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Deddington

Member Since 27 Mar 2006
Offline Last Active Today, 09:28

Posts I've Made

In Topic: Do we have any power to challenge Zopa on Safeguard

Yesterday, 17:59

View Postbinkey, on 24 May 2013 - 16:44, said:

Dear Moderator, indeed no, I was not criticising you. My apologies! I was attempting to explain that most of us would have preferred that Zopa state clearly what was really behind the changes and what the practical implications were.

Which just goes to show what an imperfect medium this for having a chat. See you in the pub :wacko:

In Topic: Do we have any power to challenge Zopa on Safeguard

Yesterday, 14:15

View Postbinkey, on 24 May 2013 - 14:05, said:

Thanks to all the above I am now clear about all this. I had always thought that my premier league football club was the most obscure organisation I have ever used. But they are rolling in money and have more fans than they need!
Most of us are reasonably intelligent and sensible adults who prefer to make informed decsions, moderator please note!

If that was me you were referring to I will clarify my post. I meant I totally agreed with what propman said in the whole post. I can see how it could read that I was just agreeing with it being too long which was not my intent. I will edit myself for clarity.

And welcome to the forum.

In Topic: Do we have any power to challenge Zopa on Safeguard

23 May 2013 - 20:55

View Postpropman, on 23 May 2013 - 20:15, said:

Individually we have virtually no power, but as a class Zopa lives or dies by the whims of its potential customers.

Re the rate, there are 2 issues:

Funding for lending means that Zopa's competitors (the banks) are funded at an uncompetitive rate. This is not available to Zopa, but it has to have a competitive rate or some other USP. It has not found another convincing USP that is sufficient to meet its ambitions. Certainly there is a niche of anti-establishment people that wants to help others or to "play" at credit and others that are prepared to pay more to not have to deal with a bank. Whether that is big enough to provide sufficient income to support itself is questionable and anyway there are others providing much of this and so only part of that market would be available for Zopa even if they were inclined to operate on that premise. Otherwise they need to provide competitive rates to borrowers.

Zopa is unusual in the P2P world at making a profit, but to date the return does not repay the risk taken by its backers. If it is to stay in business long term it needs to pay a fair return for its shareholders continued involvement. Therefore while it continues to make modest returns while not paying unacceptable salaries to Giles and crew, I don't think that its fees are unreasonable. To get back to the impact of Funding for Lending, applying the same logic that it is the proportion of interest paid that determines a fair return would have meant that where a bank once paid savers 5% and charged borrowers 15%, that now it is funded at 1% it shoudl lend money at 3%. However its cost base has not decreased from 10% of its loanbook to 2%. Why should Zopa be any different? Basically it charges fees that need to cover a return to its backers and its costs. By innovating to grow it should be able to cover its costs with a smaller percentage of its loanbook (economies of scale). It is this prospect that allows it to receive increased funding from its backers despite not making dividend payments and not being in a position to be sold in the near future. Otherwise it would be forced to rais its fees further.

Rightly or wrongly it has chosen the Fund option and basket if loan principles in SG to increase the value that it provides to customers in the hope of continuing and expanding its growth. I agree that this has taken some of the fun theat Zopaholics had away. Axs I have said on the SG thread I appear to have been extremely unlucky so far on SG, but I will still make an improved return on similarly risky investments so long as interest rates do not increase greatly more than expected in the next 3 years and the Fund proves to be sufficient. I have shown that there is a risk of a reasonable basket of loans being significantly different from the quoted rate, but the difference is tiny compared to the effects of bad luck on defaults for a similar sized prortfolio.

That is my take and currently I will continue to invest. As said before the loss of transparency is worrying and I will reconsider further lending if we do not receive information on the fund in a reasonable time frame.

Sorry for the extended response

- PM
- PM

Totally agree.

In Topic: 'Safeguard offer'?

23 May 2013 - 09:25

View Postpropman, on 23 May 2013 - 08:42, said:

Would you mind sharing the split between the different rate bands as Zopa's chart is difficult to estimate.
- PM

A* - 482 - 5.93%
A  - 151 - 5.96%
B  - 74 - 7.7%

In Topic: 'Safeguard offer'?

23 May 2013 - 08:14

View Postpropman, on 23 May 2013 - 07:57, said:

Has anyone looked at the rates that are being disbursed?

Just had a quick look and the 33 longer loans to date average 5.824% before fees with only 7 in processing. Have I just been unlucky or have Zopa miscalculated?

- PM

I have 707 loans withdrawn from SGL at an average rate of 6.09%. So given this large sample it would appear Zopa are very close to their 6.1% for me.

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