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Post by wiseclerk on Feb 19, 2014 15:44:29 GMT
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Post by bengilbert on Feb 19, 2014 17:43:45 GMT
Thanks a lot for sharing that - I didn't know that isePankur had made their loan book available for download, and being able to look in detail really helps since I wouldn't have known where to start on estimating the chance of an Estonian borrower defaulting.
One very quick analysis I just did (very possibly with errors, haven't checked it) was to see what default losses (principal outstanding at default minus recoveries) were on all loans that should have run to their end (defined as having a end date more than 60 days before the date of the data, which was 6 Feb 2014). I got this:
completed loans made in H1 2011: 227,890
default losses: 15,428 (6.8%)
completed loans made in H2 2011: 201,940
default losses: 10,092 (5.0%)
completed loans made in H1 2012: 61,490
default losses: 1,491 (2.4%)
All these loans had a maximum term of 2 years, so the figures for the 2011 loans include almost all the loans made then. The average loan term for the completed loans was 1.6 years for H1 2011, 1.7 for H2 2011 and 0.9 for H1 2012 (reflecting the fact that longer loans from 2012 haven't yet completed).
If the annualised rate of default losses runs at 3-5%, that would suggest something like 15-20% net returns, pretty good unless there are reasons to think that default rates are likely to be higher in future.
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mikes1531
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Post by mikes1531 on Feb 20, 2014 2:18:16 GMT
If the annualised rate of default losses runs at 3-5%, that would suggest something like 15-20% net returns, pretty good unless there are reasons to think that default rates are likely to be higher in future. Does the 15-20% return include an adjustment for the unfavourable tax treatment of bad debt losses? Or is it simply the difference between the average loan interest rate and the estimated bad debt rate?
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Post by bengilbert on Feb 20, 2014 9:53:33 GMT
Good point, it was just returns minus default losses, things would look a lot worse once tax was factored in.
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james
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Post by james on Feb 20, 2014 10:30:39 GMT
wiseclerk, thanks, that is interesting. At the moment I don't sell loans quickly based on those factors. Instead I use them to help me to decide when and whether to sell if a loan becomes late.
How are you doing in the ranking of investment returns for twelve months and over ten thousand Euros lent now? I'm currently ranked 9 with about seventeen thousand Euros of active loans. It's interesting to see what others who are doing well are doing to achieve their results.
bengilbert, use caution with older loan default rates. isePankur didn't start verifying things like income and checking bank statements until quite recently, I forget when, maybe April 2012. Interest rates also increased significantly around October 2012 around the time when non-Estonian lenders could start to participate. For me that makes data from the second half of 2012 and onwards the most interesting. The combination of higher rates and lower defaults combined with the high recovery rates suggest that even allowing for tax, defaulting loans might well end up being profitable. isePankur has also been increasing the time from lending to defaulting, so that implies lower default amounts over time.
It's also worth remembering that you can sell late loans if you like, until they get beyond 60 days late. If an arrangement is made after 60 days the loan becomes saleable again. I sold around half of my interest on one of those. If the borrower continues to pay, the late and default charges will deliver an effective interest rate above 60%. What these things mean is that you can choose to take a capital gain or loss from selling rather than the costs of a default. In general I've made a small profit from selling late loans. I've often been able to sell them at 5% margin.
More troublesome for me are low interest rate loans. I take the exposure to them to increase my diversification into lower value loans and improve both diversification and lending speed but at the lower rates it's necessary for me to take a capital loss of a few percent to sell. I sell because keeping a loan at a rate of below 16% is less attractive than getting say 97% of the money back and relending it at a higher average rate.
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Post by wiseclerk on Feb 20, 2014 12:31:49 GMT
If the annualised rate of default losses runs at 3-5%, that would suggest something like 15-20% net returns, pretty good unless there are reasons to think that default rates are likely to be higher in future. Does the 15-20% return include an adjustment for the unfavourable tax treatment of bad debt losses? Or is it simply the difference between the average loan interest rate and the estimated bad debt rate? If Isepankur continues to maintain the 86% recovery rate of defaults then I don't see the tax issues to be that big. wiseclerk, thanks, that is interesting. At the moment I don't sell loans quickly based on those factors. Instead I use them to help me to decide when and whether to sell if a loan becomes late. How are you doing in the ranking of investment returns for twelve months and over ten thousand Euros lent now? I'm currently ranked 9 with about seventeen thousand Euros of active loans. It's interesting to see what others who are doing well are doing to achieve their results. You beat me. For those settings I am ranked at position 13. I am keeping those as I had little success in selling them - maybe I did not try hard enough. But even if I am using my aggresive investment profiles, I usually get around 4 high percentage interest loans for every low percentage loan, which I feel is a good ratio. The trick in my opinion is not to leave aggressive investment profiles running constantly, but to pause it most of the time and only turn it on if there is much surplus cash in the account. Be sure to pause it before 7pm (Estonian time) otherwise it will then bid on all open loans your not already in. If I turn it on in the morning and pause it in time, I only get the fresh loans, hopefully many quickfunding ones.
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duck
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Post by duck on Feb 20, 2014 17:30:57 GMT
sorry to ask the obvious but what is the 'ranking'?
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Post by wiseclerk on Feb 20, 2014 17:38:31 GMT
Investors by ROI (as calculated by Isepankur) based on all investors that meet the selection criteria, which you can set. You can play with this under "Calculate reports" here: www.isepankur.ee/my-isepankur/investmentsprovided you have an account and are logged in.
You are in position 13 amongst the investors based on your return rate. Investors who have invested minimum 10000€ are taken into account.These investors have invested minimum over a period of 12 months.
I find the brackets distribution more useful than the rank number. |
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duck
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Post by duck on Feb 20, 2014 17:47:13 GMT
Excellent thank you (and for the very quick response) I've not found that previously so I have been calculating my own ROI (inc my tax liabilities) which is still looking very positive. That said, I need to spend more time sorting some chaf from the wheat after increasing my loan book recently.
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mikes1531
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Post by mikes1531 on Feb 20, 2014 19:27:34 GMT
In general I've made a small profit from selling late loans. I've often been able to sell them at 5% margin. What exactly do you mean by "margin"? Did you mean "discount"?
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Post by wiseclerk on Feb 20, 2014 20:41:20 GMT
No he means premium. You can sell loans at up to 5% premium. After the 1.5% resale fee that means 3.5% profit.
I've sold overdue loans at premium, but usually only 1 to 3%. But more often I sell them at par or at 1-3% discount. I think all other circumstances will need to be very good to be able to sell an overdue loan at 5% premium. However I sell my overdue loans usually only after the second missed payment. Maybe if you sell them very early (a few days after the first missed payment) then you can achieve 5% premium?
When do you sell yours, James?
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james
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Post by james on Feb 20, 2014 20:45:06 GMT
By margin I mean putting 5 in the box where you give the percentage above or below the current capital amount owed. So for £50 owed on a loan, the price to buy would be 52.50 Euros.
I haven't sold any late loans at a premium recently. That is mainly because I have not had any that I wanted to sell. I have four for sale now. The ones I sold that were late usually had an original interest rate of 28%. I did recently sell two pieces at -2% with an interest rate for the buyer that was about 26.5% for A 1000 for a person who has now missed two payments.
At present I have about 900 Euros of loans that I am trying to sell. They do sell, sometimes slowly. I have sold 22 loans since the middle of December. That is when I started to keep good records of why I was selling and the rates used.
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Post by wiseclerk on Feb 20, 2014 20:47:08 GMT
Rather 52.50 Euro??
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james
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Post by james on Feb 20, 2014 20:55:47 GMT
Yes, 52.50. Just corrected my post, thanks.
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mikes1531
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Post by mikes1531 on Feb 20, 2014 21:06:54 GMT
No he means premium. You can sell loans at up to 5% premium. After the 1.5% resale fee that means 3.5% profit. I've sold overdue loans at premium, but usually only 1 to 3%. My first reaction was "Who would buy late loans at a premium?" but if IP's collection process has been effective, and the Late fees are bonuses to the lenders then I suppose it isn't that unreasonable. Some IP lenders obviously are gamblers!
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