Back in December 2015 I analyzed some 2014 loans (inspired by Bondora’s own similar earlier analysis) and concluded that the Bondora Rating applied on those loans had significantly misjudged the expected loss for those loans.
According to Bondora my article was full of mistakes and inaccuracies. Also, turns out there are sides in data analysis and they promised to publish theirs.
And they did with this “magnificent” piece here: Bondora Rating has outperformed expectations: 98% of the portfolio above target return (Jan, 2016)
More than a year has passed since and it feels like a good time to revisit the analysis to see how things have progressed since then.
To avoid giving Bondora any random excuses again this time around, I thought it easier to simply use the monthly stats provided by Bondora themselves in their blog or their side of the numbers as said above.
Following graphs are all simply put together from Bondora’s monthly blog posts for performance and recoveries.
Explanations:
- Each line on a graph shows results for a single segment of loans issued within a certain period. For example EST loans issued in 2014.
- Each point on a line is the return or recovery rate according to Bondora at that point in time.
- XIRR is the same as “Actual” in Bondora’s blog posts. For clarity, I have used “XIRR”, as this figure is the annualized return Bondora calculates with their XIRR methodology.
- ER for 2015 loans is the same value as “Target” in Bondora’s blog posts and stands for Expected Return according to Bondora Rating.
- There’s a ~6 month gap between first results and second, where Bondora didn’t publish these figures.
Performance for 2014 and 2015 segment loans
(Updated figures in Sep 2019)
Let’s first look at the returns over time for loans issued in 2014. Bondora uses their own methodology for these calculations and I have not adjusted them in any way.
Let’s now look at the same figures for 2015 loans, where Bondora claimed in just Jan, 2016 that “98% of the portfolio above target return”.
Note that proportion of loans issued in 2015 is following:
- EST 43.50%
- FIN 37.90%
- ESP 18.60%
Recovery rates of Bondora loans
Second figure of interest would be recovery rate. As we all know, recovery takes time and thus increases over time. Usually.
Bondora figures only show the principal percentage recovered and use their own methodology to calculate this as well.
Conclusions
I’ve kept my commentary in this post minimal as to not make any mistakes and inaccurate claims this time around. I’ll try to keep in the same lines with the conclusions as well.
- In Jan, 2016, 98% of loans issued in 2015 were above target returns according to Bondora. By Dec 2016 the same loans as a whole were below target by more than 1% with ESP (18.6% of loans issued) and FIN (37.9% of loans issued) both fully below target.
- For all the segments of 2014 and 2015 highlighted in the data, there is exactly ONE case where the return is slightly higher than the previous result. In all the other cases the return is decreasing.
- In Oct, 2016 I had recovered €133 of the €100 principal of my Spanish loans that defaulted in Q2 2016. By Jan, 2017 I had €94 left of that €133?
A few questions as homework or to ask from Bondora’s support:
- What happened between Jan, 2016 and Dec, 2016 that the 98% above target returns for 2015 loans turned into more than 56% below target and average return dropped from 19.5% to 15.24%?
- What happened with the additional €39 of principal that had been recovered from Spanish Q2 2016 defaulted loans by Oct 2016? Where did it go by Jan, 2017?
