Bad debt figures Options

[adilowes]

I just compared Jan 08 to Jan 09 figures.

Jan 08:
Loan: £17.8 million
Defaults & Collections: £18 thousand

Jan 09:
Loan: £31 million
Defaults & Collections: £270 thousand

A big increase.

But I suspect so are the quantity of Loans Zopa are dealing with. The only true measure is using Percentages as apposed to actual figures. Zopa bad debt and late payment figures are only going to increase exponencially.

If the percentage rate doesn't increase in the next 12 months yet for example the amount in loans triples then the bad debt will also triple.

[James TI]

I just compared Jan 08 to Jan 09 figures.

Jan 08:
Loan: £17.8 million
Defaults & Collections: £18 thousand

Jan 09:
Loan: £31 million
Defaults & Collections: £270 thousand

A big increase.

Beware making this comparison.

The Loan value is a current value.
The Defaults & Collections value is a lagging value, hence will probably be significantly higher.

The current loans value should probably be compared with the Default & Collections value in 13 months time when ~ 50% of the capital has been paid back.

[roger_at_zopa]

I just compared Jan 08 to Jan 09 figures.

Jan 08:
Loan: £17.8 million
Defaults & Collections: £18 thousand

Jan 09:
Loan: £31 million
Defaults & Collections: £270 thousand

A big increase.

If you wish to compair like for like its best to drop the listings market as it was not 'active' over much of the time frame of the first set of figures and contains loans with a high default risk . This means that the Jan 09 figures read as

Jan 09:
Loan: £30 million
Defaults & Collections: £224,500 thousand

Also the Christmas peirod seem to cause a lot of loans to be marked as 'collections' until Zopa had a chance to chase the borrower. The Feb figures may end up giving a better indication of what is going on.

Roger

[savaroony]

Latest bad debt figures are now available to download from your dashboard or here:  Risk_Info_to_Lenders20090216.zip ( 8.89K ) Number of downloads: 91

[ooo]

Below is number of loans in Def/Collect.
October 35
November 40 ie, +5
December 47 ie, +7
January 71 ie, +24
Feb 90 ie +19

So Jan was no blip.

Also def/collection went from £270k to £322K. That is a 20% increase in 1 month.

Percent of loans in Def/Collect has gone:
Nov: 0.52%
Dec: 0.56%
Jan: 0.88%
Feb 0.96%

[Change]

Below is number of loans in Def/Collect.
October 35
November 40 ie, +5
December 47 ie, +7
January 71 ie, +24
Feb 90 ie +19

So Jan was no blip.

Also def/collection went from £270k to £322K. That is a 20% increase in 1 month.

Percent of loans in Def/Collect has gone:
Nov: 0.52%
Dec: 0.56%
Jan: 0.88%
Feb 0.96%

It would seem that in this environment it would be prudent to expect this to worsen. I am making the assumption that bad debt rates will at least double over the next 12 months and factoring that in to my rates. It is quite clear from some of the offers being made in the market, that a number of individuals are ignoring this or think the trend will reverse.

This post has been edited by Change: Feb 28 2009, 01:04 AM

[pomma9649]

I am making the assumption that bad debt rates will at least double over the next 12 months and factoring that in to my rates.

I understand what you are saying - the good payers will return some of the cost of the bad ones....but
increasing rates ultimately makes it harder for borrowers to pay back....
and 16% of nothing is still the same of 6% of nothing.....

[comptroller]

Below is number of loans in Def/Collect.
October 35
November 40 ie, +5
December 47 ie, +7
January 71 ie, +24
Feb 90 ie +19

So Jan was no blip.

Also def/collection went from £270k to £322K. That is a 20% increase in 1 month.

Percent of loans in Def/Collect has gone:
Nov: 0.52%
Dec: 0.56%
Jan: 0.88%
Feb 0.96%

Rates are rising because they would anyway. The level of business is increasing and the book is becoming more mature. Without detailled statisical analysis, for which the data is not publicly available, it is not possible to say i) whether this is what would be expected with the ageing of the loan book and ii) if extrapolated to the completion of the loans if it would exceed Zopa's annual or lifetime expectation of bad debt.

[Change]

I understand what you are saying - the good payers will return some of the cost of the bad ones....but
increasing rates ultimately makes it harder for borrowers to pay back....
and 16% of nothing is still the same of 6% of nothing.....

If the loan book contains one loan you are right. I guess my point is that it seems some lenders are assuming the continuation of the past in a balanced loan book. It is just their low average rates will have to soak up increasing bad debts.

I am not suggesting for one minute that 16% is the right place to be, but just look at what the competition are offering in the market place for AAA type lenders; I have not seen any organisation offering anything below 7% with LIBOR at just over 1%, this is for areason, interest rates may have come down, but risks have increased.

[savaroony]

Latest bad debt info is now available to download from your dashboard and here:  Risk_Info_to_Lenders20090316.zip ( 8.89K ) Number of downloads: 70

[jaynieeee]

If the loan book contains one loan you are right. I guess my point is that it seems some lenders are assuming the continuation of the past in a balanced loan book. It is just their low average rates will have to soak up increasing bad debts.

I am not suggesting for one minute that 16% is the right place to be, but just look at what the competition are offering in the market place for AAA type lenders; I have not seen any organisation offering anything below 7% with LIBOR at just over 1%, this is for areason, interest rates may have come down, but risks have increased.

Much of "our competition" are paying punitive rates by HM government, not linked to LIBOR or base rate.

They also have a lot of "toxic" debt on their books, although they are managing to "off load" this by paying a insurance premium.

They are also having to attract lenders (depositers) and using a savings rate that would correspond to the LIBOR or base rate wouldn't be that attract to many - Like us lot?

All in all a direct comparision between Zopa lenders and banks isn't really comparing like for like.

[Change]

Much of "our competition" are paying punitive rates by HM government, not linked to LIBOR or base rate.

They also have a lot of "toxic" debt on their books, although they are managing to "off load" this by paying a insurance premium.

They are also having to attract lenders (depositers) and using a savings rate that would correspond to the LIBOR or base rate wouldn't be that attract to many - Like us lot?

All in all a direct comparision between Zopa lenders and banks isn't really comparing like for like.

I think what you are saying is that Zopa lenders have a competitive advantage. I guess it just depends as a lender, whether you leave most of that on the table as price or pocket more of it as profit.

As a lender my marginal profit is the same as the bank. What I charge is a function of what I could achieve on a deposit with a bank, the difference is my additional profit for using Zopa. Profit to cover risk and a margin for safety. That is no different to the bank's calculation.

It was interesting to see the statement yesterday that the banks have been losing deposits at quite a considerable rate to NS&I, who trebled their deposits last year to £9.9bn!

[Guest_BenMH_*]

Rates are rising because they would anyway. The level of business is increasing and the book is becoming more mature. Without detailled statisical analysis, for which the data is not publicly available, it is not possible to say i) whether this is what would be expected with the ageing of the loan book and ii) if extrapolated to the completion of the loans if it would exceed Zopa's annual or lifetime expectation of bad debt.

Agreed that there is a general credit deterioration. The thing that concerns me is that the loss rates could be lower than they "really" are as a) the book is growing fast (I believe), losses on emerge after a while, so c) loss ratios are an underestimate as the current "book" is larger than the "book" on which the business was written.

[anndy]

Hi everyone!
I may have started all this on bad debt last November when I had four late payers. Well I have now one bad debt and five late payers. I have been reading all the comments and Members trying to work out bad debt figures etc. most of which, sadly, I do not understand. BUT why doesn't Zopa management intervene and come up with some true calculations from their point of view! I cannot afford to loose money (and yes I know there was a risk!) so I am taking money out when I can and not reinvesting (originally £5000). Hopefully at the end I will be able to ascertain whether it was worth it!!
andy

[savaroony]

Latest bad debt data now available for you to download from your dashboard and here:  Risk_Info_to_Lenders20090415.zip ( 8.96K ) Number of downloads: 55

[ooo]

Below is number of loans in Def/Collect.
October 35
November 40 ie, +5
December 47 ie, +7
January 71 ie, +24
Feb 90 ie +19
Mar 100 + 10
April 121 +20

Seems like rate of increase in late payers is about 20 a month. This is about 4 times higher than it was last year.

In April £120k of loans went into late/default.

I think that Zopa should improve this spreadsheet. Also the stats should be published like the other stats are so they can be added to those nice graphs...
Additional columns needed in spreadsheet are:
Current balance of outstanding loans (i.e. amount still to be paid back).
Change in amount of loans entering default/late payment.
Current number of outstanding loans.

This way we could calculate % of outstanding loans that defaulted rather than including loans that have already been paid back. I think this is important as the percentages will increase significantly as I am sure that a lot of loans have been repaid already.

This post has been edited by ooo: Apr 18 2009, 12:43 PM

[Deddington]

000

I agree with you on that.

[savaroony]

Hello all - apologies for not getting the monthly update on these figures to you as promptly as usual; I've been out of the country for a couple of days but will get this posted ASAP.

[savaroony]

Hello all - apologies for not getting the monthly update on these figures to you as promptly as usual; I've been out of the country for a couple of days but will get this posted ASAP.

And here it is:  Risk_Info_to_Lenders20090520.zip ( 9.27K ) Number of downloads: 24

It will be made available for download from the website ASAP too.

[sl75]

And here it is:  Risk_Info_to_Lenders20090520.zip ( 9.27K ) Number of downloads: 24

It will be made available for download from the website ASAP too.

Ummm... most of the numbers in the columns:
- Actual Defaults and Collections 06/03/2005-20/05/2009
- Actual Defaults 06/03/2005-20/05/2009
... are blank. I think something may have been missed out when creating the spreadsheet?

As long as the other columns have been correctly updated, copy-pasting the formulas from the "Listings" section into this area seems to work.