Assetz Capital Shares Defaults and Losses for 2013 & 2014

Assetz CapitalAssetz Capital is participant in the booming growth of peer to peer lending in the United Kingdom.  The P2P lending site has facilitated almost £50 million in loans since the platform launched in 2013.  Recently the company published defaults and losses data in an effort to create an environment of transparency for both investor and borrower.

The Peer 2 Peer Finance Association (P2PFA), an entity that strives to set high standards for the P2P industry, has set guidelines on operating principles for industry participants.  This past June they published standards for calculating default rates.  Assetz has presented numbers using the P2PFA guidelines.  While Assetz is not a member of P2PFA they concur with the intention of standardized reporting and has embraced transparent information.

When Assetz Capital started at the beginning of 2013 they anticipated a default rate of 1.5% and a loss rate of 0.5%. The company stated, “Just over 18 months later and we’re in a solid position”.

“Our standardised report shows in 2013 that although several loans were briefly classed as non-performing, there were no losses. This is thanks to our strict and detailed underwriting and the tangible security taken on each loan”.

For 2014, some loans have defaulted, including one case where the borrower died, and they are working through the estate. In another, the borrower is refinancing and they are suffering from bank delays.

Assetz Capital clarifies, “However, because of the strong security we have in place there is no expected loss faced by investors on either of these loans. The recovery process is underway and we’re confident of a successful outcome”.

The company reported on a  £700,000 loan that went into default:

  • We almost immediately recovered £400k.
  • A plan has been set and agreed over the next 12 months for the remaining money, plus interest for our investors.  With security covering the outstanding amount, we hope to make a full recovery of lender capital and interest.

“We are dedicated to keeping lenders updated, which is why we will continue to report on the raw numbers of individual loans”.

Assetz Capital believes that any loan which is late or in breach of the loan covenants should be classed as a default.

“If lending is done properly, the majority of defaults should be recovered successfully, and we maintain that, for an accurate idea of how bad debt will affect returns, investors should look at the loss rate”.

Assetz Capital defines their glossary of the key terms:

  • Volume: The total amount lent in a given year.
  • Non-performing: Generally speaking, this refers to a loan more than 45 days late with a repayment or which is in breach of the conditions of the loan in some way.
  • Default: A loan more than 120 days late with a repayment. Crucially, this isn’t the same as an expected loss.
  • Expected loss: Any lent money that is not expected to be recovered.
Volume Non-performing Defaults Expected Loss
   £ £ % £ %    £ %
Total    40,943,745 1,860,000 4.54 350,000 0.85    50,000 0.12
2014    29,860,250 700,000 2.34 350,000 1.17    50,000 0.17
2013    11,083,495 1,160,000 10.47 0 0    0 0

Correct at 26 September 2014



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