coogaruk
Hello everyone! Anyone remember me?
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Post by coogaruk on Aug 5, 2020 17:40:05 GMT
Not that I have given this much more than a passing thought but:
So Metro Bank has apparrently shunned Ratesetter's loan book.
The only reason I can deduce for this is affordability. That and the fact that it really 'belongs' to us lenders!
By doing so they avoid any credit risk on said portfolio of course but if I was about to embark on a massive unsecured consumer credit adventure right in the middle of a global pandemic I think I'd prefer giving it a bit of a kick start by taking on a pretty good quality maturing loan book rather than starting from scratch with my limited pile of cash.
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beagle
Investor in ratesetter, funding circle, lendy (lesson learnt) and AC
Posts: 670
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Post by beagle on Aug 5, 2020 17:45:20 GMT
Not that I have given this much more than a passing thought but:
So Metro Bank has apparrently shunned Ratesetter's loan book.
The only reason I can deduce for this is affordability. That and the fact that it really 'belongs' to us lenders!
By doing so they avoid any credit risk on said portfolio of course but if I was about to embark on a massive unsecured consumer credit adventure right in the middle of a global pandemic I think I'd prefer giving it a bit of a kick start by taking on a pretty good quality maturing loan book rather than starting from scratch with my limited pile of cash.
why buy a loan book you didn't underwrite. why take the risk with your deposits and expose more risk.
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chris1200
Member of DD Central
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Post by chris1200 on Aug 5, 2020 17:49:03 GMT
Does this really need a new thread when we have two dedicated to the Metro Bank transaction already?
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coogaruk
Hello everyone! Anyone remember me?
Posts: 706
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Post by coogaruk on Aug 5, 2020 17:53:13 GMT
Does this really need a new thread when we already have two dedicated to the Metro Bank transaction already? Obviously I think so but I'm happy to let the mods decide.
Edit: I've just counted six threads which appear to be dedicated to RYIs!
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coogaruk
Hello everyone! Anyone remember me?
Posts: 706
Likes: 464
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Post by coogaruk on Aug 5, 2020 17:56:46 GMT
Not that I have given this much more than a passing thought but:
So Metro Bank has apparrently shunned Ratesetter's loan book.
The only reason I can deduce for this is affordability. That and the fact that it really 'belongs' to us lenders!
By doing so they avoid any credit risk on said portfolio of course but if I was about to embark on a massive unsecured consumer credit adventure right in the middle of a global pandemic I think I'd prefer giving it a bit of a kick start by taking on a pretty good quality maturing loan book rather than starting from scratch with my limited pile of cash.
why buy a loan book you didn't underwrite. why take the risk with your deposits and expose more risk. That's pretty irrelevant. It's the loan books quality and performance thus far that counts. No guarantees as to the future of course but then there are those with much better skills at valuing loan books than me.
Do you consider starting to write a whole bunch of fresh loans less of a risk right now?
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Post by gar on Aug 5, 2020 18:11:01 GMT
Simple really, asset stripping.
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Post by Deleted on Aug 5, 2020 18:13:25 GMT
Do you consider starting to write a whole bunch of fresh loans less of a risk right now? Yes. With much stricter criteria than the loans that were being thrown out like confetti prior to Covid.
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coogaruk
Hello everyone! Anyone remember me?
Posts: 706
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Post by coogaruk on Aug 5, 2020 18:17:50 GMT
Do you consider starting to write a whole bunch of fresh loans less of a risk right now? Yes. With much stricter criteria than the loans that were being thrown out like confetti prior to Covid. TBF I think that was more of a FC thing but I'd be interested to know what your criteria might be for an unsecured loan application during the current economic climate.
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Post by Deleted on Aug 5, 2020 18:20:48 GMT
TBF I think that was more of a FC thing. No its a credit cycle thing. RS weren't immune, look at some of the loans from a couple of years ago that were so toxic they took them back on balance sheet to protect their reputation. There is a very well known saying among those who know credit markets - "The best loans originate in the worst times, the worst loans originate in the best times" Everyone who invests in any form of credit should have that tattooed on their forehead so they never forget.
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Post by Ton ⓉⓞⓃ on Aug 5, 2020 18:27:10 GMT
why buy a loan book you didn't underwrite. why take the risk with your deposits and expose more risk. That's pretty irrelevant. It's the loan books quality and performance thus far that counts. No guarantees as to the future of course but then there are those with much better skills at valuing loan books than me.
Do you consider starting to write a whole bunch of fresh loans less of a risk right now?
I suppose Metro must want a loanbook with stricter underwriting, they might think the credit controls that were in place weren't appropriate for today's economy, after all RS cut the interest rate.
I'm not actively lending anywhere as the future is too flexible right now. They might want to keep the retail Lenders in the game (copying Z to a degree), that's a lot of potential customers with cash, why waste them (I'm not an RS Lender).
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coogaruk
Hello everyone! Anyone remember me?
Posts: 706
Likes: 464
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Post by coogaruk on Aug 5, 2020 18:31:03 GMT
TBF I think that was more of a FC thing. No its a credit cycle thing. RS weren't immune, look at some of the loans from a couple of years ago that were so toxic they took them back on balance sheet to protect their reputation. There is a very well known saying among those who know credit markets - "The best loans originate in the worst times, the worst loans originate in the best times" Everyone who invests in any form of credit should have that tattooed on their forehead so they never forget. Understood but I think the bad loans you are referring to had little to do with p2p and more to do with the third party that was providing them. Dodgy car dealer springs to mind!
I blame that whole fisaco for where RS has ended up today rather than laying it at COVID's door. Others disagree.
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Post by Deleted on Aug 5, 2020 18:36:38 GMT
Understood but I think the bad loans you are referring to had little to do with p2p and more to do with the third party that was providing them. Dodgy car dealer springs to mind!
I blame that whole fisaco for where RS has ended up today rather than laying it at COVID's door. Others disagree.
And RateSetters due diligence was... where exactly? Why were they doing deals with 'dodgy car dealers' as you put it? Maybe they too busy salivating at the prospect of fat fees? Honestly, I've seen multiple credit cycles now, and the behaviour never changes. Covid, credit crunch '08, dot-com crash, its all the same cycle. Good Times - people think the good times will never end, loans are seen as 'sales', volumes are key to generating big fat commissions and fees. Bad Times - people suddenly remember that loan quality matters, underwriting tightens up, laser-like focus on risk vs reward That is where that saying about best loans in worst times comes from. RS are nothing special in this regard, they are just another credit player, albeit one with a nasty touch of 'Fin-Tech' arrogance and little experience of downturns.
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iRobot
Member of DD Central
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Post by iRobot on Aug 5, 2020 18:36:51 GMT
Ok, due warning - wine-fuelled speculation ahead!  How about MB, in their new MB/RS guise (if / when it happens), approach the existing RS loan holders, offer them a new loan to pay off the RS one (with a suitably foreshortened redemption date) with a shiny new redemption date and at a sparkly new rate which is a couple of % lower than the borrower is currently on. Oh, and <ahem> 'sweeten the deal' with a (compulsory) MB current account and (compulsory) MB credit card - interest free for the first 6m, of course! - for good measure? OK, maybe not all existing RS borrowers. Maybe just the C-grades up ... Leave the Ds, Es (and Fs?) on the old loan book  Any reason that couldn't happen? I have a suspicion some or all of that might be frowned upon by the FRA / FCA - one of the F*A's anyway ...  |
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iRobot
Member of DD Central
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Post by iRobot on Aug 5, 2020 18:46:01 GMT
Honestly, I've seen multiple credit cycles now, and the behaviour never changes. Covid, credit crunch '08, dot-com crash, its all the same cycle. Good Times - people think the good times will never end, loans are seen as 'sales', volumes are key to generating big fat commissions and fees. Bad Times - people suddenly remember that loan quality matters, underwriting tightens up, laser-like focus on risk vs reward Reminds me of possibly the best economics 'lesson' I've seen: " How The Economic Machine Works by Ray Dalio" - ok kids, yeah it is a whole half-hour long, but it's a cartoon! 
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beagle
Investor in ratesetter, funding circle, lendy (lesson learnt) and AC
Posts: 670
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Post by beagle on Aug 5, 2020 22:38:24 GMT
why buy a loan book you didn't underwrite. why take the risk with your deposits and expose more risk. That's pretty irrelevant. It's the loan books quality and performance thus far that counts. No guarantees as to the future of course but then there are those with much better skills at valuing loan books than me.
Do you consider starting to write a whole bunch of fresh loans less of a risk right now?
It isn't irrelevant at all. They intend to control their risk and leverage the technology. If they answer to share holders they want to own this aspect. Not be party to another companies risk approach as this if it went wrong would be perceived as short sighted.
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