in full, so providing the living wills work, losses should be manageable IMHO.
- PM
Can't argue with the zero maintenance aspect. Again though, not sure why a significant recession would be a necessary precondition to haircuts. If PF cash (as a %) has just nearly halved in 4 months, how much more of a downturn is required exactly to be concerning? Perhaps I'm wrong, but as I see it the only way the PF is not going to run out of actual cash in the relatively near future is by a large injection of cash or a dramatic turnaround in loan/recovery performance. Both of which are perfectly possible, but not quite likely enough for me.
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Post by propman on Jul 24, 2019 20:18:20 GMT
not sure why a significant recession would be a necessary precondition to haircuts. If PF cash (as a %) has just nearly halved in 4 months, how much more of a downturn is required exactly to be concerning? Perhaps I'm wrong, but as I see it the only way the PF is not going to run out of actual cash in the relatively near future is by a large injection of cash or a dramatic turnaround in loan/recovery performance. Both of which are perfectly possible, but not quite likely enough for me. Without a recession, while they could still run down the PF, I suspect that they will up the funds to the PF, the repayment impact of a small increase in APR shouldn't reduce lending too much so long as there is confidence out there. Hopefully they have also learned to better credit check so that the high defaults of a couple of years ago might reduce despite the higher APR. In the short term I suspect that they will increase the proportion of APR paid upfront as well. However I agree that the risk is significant and won't risk a large amount until we can see improvements.
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r00lish67
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Post by r00lish67 on Jul 24, 2019 20:57:56 GMT
not sure why a significant recession would be a necessary precondition to haircuts. If PF cash (as a %) has just nearly halved in 4 months, how much more of a downturn is required exactly to be concerning? Perhaps I'm wrong, but as I see it the only way the PF is not going to run out of actual cash in the relatively near future is by a large injection of cash or a dramatic turnaround in loan/recovery performance. Both of which are perfectly possible, but not quite likely enough for me. Without a recession, while they could still run down the PF, I suspect that they will up the funds to the PF, the repayment impact of a small increase in APR shouldn't reduce lending too much so long as there is confidence out there. Hopefully they have also learned to better credit check so that the high defaults of a couple of years ago might reduce despite the higher APR. In the short term I suspect that they will increase the proportion of APR paid upfront as well. However I agree that the risk is significant and won't risk a large amount until we can see improvements. Fair enough, you may well be right. I'm probably being overcautious (or at least jumping the gun a little) as I often do. They may well be able to prop up the PF in the short term - It may come down to whether they really can lower their default rate whilst lending to riskier borrowers. Sounds challenging though!
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jlend
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Post by jlend on Jul 25, 2019 5:54:10 GMT
I don't know how much seed capital was put in the LW shield. All the PFs have put in seed capital to get them going.
This has tended in some cases to make the coverage ratios and PF cash look very healthy in the early years of LW, RS, GS.
As the accounts mature and the amount of money lent out increases, the impact of the seed capital becomes less, and in some cases this seed is withdrawn over time by the platform for other purposes.
There is a lot going on with PFs, I only mention the above point as an example.
I think it would be useful for platforms to provide regular updates explaining what they are seeing and assuming. I personally don't know whether the fall in the cash balance is a planned activity in that LW are taking less contributions upfront or whether it is fully due to an increase in defaults.
RS do a quarterly PF written update that goes some way towards this. I think that will become more important over the next few years for me at least.
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Post by fatbritabroad on Jul 30, 2019 17:36:26 GMT
Slightly silly question I'm sure but where are you getting the info on the provision fund?the bit on the main page that talks about risk and return only shows v low default amounts so far
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Post by propman on Jul 30, 2019 18:46:45 GMT
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ashtondav
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Post by ashtondav on Aug 1, 2019 9:02:22 GMT
I am with FC, ZOPA, AC, LW and RS. All of them have badly underestimated bad debt (AC maybe excepted) - especially 2017 and 2018. I find that very strange in an era of full employment, low inflation and low interest rates. I can't help wondering if the mainstream banks are experiencing the same issues.
I will be running for the hills if i see any sustained monthly increase in unemployment and inflation.
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Post by propman on Aug 1, 2019 10:19:20 GMT
I am with FC, ZOPA, AC, LW and RS. All of them have badly underestimated bad debt (AC maybe excepted) - especially 2017 and 2018. I find that very strange in an era of full employment, low inflation and low interest rates. I can't help wondering if the mainstream banks are experiencing the same issues.
I will be running for the hills if i see any sustained monthly increase in unemployment and inflation.
AIUI loan defaults ran way below long term averages for middle of this decade returning to average more recently. I would love to see an analysis of those with personal loans. With decreasing home ownership from those without there own home prior to GFC and a generation brought up on cheap credit I suspect that the creditworthiness of prospective borrowers has declined. Ignoring the Zopa low rate loans, P2P has not been lending to the most credit worthy. national statistics are misleading. There are many people in industries where jobs are either hard to come by or with decreasing real wages. There is also a growth in those on wages at or close to NLW whioch is not likely to leave much capacity to service loans (or car finance) after paying private rents. Info on "typical borrowers" is notable by its absence from most sites.
Also companies borrowing from P2P exclude the most credit worthy who are (generally) well serviced by the banks. With the well explored limitations on credit references and limits on info relative to the companies main banks, there will always be significant risks from the sector. Add to this the preponderance of service industries who usually operate with minimal net assets or net liabilities and losses merely require a downturn in business. Today the movement in technology and practices will leave many behind while apparently making others credit worthy despite little but currently being ahead of the game. Such fluctuations lead to losses despite the economy as a whole progressing adequately.
So for me i assume there will be losses and I suspect (having called the crisis early before) that I will be too late to avoid them when they come. but that is the nature of investing...
- PM
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jsmill
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Post by jsmill on Aug 2, 2019 10:37:32 GMT
I am with FC, ZOPA, AC, LW and RS. All of them have badly underestimated bad debt (AC maybe excepted) - especially 2017 and 2018. I find that very strange in an era of full employment, low inflation and low interest rates. I can't help wondering if the mainstream banks are experiencing the same issues.
I will be running for the hills if i see any sustained monthly increase in unemployment and inflation.
AIUI loan defaults ran way below long term averages for middle of this decade returning to average more recently. I would love to see an analysis of those with personal loans. With decreasing home ownership from those without there own home prior to GFC and a generation brought up on cheap credit I suspect that the creditworthiness of prospective borrowers has declined. Ignoring the Zopa low rate loans, P2P has not been lending to the most credit worthy. national statistics are misleading. There are many people in industries where jobs are either hard to come by or with decreasing real wages. There is also a growth in those on wages at or close to NLW whioch is not likely to leave much capacity to service loans (or car finance) after paying private rents. Info on "typical borrowers" is notable by its absence from most sites.
Also companies borrowing from P2P exclude the most credit worthy who are (generally) well serviced by the banks. With the well explored limitations on credit references and limits on info relative to the companies main banks, there will always be significant risks from the sector. Add to this the preponderance of service industries who usually operate with minimal net assets or net liabilities and losses merely require a downturn in business. Today the movement in technology and practices will leave many behind while apparently making others credit worthy despite little but currently being ahead of the game. Such fluctuations lead to losses despite the economy as a whole progressing adequately.
So for me i assume there will be losses and I suspect (having called the crisis early before) that I will be too late to avoid them when they come. but that is the nature of investing...
- PM
Some interesting points there propman. I have found lending works to be a decent platform so far, however current default trends and provision fund coverage (or lack thereof) are causing me some concern. My personal preference would be for LW to offer slightly lower returns (of say 6-6.2) and increase the contributions to the provision fund. Ideally this should already have happened as to my mind that still represents a competitive rate in the current market
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r00lish67
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Post by r00lish67 on Aug 2, 2019 10:58:42 GMT
AIUI loan defaults ran way below long term averages for middle of this decade returning to average more recently. I would love to see an analysis of those with personal loans. With decreasing home ownership from those without there own home prior to GFC and a generation brought up on cheap credit I suspect that the creditworthiness of prospective borrowers has declined. Ignoring the Zopa low rate loans, P2P has not been lending to the most credit worthy. national statistics are misleading. There are many people in industries where jobs are either hard to come by or with decreasing real wages. There is also a growth in those on wages at or close to NLW whioch is not likely to leave much capacity to service loans (or car finance) after paying private rents. Info on "typical borrowers" is notable by its absence from most sites.
Also companies borrowing from P2P exclude the most credit worthy who are (generally) well serviced by the banks. With the well explored limitations on credit references and limits on info relative to the companies main banks, there will always be significant risks from the sector. Add to this the preponderance of service industries who usually operate with minimal net assets or net liabilities and losses merely require a downturn in business. Today the movement in technology and practices will leave many behind while apparently making others credit worthy despite little but currently being ahead of the game. Such fluctuations lead to losses despite the economy as a whole progressing adequately.
So for me i assume there will be losses and I suspect (having called the crisis early before) that I will be too late to avoid them when they come. but that is the nature of investing...
- PM
Some interesting points there propman . I have found lending works to be a decent platform so far, however current default trends and provision fund coverage (or lack thereof) are causing me some concern. My personal preference would be for LW to offer slightly lower returns (of say 6-6.2) and increase the contributions to the provision fund. Ideally this should already have happened as to my mind that still represents a competitive rate in the current market I agree. I think some narrative on recent performance wouldn't go amiss either, like explaining: 1) Why, despite the lack of any recession, the forecast bad debt rate for 2017 has risen by 100% from the outset (from 3.4% to 6.8%)? 2) If that 6.8% bad debt rate for 2017 is the reality for borrowers paying an average APR of 9.7%, how is it credible that borrowers in 2019 paying an average APR of 14.3% are currently forecast a bad debt rate of just 4.9%?
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However, what I'm talking about is all right there in statistics.