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The traditional yearly update on the loan portfolio is ready!
In a nutshell, all indicators are green and demonstrate the excellent quality of our portfolio of loans.
It is also important to mention that since last year's review, the stock of bad loans which had been accumulated since 2019 was repurchased in July this year.
Besides, Klear has entered in an agreement with a debt collection agency. Each month, any new bad loan is automatically sold to the agency at a pre-agreed price of 20%. The rule for “bad loan” is “more than 5 installments in delay and no payment in the last 3 months”.
The first one was sold in October and every month we will screen the portfolio to trigger the sale of loans entering this category.
This process will provide a more accurate view of the return and help avoid the yoyo effect we’ve seen before, when bad loans were not taken out on a regular basis.
1. Average return on the whole portfolio
The portfolio continues to behave better than initially forecasted. The average return since the start of the platform is 6.5%.
It is important to understand that it will slightly decrease over time as the proportion of segment S loans is growing progressively.
On the other hand, the risk is decreasing, and the portfolio will become even more resilient in case of future economic troubles.
2. Net profit
The loss from the sale at a discount of the bad loans represents only 13% of the earned interest, which results in an accumulated profit above 1 Million BGN.
The P2P lending model works perfectly thanks to our positioning on the best profiles and our uncompromising standards in granting loans.
3. Investors by level of return
The return is mostly ranging between 5% and 8%.
4. Returns vs number of loans invested in (for investors not actively trading on the secondary market)
To consider if an investor is actively trading on the secondary market, we look at his purchases and sales on the secondary market, more precisely if he’s buying or selling at a discount/premium quite different from the recommended KIP. If the difference between actual and recommended price represents more than 15% of the earned interest, he is classified as actively trading on the secondary market.
Besides, we count only investors who have earned at least 1 BGN of interest.
All investors with more than 150 loans (the safe threshold) have a return above 4%.
5. Return vs number of loans invested in (for investors actively trading on the secondary market)
Transacting on the secondary market offers opportunities to earn above 10% but it is riskier. There is a higher volatility when transacting actively on the secondary market.
6. Time to sell
The average time to sell has decreased since the last report.
After a 3-month period at the beginning of the first lockdown in March 2020 where the time to sell had increased, we are now back to the previous levels. On average, it’s possible to get liquidity within 5 days on more than 90% of the portfolio.
We expect this time to sell to decrease further. So far, the last mile in selling a whole portfolio was to get rid of the loans in delay. With the new regular process of taking out defaulted loans, there will be less loans in delay to sell and, with a reasonable discount for these few loans in delay, the sale could be completed quickly.
7. Risk levels by vintage of production
Short term indicator R2-6
It’s a short-term indicator to assess at an early stage the quality of a new vintage.
We look at loans financed having reached more than 30 days delay in the first 6 months of their life (among all loans from a vintage which had at least 6 months of life)*.
| Period | Financed* | Incidents | R2-6 % |
|---|---|---|---|
| 2016 S2 | 77 | 3 | 3.9% |
| 2017 S1 | 168 | 3 | 1.8% |
| 2017 S2 | 173 | 4 | 2.3% |
| 2018 S1 | 183 | 0 | 0.0% |
| 2018 S2 | 188 | 1 | 0.5% |
| 2019 S1 | 213 | 5 | 2.3% |
| 2019 S2 | 259 | 4 | 1.5% |
| 2020 S1 | 175 | 2 | 1.1% |
| 2020 S2 | 203 | 2 | 1.0% |
| 2021 S1 | 131 | 1 | 0.8% |
| ALL | 1 770 | 25 | 1.4% |
According to this early risk indicator, the loans originated in 2020 and 2021 are of better quality than the average.
How to read it:
For example, among all the loans financed in the second semester of 2020, 203 had at least 6 months of history and among them 2 reached at least 30 days delay (equivalent to 2 installments in delay), which is 1%. Please note that these 2 loans may have repaid their delay since.
1 Year risk indicator R3-12
We look at loans having reached more than 60 days delay (equivalent to 3 installments in delay) in the first 12 months of their life, among all loans from a vintage which had at least 12 months of life.
| Period | Financed* | Incidents | R3-12 % |
|---|---|---|---|
| 2016 S2 | 77 | 3 | 3.9% |
| 2017 S1 | 168 | 6 | 3.6% |
| 2017 S2 | 173 | 9 | 5.2% |
| 2018 S1 | 183 | 3 | 1.6% |
| 2018 S2 | 188 | 2 | 1.1% |
| 2019 S1 | 213 | 5 | 2.3% |
| 2019 S2 | 259 | 7 | 2.7% |
| 2020 S1 | 175 | 3 | 1.7% |
| 2020 S2 | 164 | 4 | 2.4% |
| ALL | 1 600 | 42 | 2.6% |
We have confirmation that the loans financed in 2020 have on average a better quality.
Conclusion
Having passed the pandemic situation and showing a better quality of the most recently financed loans is an unquestionable proof of the capacity of Klear to filter adequately the good borrowers and to ensure stable returns for its investors.
