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Post by briannguyen on Dec 3, 2015 21:50:43 GMT
Guys, I'm thinking about creating an efficiency analysis for P2P platform and bank. (Lending Club vs Citigroup)
I would like to use ratio of operating expense over outstanding loan. As we don't have outstanding loan value available, I would like to calculate that. Do you guys have an idea how to calculate outstanding loan value based on loan origination amount ??
Thanks in advance
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james
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Post by james on Dec 3, 2015 22:08:19 GMT
I have reservations about the value of that number, at least for investors, who are more likely to be interested in the percentage of the total amount paid by borrowers that does not get paid to lenders, excluding the loan capital. So interest and initial or other fees like servicing minus amount paid to lenders is the overhead for lenders.
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Post by ablrateandy on Dec 3, 2015 23:05:27 GMT
Are you going to include on and off-balance sheet for Citi? RCFs? Bonds? If you ask a client they would sat that is all Citi lending even if off balance sheet or syndicated. Lending Club is purely a lending business. Citi is not... can you split out their loan book costs?
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Post by briannguyen on Dec 4, 2015 17:32:32 GMT
I think the outstanding loan of citigroup is quite clear. I will use the unsecured consumer loan part, eg: credit card. The operating expense I will use purely the number from FS, no off balance sheet items
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pikestaff
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Post by pikestaff on Dec 8, 2015 8:20:56 GMT
It is very unlikely that you will be able to split out the costs for the on b-s loan book alone, and even less likely that the figure will be meaningful if you can, because it will be full of management allocations.
Additionally, there are costs elsewhere in the supply chain which may not be captured. Depending on the platform, broker/introducer fees may be borne directly by the borrower and you may not see them. I don't know how it works at Lending Club specifically. In the banking world it is more likely (particularly for on b-s lending) that broker fees are an expense of the bank.
One other thing. You are asking your question on a UK-centric (and to a lesser extent euro-centric) forum. We don't really cover the US at all.
My suspicion from a UK perspective is there are so many mouths in the food chain for p2b lending that it may well be less efficient than the banks in overall cost terms. Consumer p2p may be more efficient once scale is achieved.
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adrianc
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Post by adrianc on Dec 8, 2015 8:33:10 GMT
I have reservations about the value of that number, at least for investors... Quite. As a lender through the bank or P2P, I want to know what I'll get back, total. I couldn't give a toss about whether the internal procedures are efficient or not. If I was looking to invest IN the financial institution, as a shareholder, then I'd be more inclined to care about that, because it impacts their profitability. But I'd also be happy with them reducing the rate they paid to the lenders, so long as enough came in to match demand.
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bigfoot12
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Post by bigfoot12 on Dec 8, 2015 8:59:05 GMT
As a lender through the bank or P2P, I want to know what I'll get back, total. I couldn't give a toss about whether the internal procedures are efficient or not. As P2P (apart from Zopa - and even it is very different now) hasn't been through a full credit cycle we don't know what we'll get back. Even after a full credit cycle we might merely have been lucky or unlucky. Knowing how much of the fees are going elsewhere to those whose money isn't at risk is important. Knowing what the total cost the borrower is willing to pay ought to be some indicator of the riskiness of the proposition.
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