This week’s biggest news has been the new Chinese p2p market regulations. Yirendai’s stock fell from a high of $37.50 to a low of $20.40 and is at $21.86 by market close on Friday. The fall attracted a slew of equities lawsuits which did not help the stock.
In the meantime in the US we have seen quite a few fund raises recently:
- River North Marketplace Lending Corp launched a $1bil fund dedicated to marketplace lending.
- Fundation Group $100mil from Goldman Sachs
- Behalf raised $27 mil
- LendUp’s $47mil
- Camino Financial $2mil
- LoanDepot raised $150 million
- Elevate Credit $545 million credit facility at the end of July
In the UK, Zopa released their 2015 numbers showing a doubling of their origination volume from 2014 while expenses went up by 45% only. In the same time, on Friday Zopa announced they will reduce their interest rates by 0.2%.
We have seen the US FED increase rates in the spring and Lending Club and Prosper follow up on the increase. We are now seeing Zopa (and likely the rest of the UK p2p lenders) follow up on the rate decrease of BoE. In the meantime, P2P lenders in Australia are growing aggressively while their central bank rate is 1.5% and ANZ bank’s savings interest rate is 3%, for example.
Many people wonder how central interest rate changes affect the P2P lending market. It appears that it doesn’t affect it very much when it changes by a few points. Everybody is speculating how a larger increase in interest rates will affect the market. For now, we can only speculate what will happen when rates really rise. In all cases nearly everybody agrees that it will take years before rates rise significantly, if ever again. Rates have been stuck near 0% in Japan since the 1980s after all with no end in sight.
In the UK as well, IFISA capital will become available for bonds investments in November 2016. When IFISA capital opened to P2P lending Crowd2Fund saw a 667% increase in lending capital availability. This confirms my belief that retirement capital is great capital for lenders.
And to finish on a thoughtful note : “When the government is in the business of offering credit, as it is now with student loans, it should think hard about credit risk,” S.P. Kothari, a professor at the MIT Sloan School of Management wrote in The Wall Street Journal with Korok Ray, a professor at the Texas A&M University. “One of the chief lessons of the 2008 financial crisis was that mispricing credit risk can have catastrophic consequences. Yet the government’s Direct Loan Program mostly ignores the credit risk of students, treating them largely as identical in their long-term employment outcomes.” Private lenders are picking up the best student of the crop even amplifying this effect.
Thank you for reading the Lending Times.