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Bondora Stats Crash Course #1: Recovery Rate

Bondora provides a ton of data and statistics for investors. However, this can easily lead to overwhelm and confusion. I will attempt to shed some light and provide helpful clarifications on some of the graphs and numbers you may have been introduced to already.

Short version: The only meaningful data about recovery rate is available on the bottom of the statistics page on the green Cumulative Recovery Rate graph.

What is recovery rate?

Let’s start with the basics and look at the definition of recovery rate from Investopedia:

Recovery rate is the extent to which principal and accrued interest on defaulted debt can be recovered, expressed as a percentage of face value.

In other words, recovery rate usually shows how much of your defaulted loans have been repaid (recovered).

As a simplified example, if a €1,000 loan defaults and the borrower repays €500, then the recovery rate is 50%.

In majority of cases, we can forget about accrued interest when we talk about defaults in Bondora. They don’t account for those in the statistics we’re going to review here.

Excluding accrued interests makes default rates lower and recovery rates higher in the statistics.

Where can you see recovery for Bondora loans?

Let’s look at 3 main places where Bondora shares recovery rate statistics on their portfolio.

1. Statistics Page: Cumulative recovery rate

Bondora's cumulative recovery rates
Cumulative recovery rate is available in the left column at the bottom of the statistics page. Click on the image to enlarge.

This graph is the closest to recovery rate you will get with Bondora. This graph shows for each month the amount of principal that defaulted at that point and how much has been recovered since.

For example, the highest recovery rate for loans that have defaulted since Dec 2015, is for Jul 2016. In almost 4 years those loans have recovered 34.46%.

This means that out of the €764,000 that defaulted that month, €263,000 has been repaid since. Including all principal, interest and late charge repayments.

2. Statistics Page: Recovery Rate

Bondora's creative recovery rate
Recovery rate graph is available in the right column at the bottom of the statistics page. Click on the image to enlarge.

This graph uses Bondora’s creative approach to recovery rate calculation. For clarity and easier distinction purposes, I will be calling this “recovery rate” from now on.

As you can see, at the time of writing this post, the highest “recovery rate” for several years is for Oct 2019 at 86.2%.

Let’s compare it to the cumulative recovery rate for the same defaulted loans.

Bondora's cumulative recovery rate for Oct 2019.
Cumulative recovery rate for Oct 2019 is at 4.98%. Click to enlarge the image.

The difference for recovery rates for the exact same defaulted loans is 86.2% – 4.98% = 81.22%. Or to put it in a different way. Bondora’s creatively calculated “recovery rate” is 17x higher than actual recovery rate.

How can that be? What’s the difference?

When you open the images, you can see that in the cumulative recovery rate chart, the defaulted principal amount is almost €4.3 million. In other words, €4.3 million worth of principal defaulted in Oct 2019.

However, on the blue “recovery rate” graph, they use “Planned” amount of €250k only.

What is this planned amount?

By default this planned amount only includes principal payments that would have had to be paid according to the original payment schedule. The schedule that was cancelled when the loan defaulted.

Bondora annuity payment defaults and profits.
Red portion is considered by Bondora as loss for a Loan A that has defaulted with no payments on month 3. Dark green part would be considered as profit for an identical Loan B that has paid according to schedule.

The graph above is an example of a typical loan repayment schedule on Bondora. The blue parts are scheduled future principal repayments and the light green parts are scheduled interest payments.

The red area shows the amount of principal that is considered as defaulted in this “Planned” amount that’s used for the “Recovery rate” graph. However, for recovered amount (“Actual” on the graph), all principal and interest payments received are included.

In other words, if a €10,000 loan defaults, the red area amounts to €100 and the borrower repays €1,000, the recovery rate would be shown as:

€1,000 / €100 * 100% = 1000% recovery rate.

Even though you are still €9,000 + interests in the loss, Bondora would claim your investment has recovered 1000% of its loss.

If the borrower then makes no further payments, the “recovery rate” starts slowly declining each month as the next payment in the schedule passes and more principal is considered as defaulted.

3. Bondora’s blog updates on recovery

Each month Bondora publishes an update on their blog in the Collection & Recovery category. This update also uses the abovementioned creative “recovery rate” and thus shows no real information about actual recovery rates.

Source: “Recovery rates” published on Bondora blog on March 20, 2020.

Expected recovery rate

Bondora also used to share LGD (Loss Given Default) figure in their loan dataset, which allowed you to calculate the recovery rate Bondora Rating expected when pricing the loans.

You could easily calculate this by:

1 – LGD = Recovery rate

However, Bondora has stopped publishing LGD since mid-2019 for some reason. The following table includes unweighted expected recovery rates used in Bondora Rating up to mid-2019.

Row LabelsEEESFISKGrand Total
2015 135%10%10%10%20%
2015 235%10%10%N/A20%
2015 335%10%10%N/A21%
2015 435%10%10%N/A21%
2015 535%10%10%N/A23%
2015 635%10%10%N/A20%
2015 735%10%10%N/A20%
2015 835%10%10%N/A19%
2015 935%10%10%N/A20%
2015 1035%10%10%N/A22%
2015 1135%10%10%N/A19%
2015 1241%21%26%N/A33%
2016 142%25%32%N/A35%
2016 242%25%32%N/A35%
2016 342%25%32%N/A36%
2016 442%25%32%N/A37%
2016 542%25%32%N/A37%
2016 642%25%32%N/A37%
2016 742%25%32%N/A37%
2016 842%25%32%N/A35%
2016 942%25%32%N/A36%
2016 1042%25%32%N/A37%
2016 1142%25%32%N/A35%
2016 1242%25%32%N/A35%
2017 142%25%32%N/A37%
2017 242%25%32%N/A38%
2017 342%25%33%N/A38%
2017 442%25%32%N/A38%
2017 542%25%32%N/A38%
2017 647%22%38%N/A39%
2017 751%22%40%N/A40%
2017 850%23%41%N/A38%
2017 951%23%42%N/A40%
2017 1051%22%42%N/A42%
2017 1151%23%43%N/A46%
2017 1251%24%42%N/A45%
2018 151%24%44%N/A46%
2018 251%24%47%N/A47%
2018 352%24%48%N/A48%
2018 451%24%47%N/A48%
2018 551%24%47%N/A48%
2018 651%25%46%N/A48%
2018 751%25%46%N/A48%
2018 847%25%43%N/A45%
2018 939%25%39%N/A39%
2018 1048%25%24%N/A39%
2018 1150%24%32%N/A43%
2018 1251%24%34%N/A44%
2019 251%25%34%N/A44%
2019 350%24%35%N/A43%
2019 450%25%34%N/A43%
2019 558%46%43%N/A51%
2019 6N/AN/AN/AN/AN/A

For a more accurate result, you could calculate this figure on each individual loan, weight it and only look at the results for loans that actually defaulted.

Note that the expected recovery rate you get using the calculation gives you a somewhat different result. At least in the beginning, when Bondora Rating was introduced, the LGD accounted for the effect of time on your return and some other criteria.

In conclusion

Bondora offers investors several ways to find recovery rate data. However, most of it is based on creative calculation methodologies that show highly overestimated and misleading figures.

Thankfully there is the Cumulative recovery rate graph on the statistics page and if you’re more data savvy, you can get a more detailed look through Bondora’s datasets.

With some creativity and combining of different datasets, you can actually get a very detailed overview, if you find that it’s worth your time.

Disclaimers: My investments on Bondora during 2010-2016 ended with a total annualized return above 28%. I worked at Bondora nearly 2 years and quit at the end of 2015, when it became clear that the company had chosen a path I did not want to participate in. I am not related to, employed by or compensated by any P2P company for writing these articles. Nor am I an owner of any P2P company (unless I own a tiny fraction through a global stock market index fund). This blog also generates no ad revenue and I have no English products to sell you here. You can’t even join a mailing list for English readers. I do have a Bondora referral link if you want the €5 bonus, but I don’t recommend investing your money there.

PS! If you find this kind of overview useful and would like to see more of these, then let me know in the comments and/or show your support by helping me fund the hosting expenses and compensate for the time it takes to write and research these topics. I’ll consider writing more of these, if enough people get value from it.

By Taavi

Taavi has been investing into P2P-lending platforms since 2010.

2 replies on “Bondora Stats Crash Course #1: Recovery Rate”

This is very valuable article, especially considering your background. I have shared a quote “Bondora’s creatively calculated “recovery rate” is 17x higher than actual recovery rate.” on a popular Lithuanian finance blog. Eventually, many Lithuanian P2P investors will take a look at your website. In case you wanna know, it’s honestfire_lt (most articles – in LT).

Currently we have 4 very suspicious numbers:
a) author of LT blog had XIRR > 2500%, and Bondora says he is No 3 among investors;
b) me – XIRR 82%, No 12 among investors.

In your opinion, could it be that there are dozens/hundreds of 1st, 2nd, etc. places among investors. You know, like when there is competition among kids, there are often 5x [1st place] or 10x [3rd place] prizes so that kids and their moms are happy.

Thank you for writing articles in English!

There’s no reason to have 5x 1st places. You can get insanely high XIRR for example if you buy defaulted loans with large discount. Bondora only considers a small portion of the defaulted principal as overdue initially. The rest is considered as “current” in the XIRR calculation, so Bondora thinks you made huge capital gains instantly after purchase.

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