Marketplace Lender Prosper Releases Quarterly Investor Update, Borrower Rates on Platform Higher than Pre-Pandemic Levels

Prosper, a peer-to-peer lending company that connects borrowers and investors with over $17B in loans issued via its platform, recently shared their Quarterly Investor Update – Q1 2021.

Ashish Gupta, the Chief Credit Officer at Prosper Marketplace, writes in a blog post that the company has continued operations in a resilient manner and reports “strong credit performance.”

Gupta added:

“Prosper’s Q1 2021 Quarterly Update provides our investor community the latest information on the performance of loans on the Prosper platform as well as our view of the macro environment. Overall, we have continued to see improvement in credit performance on the Prosper platform driven primarily by our disciplined underwriting approach over the past several years.” 

Gupta added that at Prosper, they believe this is a “testament” to the strength and resilience of their platform, which leverages more than a decade of “proprietary” data and advanced AI-powered models “using traditional and alternative data sources to evaluate credit and fraud risks.”

While sharing details on the current macroeconomic environment, Gupta noted that because of the “unprecedented government stimulus over the last year, the overall macro environment is showing ongoing signs of improvement.”

He added:

“Additionally, due to reduced consumer spending, consumer finances for middle and high-income borrowers appear to be in better shape today vs pre-pandemic.” 

According to the Prosper team, these trends become evident when reviewing the following information:

  • The unemployment rate in February 2021 “was at 6.2%.” While “current unemployment rate is still high relative to February 2020 unemployment rate of 3.5%, it has improved materially since the peak unemployment rate of 14.8% in April 2020.”
  • Employment rates “among workers in the top wage quartile (those making greater than $60K annually) is better than pre-pandemic levels.”
  • Revolving balances “on credit cards and other revolving plans in February 2020 are down by 13% ($114B) year-over-year due to reduced consumer spending.”
  • Personal savings rate, “defined as personal saving as a percentage of disposable personal income (DPI), is at 20.5% in January 2021 vs. 7.6% in January 2020, amounting to over $2.6 Trillion in higher savings year-over-year, mostly concentrated in middle- and high-income households.”

While sharing details on the outstanding portfolio performance, the Prosper team noted:

Overall, “performance of our outstanding portfolio is trending better than pre-pandemic levels.”

  • 30+ Days Past Due (DPD) rate “for our outstanding portfolio is 35% favorable to February 2020 levels and overall payment rate on the portfolio is 13% higher compared to the prior year.”
  • As of February 2021, “3.8% of outstanding receivables are enrolled in a Prosper COVID-19 relief program. Almost all of these borrowers are enrolled in a payment reduction program.”
  • 80% of borrowers “graduating from their payment reduction period are staying current by either making new higher payments or enrolling in a second stage of the payment reduction program, which provides an additional six-month payment reduction period.”
  • Performance of borrowers “who did not enroll in any of our COVID-19 hardship relief programs continues to trend favorably; 30+ DPD rate for these borrowers is 44% lower than pre-pandemic levels.”

While commenting on new originations credit quality and early performance, Gupta noted:

  • Early delinquency rate “for vintages underwritten just before the pandemic (2019H2, 2020Q1) as well as vintages underwritten during the pandemic (2020Q2, 2020Q3) is trending favorably.”
  • Credit quality of new originations “continues to be strong year-over-year. Repeat borrowers, who have historically demonstrated significantly better credit performance than new borrowers, made up 53% of originations in February 2021 vs. 45% in February 2020.”
  • Compared to pre-pandemic levels, “borrower rates on the platform remain higher to help provide enough cushion to platform investors against volatility in the macro environment.”
  • Median monthly “loan payment to income ratio (PTI) was 5.08% in February 2021 vs. 5.31% in February 2020.”

Gupta concluded the blog post by noting:

“We believe our consistent focus over the last several years on higher credit quality and higher income borrowers has contributed towards the resilient credit performance we’re seeing on the Prosper platform and helped us deliver solid risk-adjusted returns for our investors.  We continue to remain disciplined in our approach in a dynamic credit environment.”

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