Lending Works has revealed that its expected annual losses and returns have remained stable while negative rates are still required in two of its loan cohorts.
In its third-quarter credit performance update, the peer-to-peer lending platform said the overall expected annual loss has remained relatively stable at around 4.3%. But he predicted that some of his existing loan clients could experience financial difficulties in the fourth quarter when government support programs end.
Lending Works said the expected annual returns have remained relatively stable and are broadly in line with expectations from their previous performance update.
Read more: Lending Works Partners with Experian to Boost Credit Checks
The platform said that the expected average annual return of older cohorts (2014-2019) has remained stable at around 4.3% per year for growth investments and 3.7% per year for flexible investments.
The average returns for the 2020 and 2021 cohorts are respectively 2.7% and 4.5% per year for growth and 1.9% and 4% per year for flexibility, which is also broadly in line with the forecasts of the second quarter update.
Lending Works said negative interest rates are still required for the 2017 and 2018 cohorts to ensure the platform’s shield appropriately covers unrealized bad loans expected in the active portfolio.
Read more: Lending Works strengthens its management team
Future income needed to cover expected losses fell from £ 3.6million in the second quarter to £ 3.4million in the third, reflecting the most recent performance of the platform’s portfolio and the latest valuation expected credit losses due to the pandemic. .
The shield’s cash balance fell from £ 0.74million in the second quarter to £ 0.63million in the third after use of the shield was mainly due to arrears and default payments to investors from detail on loans from older cohorts.
Lending Works added that its collection and collection capabilities have been strengthened over the past 18 months to help minimize the impact of the pandemic on investor returns.
Read more: Lending Works warns of short-term increase in loss rates
“The expected annual returns and expected annual loss rates have remained relatively stable compared to our second quarter 2021 update,” Lending Works said in a blog post on its website.
“The expected annual losses have been updated to reflect the most recent portfolio performance as we continue to closely monitor the full impact of Covid-19 on our ready clients, particularly at the end of the retention program. coronaviruses.
“We believe that caution remains in order as government support programs are wound up. That said, if the actions we have taken are too conservative, the lender rate adjustment mechanism will be used to increase the expected annual returns received by investors over the life of the loans in their portfolio. “
Separately, 4thWay revealed low ratings by Lending Works lenders this year.
Analysis revealed that there were 34 Trustpilot reviews written in 2021 by its customers who loaned money and out of those 31 lenders the platform gave one star. The average investor rating for Lending Works has been 1.2 out of five so far this year.