- Dear Readers,
- As you are probably aware Lending Times is organizing an event in New York on Monday August 15th titled “The future of Market Place Lending – Madden and beyond”. We would like to welcome our interested readers to participate in the panel. We have 1 seat available at this time. Please contact us if you are interested in participating in the panel.
- Thank you.
- George Popescu
- Rates for personal loans have not changed over the last 30 days according to Bankrate.com . Howeve, every mainstream lender now issues personal loans, and there are many good options particularly for people with good credit. Wells Fargo for as little as 9.25% and Houston-based Integrity Bank charges 9%.
- A report from Zephyr shows a reduction by 40% in M&A volume from H2 2015 except in Middle East and Africa. Global PE and VC volumes followed the same patterns in H1 2016 declining 20% in volume over Q1 2016 and 47% over H2 2015.
- An additional summary of the congressional review of marketplace lending we discussed yesterday. Parris Sanz from CAN Capital struggled to explain away their avoidance of using APR. The explanation usually given is “most SME leaders they think in cash-in/cash-out per day, week or month, and not in percentages”.
- An interesting survey made by FINRA showing that the average household in the US understands less about finance than they did in 2009 but is doing financially a little better.
- Lendio announces support for a standard way for SMEs to compare credit products across the SME lending industry. This initiative is called SMART Box.
- JP Morgan had a blowout quarter in Fixed Income while the rest of the industry has seen 25% headcount cut vs same time last year. We will find out if this blowout will be similar across all firms or just JPM .
- OnDeck announces the date for 2nd quarter earnings on August 8th.
- A fairly long article explaining why financial advisers are cautious about p2p lending in the UK and showing how Octopus Financial has jumped in with both feet.
- 8 out of 86 p2p platforms that applied with FCA have been authorized. However, the p2p finance association believes delays are not such a big deal. The main issue is that P2p platforms can not offer ISAs until they are FCA approved. The delay is not a big deal because ISAs are long-term savings products and investors can put money in at any point.
- Funding Circle alum raised 41% of their equity crowdfunding campaign for a house builder just in a few hours.
- AuxMoney, the leading German P2P lender continues to do very well. 202% origination growth in H1 2016 v H1 2015. On the continent, the 2 leading platforms in unsecured personal seem to be the German AuxMoney and the French Younited Credit.
- 264 p2p lenders shut down in H1 2016 out of a total 2,349 who are still active as of June 2016. A 10.1% default rate.
- Lending Crowd, the 4th licensed p2p lender in NZ, is seeking up to $5 million from financial services sector investors to help the peer-to-peer (P2P) lender build scale and grow loan volumes. To date, Croad said Lending Crowd has received $22 million worth of loan applications and written $2.5 million worth of loans with 60% of this total comprising personal and motor vehicle loans, and 40% business loans.
- United States
- Personal loans are cheap, but can I get one?, (Bankrate.com), Rated: AAA
- Global M&A, PE and VC activity declines in the first half of 2016 after reaching record highs last year, (Bureau Van Dijk), Rated: AAA
- Congressional Committee Reviews Marketplace Lending, (Crowdfund Insider), Rated: AAA
- A FINRA survey of US consumer financial capability, (FINRA), Rated: AAA
- Lendio Announces Support for SMART Box Initiative Focused on Enhancing Online Lending Disclosures, (Press Release), Rated: A
- JPMorgan had a blowout quarter in fixed income, and it’s big news for Wall Street, (Business Insider), Rated: A
- OnDeck Announces Date Of Second Quarter 2016 Earnings Conference Call, (Yahoo Finance), Rated: B
- United Kingdom
- How are the alternative finance industry and the $1.6 trillion wealth management market approaching each other?, (City A.M.), Rated: AAA
- P2P body chief denies FCA delays damaged industry, (FT Adviser), Rated: A
- AngelsDen & Funding Circle’s Alum Verto Homes Launches £1M Funding Raise on Crowdcube, (Crowdfund Insider), Rated: A
- European Union
- Leading German Crowdfunding Platform, P2P Lender Auxmoney Powers On, (Crowdfund Insider), Rated: AAA
- 264 Peer to Peer Lenders Shut Down in China During First Half of 2016, (Crowdfund Insider), Rated: A
- New Zealand
- Peer-to-peer lender Lending Crowd seeking capital to help it grow, (Interest), Rated: A
Personal loans are cheap, but can I get one?, (Bankrate.com), Rated: AAA
In Bankrate’s national survey of interest rates from banks and thrifts for July 13, 2016, the rate on personal loans remained unchanged for the 4th consecutive week at 10.94%. This week’s average rate is down four-tenths of a percentage point from its 2016 high. A year ago, interest on the average personal loan was 11.12%.
There are 3 types of places where you can look for a personal loan:
- Credit unions
- Finance companies (including online lenders)
As recently as a few years ago, banks dominated this space, accounting for 40% of all personal loan originations, according to the credit bureau TransUnion.
“Even though Prosper and Avant and Lending Club to a certain extent have pulled back, there are other lenders that are filling the void,” Tarkan says. “So I don’t know if there’s going to be this massive decline in availability of credit because the marketplace lending sector is contracting.”
John Ulzheimer, a credit expert who formerly worked for FICO and Equifax, says “every mainstream lender” now issues personal loans, and there are many good options, particularly for people with good credit.
To give some examples, Wells Fargo branches throughout the country offer personal loans. In Los Angeles, the nation’s second-largest bank offers personal loans for as little as 9.25%, while Houston-based Integrity Bank — with 3 southeast Texas branches — charges 9%, according to the Bankrate survey.
Global M&A, PE and VC activity declines in the first half of 2016 after reaching record highs last year, (Bureau Van Dijk), Rated: AAA
Both the volume and value of global mergers and acquisitions dropped significantly over the opening half of 2016, according to information collected by Zephyr, the leading global M&A database. Over the first six months this year, only 43,352 deals were announced for a combined $1.94 trillion. This is down nearly 20% in volume and over 40% in value compared to the 53,287 deals worth $3.27 trillion in the last half of 2015, and 52,637 deals worth $2.94 trillion in the first half of 2016.
The one exception was the Middle East and North Africa, where value climbed 23% to $15.7 billion over the six-month span, despite a small dip in volume. All other regions declined over the same time frame, with the steepest drop reserved for Central and Eastern Europe, which slipped 52% from $88.45 billion in H2 2015 to $42.58 billion this year. The top-performing countries by value for H1 2016 were the US, China, the UK, Switzerland, and Canada.
The Zephyr database also showed both the volume and value of global private equity and venture capital investment followed the same pattern as M&A in H1 2016, declining in the preceding six months and year-on-year. In all, there totaled 2,651 deals worth a combined $196 billion during H1 2016, a 20% decline in volume and 47% fall in value from the final six months of 2015.
Congressional Committee Reviews Marketplace Lending, (Crowdfund Insider), Rated: AAA
Comment: a more detailed article on the hearing from July 12th, 2 days ago.
The meeting saw the participation of several industry executives including representatives from Prosper, CAN Capital, the American Bankers Association, the law firm of O’Melveny & Myer and the National Community Reinvestment Coalition. The meeting was timely as multiple regulatory agencies are moving towards applying additional regulations on online lenders – an act that may place financial innovation at risk.
The “key takeaway” offered by the Committee was that online lending may deliver access to credit to underserved or underbanked communities. For both consumers and SMEs alike. Of course, advancement by online lenders may put traditional banks under additional pressure – something the ABA representative expressed by saying regulation should be based Rob Nichols ABAon activities – in other words, banks want similar rules to apply to online lenders.
Parris Sanz from CAN Capital struggled to explain away their avoidance of using an APR and what approximately CAN Capital was charging borrowers (Ms. Levi clarified it as 36% to 60%).
A FINRA survey of US consumer financial capability, (FINRA), Rated: AAA
The US household financial picture is improving.
- 18% spend more than they household income, 38% spend all their household income. ( in 2009 20% spent more than their household income)
- 21% of households have medical debt vs 26% in 2012
- 50% of households have no rainy-day fund , also a diminishing %
- 26% of households have used non-bank borrowing vs 28% in 2012
- 32% of households only pay the minimum payments on their credit cards vs 40$ in 2009
- 9% are underwater in their home equity vs 14% in 2012
Study participants were asked five questions covering aspects of economics and finance encountered in everyday life, such as compound interest, inflation, principles relating to risk and diversification, the relationship between bond prices and interest rates, and the impact that a shorter term can have on total interest payments over the life of a mortgage.
63% of individuals got 3 of fewer basic questions correct in 2015 vs 58% in 2009
Most Americans do not compare offers or collect information from more than one company when shopping for credit cards. This practice suggests a gap in applying financial decision-making skills to real life situations.
58% of Americans do NOT compare credit card offers before choosing a credit card to use.
Lendio Announces Support for SMART Box Initiative Focused on Enhancing Online Lending Disclosures, (Press Release), Rated: A
Lendio (www.lendio.com), a marketplace for small business loans, announced today that it will join industry leaders as an early engagement participant in supporting the model small business lending disclosure called the SMART (Straightforward Metrics Around Rate and Total cost) Box, developed by members of the Innovative Lending Platform Association (ILPA).
The SMART Box is a voluntary initiative to promote transparency through standardized pricing comparison tools and explanations, including both various total dollar cost and annual percentage rate (APR) metrics to further empower a small business to assess and compare financing options.
JPMorgan had a blowout quarter in fixed income, and it’s big news for Wall Street, (Business Insider), Rated: A
JPM had a particularly strong quarter was fixed income, currencies, and commodities, or FICC, trading, which produced revenues of $3.96 billion — up 385% from the same quarter last year. Analysts had forecast FICC revenues of $3.57 billion, according to Bloomberg estimates. Those are the highest quarterly FICC revenues for the firm since Q1 2015 ($4.1 billion). You’d have to go back to Q1 2013 to find significantly better results ($4.8 billion).
Many firms have been cutting FICC headcount, including Deutsche Bank, Credit Suisse, Goldman Sachs, and Morgan Stanley, which cut 25% of the division last year.
“We’re investing in it,” CEO Jamie Dimon said at the bank’s investor day in February. “We’re investing in it more on the technology side.”
Now the question is whether JPMorgan was the sole firm to smash expectations or whether we’ll see comparable results across the Street in the coming days.
Jefferies in June reported trading — and fixed income — revenues that were better than normal but not by much. Goldman Sachs has previously laid out a bull case for fixed income; we’ll have a window into its FICC business when that firm reports earnings on Tuesday.
OnDeck Announces Date Of Second Quarter 2016 Earnings Conference Call, (Yahoo Finance), Rated: B.0.0.1.2.0.1.0.0.0.0.0.0.$SideTop-0-HeadComponentTitle-Proxy.$SideTop-0-HeadComponentTitle.0">OnDeck Announces Date Of Second Quarter 2016 Earnings Conference Call, (Yahoo Finance), Rated: B
OnDeck will report financial results for the second quarter ended June 30, 2016, on Monday, August 8, 2016, after the market close.
How are the alternative finance industry and the .6 trillion wealth management market approaching each other?, (City A.M.), Rated: AAA
If you use an independent financial adviser or wealth manager, they’ve probably never mentioned P2P lending.
This might seem strange: there’s been a lot of talk of how the peer-to-peer industry is “moving mainstream”, and volumes reflect that. In 2015, the online alternative finance industry in the UK grew to £3.2bn – an 84 per cent increase from 2014 – and alternative finance lending accounted for around 14 per cent of new loans to small firms.
And at the same time, institutional money has flowed readily into the sector. In the last six months, according to AltFi Data, it accounted for 40 per cent of involvement in the UK market – from almost nothing prior to 2014. But most of this money comes from specialist funds, and institutional money is notoriously fickle.
Financial advisers, however, still seem reticent. “They have always been very interested, but what’s needed is conversations. When we get them in a room and speak to them – show them our processes and due diligence – they become more positive on the space. That can give them the confidence to promote P2P lending to consumers,” says James Meekings, co-founder of Funding Circle.
Most advisers will say that, while they’re not against P2P in principle – often far from it – they want to see the sector go through a cycle before seriously considering it. As wealth management veteran John Spiers says (see below), while Zopa was around during the crisis, other major players weren’t – and 2007 and 2009 were unusual anyway because the level of bankruptcies was so low, owing to interest rates being slashed so fast.
As Spiers also points out, plenty of IFAs have been burnt in the past. Now, they have to demonstrate that they’ve done a certain amount of due diligence on each product they’re recommending and, as has always been the case, they want a fee for those recommendations. As one industry analyst bluntly puts it: “if the IFA hasn’t got a product to sell, he’s not going to recommend P2P. It comes down to whether something has a metric next to it that he can understand, then he can sell it.”
For advisers “funds are the way forward,” says Meekings. They can buy stocks, shares, and funds and manage money on behalf of clients, and their existing tools mean they can buy a fund today. “It gives them diversification and global exposure – which is important, because diversifying across platforms [which can focus on just one area, like consumer credit], rather than assets, won’t necessarily do that,” he adds.
“The industry is working to create a scoring system for returns. This should be a function of the return and the shape, i.e. volatility, of that return. If advisers can study lending performance, based on meaningful and detailed data, they can begin to perform satisfactory due diligence,” says Rupert Taylor, co-founder of AltFi Data.
The Innovative Finance Isa is already giving retail investors the opportunity to hold P2P investments in the recognizable wrapper. While many investors wait for the largest platforms to get approval from the Financial Conduct Authority (currently, only three smaller platforms have been given the okay), it has enticed big players like Hargreaves Lansdown into the ring. And it’s worth noting that investors can, even without the dedicated vehicle, populate a stocks and shares Isa or a Sipp with P2P investments.
Moreover, alternative investments heavyweight Octopus Investments launched P2P product Octopus Choice in April, enabling customers to target higher interest rates than deposit accounts, but with less risk than stocks and shares.
Head of Octopus Choice Richard Wazz says that the reception from the hundreds of financial advisers introduced to the product has been “incredibly positive. Advisers are proving themselves to be not only comfortable but excited to recommend it to large numbers of their clients – seeing it as a new and welcome way of diversifying their portfolios.”
P2P body chief denies FCA delays damaged industry, (FT Adviser), Rated: A
By the time the new Isa had launched in April, just eight out of 86 peer-to-peer lending platforms had been granted the necessary permissions to offer the savings vehicle, according to the industry body. Kevin Caley, managing director of ThinCats, said he does not expect approval to happen before the end of August, adding he guessed it “may well take quite a bit longer”.
But speaking to FTAdviser, the P2P Finance Association’s chair Christine Farnish said the delays were not such a big deal because investors’ money can be put into the Isa at any point.
“It’s just a question of a small amount of time in the overall scheme of things,” she said, adding Isas are designed to be a long-term savings product.
The delays were partly a result of the FCA being made responsible for 30,000 consumer credit firms in 2014, and Ms. Farnish said the peer-to-peer sector got “put to the back of the queue”.
AngelsDen & Funding Circle’s Alum Verto Homes Launches £1M Funding Raise on Crowdcube, (Crowdfund Insider), Rated: A
Founded in 2010 by entrepreneurs, Tom Carr and Richard Pearce, Verto Homes stated it designs, builds, and sells intelligent, sustainable homes that produce and store clean energy from the sun. The company noted that none of their homes burn fossil fuels for lighting or heat and each is featured automation technology and is controlled by a smartphone app, called Vesta, which was launched on iTunes in 2015. The homes are available starting at £190,000.
Verto Homes, a London-based builder that creates sustainable homes, launched an equity crowdfunding campaign on Crowdcube to raise £1 million. Within just a few hours, the initiative successfully secured 41% of its targetted goal (£415,000) from 14 investors.
Leading German Crowdfunding Platform, P2P Lender Auxmoney Powers On, (Crowdfund Insider), Rated: AAA
Germany’s leading lending marketplace AuxMoney reports continued strong growth. Loan volume increased from €39.3 million in the first half of last year to €79.5 million in the first half of 2016 ‒ an increase of more than 100%.
Founded in 2007, by Raffael Johnen, Philip Kamp, and Philipp Kriependorf, Auxmoney is Germany’s largest crowdfunding platform and Continental Europe’s second largest P2P lender after French Younited Credit – with whom it is now competing neck and neck. According to research institute GfK, Auxmoney is also the most famous FinTech firm in Germany, which does not come as a surprise given its 1.5 million registered members.
In 2015, Auxmoney’s growth was fueled by a spectacular commitment by Dutch insurance company Aegon, as an Institutional Investor, to lend €150 million through the platform. As for its own capital needs, Auxmoney is backed by top venture-capital firms such as Seven Ventures, Index Ventures, Union Square, Foundation Capital and Partech.
Since its beginnings, Auxmoney has originated €268 million worth of loans, out of which nearly two-thirds were originated in the past 18 months alone. Both the number and the size of loans are increasing: the number of loans originated increased by 69% from 6,337 in the first half of 2015 to 10,688 loans in the first half of 2016; at the same time the average loan size increased from €6,196 to €7,439, a 20% increase.
264 Peer to Peer Lenders Shut Down in China During First Half of 2016, (Crowdfund Insider), Rated: A
During the first six months of 2016, at least 264 peer to peer lending platforms were shut down in China. This is a direct reaction to the tightening grip of Chinese regulators. The report published in ECNS, states that even tougher oversight is in store for the P2P lending industry as authorities become more vigilant in uncovering fraud and shutting down platforms that do not qualify under Chinese rules.
China published draft rules in 2015 but like many other government initiatives it was not completely clear as to how enforcement would proceed. There have been multiple high-profile P2P platforms that have collapsed. The best known is Ezubao that was described as a Ponzi-scheme months before regulators showed up to shutter the doors. Ezubao apparently fleeced investors of over $7 billion – an incredible amount. Allegedly over 95% of the projects listed in Ezubao were faked.
As of June, there were an estimated 2,349 P2P platforms in operation in China. Chinese is the largest P2P market in the world.
Peer-to-peer lender Lending Crowd seeking capital to help it grow, (Interest), Rated: A
Lending Crowd is seeking up to $5 million from financial services sector investors to help the peer-to-peer (P2P) lender build scale and grow loan volumes. Co-founder Wayne Croad, who majority owns Lending Crowd’s major shareholder Finance Direct, told interest.co.nz the P2P lender has hired Greg Anderson of Northington Partners to raise up to $5 million dollars through a capital raise.
Funds raised will be used to “assist with growing loan volume by extending marketing and product development initiatives.”
Lending Crowd became New Zealand’s fourth licensed P2P lender last year, receiving its license from the Financial Markets Authority. At the time Croad said Lending Crowd would facilitate secured loans of between $2,000 and $200,000 through its website for small and medium sized businesses, vehicles and personal loans for three and five-year terms.
To date, Croad said Lending Crowd has received $22 million worth of loan applications and written $2.5 million worth of loans with 60% of this total comprising personal and motor vehicle loans, and 40% business loans. He said registered non-bank deposit taker Finance Direct has participated in $900,000 of the loans on the Lending Crowd platform on equal terms with retail investors. There are 220 registered retail investors, and 165 active investors. In terms of loan security, Croad said 30% of loans are secured by cars plus a property, 50% are secured by vehicles, and 20% are secured by property only.
“The average weighted return for investors to date has been 12.50% after fees,” Croad said.
Lending Crowd has just released its first financial statements. They show fee and commission income of $18,601 up to March 31, and operating expenses of $39,748, leaving a loss of $17,450.