KEY TAKEAWAYS
- Country level returns are still strong with lenders earning a healthy 17.42% rate of return across all loans and all countries in 2015, which is looking good.
- The portfolio is paying above the targeted return ranges meaning excellent returns for lenders.
ACTUAL AND TARGETED BONDORA NET RETURNS BY GRADE AND COUNTRY
Estonia:
- Estonia is seeing excellent loan portfolio performance so far. The biggest and most consistent market.
- It looks like the sweet spot for lenders is in the F or HR loans as loan performance is so strong that the defaults at these levels are not reducing the overall rates of return. That can be dangerous though. They are F rated loans for a reason so remember that.
- The lowest returns are in the AA grade notes. The AAs pay less but default rarely. This is in contrast to the still excellent performing F notes at 30.61% or the more similar A notes at 12.39%
- Those looking for a blend of rate and risk have lots of choices with C, D and E loans going from 19.16% up to 28.71%. There’s no bond in the European or US market paying those rates without foolish high risk attached to them.
- Across all grades the reward of the risk/return ratio seems to be benefitting our lenders.
- Right now, Estonia is the only market with A and AA loans to buy.
 Estonia |
AA | A | B | C | D | E | F | HR | |
|---|---|---|---|---|---|---|---|---|---|
| 2015 Q1 | Realised | 14,97% | 14,80% | 17,05% | 20,24% | 24,02% | 28,37% | 30,37% | 26,35% |
| Target | 12,98% | 13,82% | 14,30% | 15,74% | 18,51% | 20,34% | 23,14% | 23,46% | |
| 2015 Q2 | Realised | 15,10% | 10,47% | 16,40% | 18,34% | 25,44% | 22,43% | 36,29% | 27,35% |
| Target | 13,11% | 13,83% | 14,26% | 15,96% | 18,47% | 20,49% | 23,06% | 23,62% | |
| 2015 Q3 | Realised | 14,97% | 15,89% | 17,02% | 20,84% | 22,53% | 30,63% | 35,30% | 35,55% |
| Target | 13,09% | 13,84% | 14,27% | 15,85% | 18,39% | 20,32% | 23,15% | 23,85% | |
| 2015 Q4 | Realised | 13,95% | 15,48% | 16,31% | 20,51% | 24,04% | 23,18% | 30,79% | 41,00% |
| Target | 12,20% | 13,17% | 13,81% | 15,50% | 17,59% | 18,41% | 21,29% | 20,83% | |
| 2016 Q1 | Realised | 11,22% | 12,39% | 14,69% | 19,16% | 24,43% | 28,71% | 30,61% | 36,19% |
| Target | 10,62% | 11,32% | 12,09% | 14,38% | 16,18% | 17,51% | 18,28% | 17,96% | |
Finland:
- Finland is performing great too. They are following a more conventional interest rate average across all grades where defaults bring down the overall rates at the higher grades.
- E and F loans are performing within 19 basis points of each other at 26.02% and 25.83% respectively.
- HR sees a rate drop. It takes all the way out to HR to see defaults impact rates as the average rate earned on an HR loan in Finland is 17.42%. Only the 16.07% for C loans and 14.20% for B loans are lower rates than HR.
- D and E loans look like the sweet spot here with a blend of rate and risk.
 Finland |
AA | A | B | C | D | E | F | HR | |
|---|---|---|---|---|---|---|---|---|---|
| 2015 Q1 | Realised | 11,96% | 10,50% | 13,14% | 16,99% | 24,63% | 46,48% | ||
| Target | 12,88% | 13,33% | 14,41% | 16,58% | 17,98% | 20,90% | |||
| 2015 Q2 | Realised | 7,75% | 14,00% | 15,68% | 13,76% | 10,83% | 18,49% | ||
| Target | 12,88% | 13,31% | 14,70% | 16,62% | 18,04% | 21,04% | |||
| 2015 Q3 | Realised | 11,34% | 13,37% | 16,97% | 18,53% | 12,03% | 26,20% | ||
| Target | 12,90% | 13,28% | 14,71% | 16,49% | 18,54% | 20,81% | |||
| 2015 Q4 | Realised | 3,66% | 11,31% | 19,32% | 17,61% | 15,54% | 25,75% | ||
| Target | 12,89% | 12,80% | 14,49% | 16,02% | 16,86% | 18,11% | |||
| 2016 Q1 | Realised | 14,20% | 16,07% | 20,36% | 26,02% | 25,83% | 17,42% | ||
| Target | 9,87% | 11,22% | 12,56% | 13,44% | 14,24% | 14,40% | |||
Spain:
- Spain currently has loans out in 3 grades: E, F and HR.
- Their returns are pretty steady at all 3 grades too ranging from 26.68% for HR up to 32.09% for F grade loans.
- The turnaround of making loans in Spain is continuing and growing more profitable each quarter. The last scoring model update was in Q1 this year as you can see from the results.
 Spain |
AA | A | B | C | D | E | F | HR | |
|---|---|---|---|---|---|---|---|---|---|
| 2015 Q1 | Realised | 0,24% | -5,53% | -4,30% | 10,58% | 17,97% | 17,21% | ||
| Target | 12,61% | 12,85% | 14,39% | 16,17% | 18,32% | 20,33% | |||
| 2015 Q2 | Realised | -9,74% | -6,38% | 10,75% | 18,78% | 19,01% | |||
| Target | 12,80% | 12,80% | 14,36% | 16,29% | 18,32% | 20,31% | |||
| 2015 Q3 | Realised | 17,74% | -8,97% | 13,69% | 18,92% | 13,63% | |||
| Target | 13,01% | 14,74% | 16,20% | 18,32% | 20,31% | ||||
| 2015 Q4 | Realised | 20,13% | -5,55% | 12,94% | 23,15% | 19,25% | |||
| Target | 13,41% | 14,93% | 16,22% | 17,85% | 18,06% | ||||
| 2016 Q1 | Realised | 32,00% | 32,09% | 28,68% | |||||
| Target | 14,61% | 14,58% | 13,93% | ||||||
ACTUAL AND TARGETED BONDORA NET RETURNS ACROSS PORTFOLIO PER QUARTER
In Q1, we saw a 415 basis point increase in returns from the previous quarter. More high performing loans are coming onto the books at excellent rates for the lenders. This is a continuing upward trend too starting with Q2 2015 at 16.25% and now for Q1 2016 we are at 23.68%. These are excellent returns.
| 2015-Q1 | 2015-Q2 | 2015-Q3 | 2015-Q4 | 2016-Q1 | |
|---|---|---|---|---|---|
| Actual | 17,03% | 16,25% | 18,14% | 19,53% | 23,68% |
| Target | 16,34% | 16,31% | 16,63% | 16,28% | 14,66% |
ACTUAL AND TARGETED BONDORA NET RETURNS ACROSS PREVIOUS 7 YEARS
In 2015 we saw a substantial improvement in returns in Spain and stable improvement in Finland. Each of the 7 years has performed well above the market.
| Vintage | ||||||||
|---|---|---|---|---|---|---|---|---|
| 2009 | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | ||
| Country | Realised | Realised | Realised | Realised | Realised | Realised | Realised | Target |
| EE | 16,39% | 29,20% | 23,77% | 22,96% | 22,39% | 22,75% | 21,44% | 16,88% |
| ES | -5,61% | -0,32% | 13,02% | 17,50% | ||||
| FI | 12,37% | 12,58% | 15,20% | 15,30% | ||||
| SK | -4,79% | |||||||
| ALL | 16,39% | 29,20% | 23,77% | 22,96% | 20,12% | 14,06% | 17,42% | 16,40% |
Disclaimer
Past portfolio performance is not indicative of future results. Economic environment, competition, performance of risk models, loan pricing and recovery processes can improve or deteriorate over time.
The truth and greatness of peer to peer lending is that you get to evaluate the risks for yourself. If you only want to invest in high grade loans, then that’s what you should do. If you are only comfortable going across multiple grades, then do that.
You need to do what works for you. Don’t just chase yield. Remember there is risk in the risk/return equation too. Invest wisely.
PS! In case you are looking for technical details on the net return calculation then please read the following support articles:
How are net returns calculated on Bondora?
Can net returns of an outstanding portfolio change over time?
Can the net return calculation be improved?
Can net returns be positive even in case default rate is above the interest rate?
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