In short:
- Bondora has offered subpar returns in 2014, 2015, 2016 and 2017. At the same time, risks have been very high.
- In several segments the pretax returns are negative.
- Returns for 2014-2016 are already below the 6.75% promised by Go & Grow product.
- All of these returns are calculated by Bondora’s optimistic calculation methodology.
Back in the day it used to take a lot of effort to analyze Bondora’s portfolio and try to figure out what’s going on and what results you can expect.
Nowadays it’s quite a bit easier. Now we have several more years of data and we don’t have to even make any analyses ourselves. We can simply look at Bondora’s own analyses and statistics.
Let’s look at loan performance based on the country and year when they were issued. The data is all freely available from Bondora blog.
Note that these “Actual” figures are still relatively meaningless and should never be compared to the “Target”. If you want to read the thorough explanation why, feel free to start here. But for our purposes it doesn’t really matter that much, because we’re only looking at trends on relatively mature loans.
| Period | Return | EE | ES | FI | All |
|---|---|---|---|---|---|
| 2015 | Actual | 13% | -7% | 1% | 5% |
| Target | 17% | 18% | 15% | 16% | |
| 2016 | Actual | 11% | -5% | 3% | 6% |
| Target | 14% | 21% | 17% | 16% | |
| 2017 | Actual | 9% | 6% | 5% | 8% |
| Target | 11% | 27% | 16% | 14% | |
| 2018 | Actual | 18% | 32% | 22% | 20% |
| Target | 11% | 19% | 16% | 13% |
The data clearly shows that, without exception, loans issued in all countries and all segments between 2015-2017 have performed worse than Bondora Rating expected.
In fact, with the exception of Estonian loans, they have performed significantly worse than expected. Estonian loans are also performing below expectations, but not as much.
Here one might be tempted to conclude that in 2018 underwriting and scoring has shown quite an improvement and we can now expect better results for the future. Indeed, that’s what you would have been led to believe about loans issued in 2015, if you had read Bondora’s blog back then.
Here’s a quote from Bondora’s article “Bondora Rating has outperformed expectations: 98% of the portfolio above target return” published on Jan 6th 2016:
After Bondora Rating was implemented in 2015 the returns in new markets (Finland and Spain) have increased considerably. Spanish market that was at break-even level prior to Bondora Rating is now delivering net returns in high teens. These improvements will further strengthen Bondora’s position as one of the highest returning platforms in the marketplace lending industry…
However, this is not a conclusion you can make here, as we can see from results today. Reasons are explained in my article linked to at the beginning of this post. Short version is, that the “Actual” figure in the table uses a calculation methodology, which barely accounts for defaults until years after they have happened.
For 2018 loans, roughly a year has passed since they were issued. Let’s look for comparison, what Bondora said the returns were for 2015 loans in September 2016, after a similar amount of time had passed.
| Period | Return | EE | ES | FI | All |
|---|---|---|---|---|---|
| 2015 | Actual | 21% (13%*) | 12% (-7%*) | 15% (1%*) | 16% (5%*) |
| Target | 17% | 18% | 15% | 16% |
*In brackets (), return calculated for same loans by Bondora in September 2019.
In 2016 the results for 2015 loans seemed great. The actual outcome was quite different (again, the reason is explained in the article mentioned previously).
Let’s do another one. Here’s the data for 2016 loans from august 2017.
| Period | Return | EE | ES | FI | All |
|---|---|---|---|---|---|
| 2016 | Actual | 18% (11%) | 13% (-5%) | 17% (3%) | 17% (6%) |
| Target | 14% | 21% | 17% | 16% |
Quote from Bondora accompanying this data:
The total actual return across all countries has increased significantly since 2015 where it rose from 12.00% to 18.54% for 2017. Of course, there is still more data to come for 2017, however, even with a drop performance trends will be strong.
If you back then thought you’ll invest with Bondora and get 17% return, you were in for a big surprise. But surely 2017 was better, right? We don’t have to guess, let’s find out.
| Period | Return | EE | ES | FI | All |
|---|---|---|---|---|---|
| 2017 | Actual | 13% (9%) | 18% (6%) | 11% (5%) | 13% (8%) |
| Target | 11% | 20% | 13% | 14% |
The trends have surely been strong and consistent. In the downward direction.
Want to hazard a guess as to what will happen to the return figure shown today for 2018 loans in a year or two? Could it be that the answer is staring you in the face?
Fortunately, we can now find solace in the fact that 2019 loans are preforming great. Or are they? …
