Performance of recovery process – March 2017

KEY TAKEAWAYS

  • The average recovery performance for 2016 was 64% which outperformed the average recovery over the last three years of 51%. This difference marks an uptrend in past years success of capturing past due payments.
  • Recoveries in Spain and Slovakia have each seen periods of increases in the past three years, although for their 2016 average, both saw a decrease of 9 percentage points compared to past months recovery overview.
  • In Finland, the three-year average recovery stayed on par with last months rate while the average recovery for 2016 increased 10 percentage points to 56%.
  • Compared to last month, past year average recovery in Slovakia saw significant dip from 108% to 99%. Still, across all countries this is the strongest average gain compared to its three-year average of 56%.
  • Estonia’s average 2016 recovery performance is essentially flat at 63% and its three-year total slightly higher at 67%.

PRINCIPAL RECOVERY RATES ACROSS MARKETS

Estonia, Finland and Spain all experienced drops in 2016 Q4 recovery performance relative to the previous quarter rates. However, this decrease may be due, in part, to the data which for now excludes December. Moreover, the broader trend is still moving in the right direction as we become more successful in our recovery process. For example, Estonia and Finland have each seen five consecutive quarters of continued recovery rate increase from Q3 of 2015 to Q3 of 2016. Again, the break in this trend as of Q4 2016 might be due to pending December data.

Quarter 2014 Q1 2014 Q2 2014 Q3 2014 Q4 2015 Q1 2015 Q2 2015 Q3 2015 Q4 2016 Q1 2016 Q2 2016 Q3 2016 Q4
Estonia 53% 69% 73% 77% 104% 74% 48% 51% 54% 67% 72% 59%
Finland 42% 64% 35% 55% 69% 63% 16% 19% 28% 57% 78% 59%
Spain N/A 19% 17% 19% 31% 26% 32% 34% 32% 77% 37% 15%
Slovakia N/A N/A 5% 9% 28% 13% 55% 57% 79% 213% 33% 71%

You can find additional related information about the recovery process from these articles:

 

Performance of recovery process – February 2017

KEY TAKEAWAYS

  • Throughout 2015 and 2016 Spain, Finland and Estonia have all experienced periods of improved recovery. Along with improvements, all three countries saw an average decrease of three percentage points in Q1 and Q2 of 2015 compared to last month.
  • Finland, Spain and Slovakia have each made strong improvements in their 2016 average recovery performance relative to their total combined average for 2014 and 2015. For example, Slovakia’s 2014 & 2015 average recovery performance was 24% whereas 2016 currently stands at an average of 123%.
  • We still have more work to do with recovery rates as some countries experienced a slight dip in 2016.

PRINCIPAL RECOVERY RATES ACROSS MARKETS

Though recoveries have dipped, the February averages reaching back to Q4 of 2015 are relatively stable with those of January for the same period. For example, Estonia, Finland and Spain’s February Q4, 2015 to Q3, 2016 averages are all within 1 percentage point of the averages for the same period in January. 2016 has seen five periods of recovery improvement while 2015 saw only two periods of recovery improvement (Spain in Q3, 2015 and Estonia in Q4 in 2015). The data in the table below is as of 14.02.2016.

Quarter 2014 Q1 2014 Q2 2014 Q3 2014 Q4 2015 Q1 2015 Q2 2015 Q3 2015 Q4 2016 Q1 2016 Q2 2016 Q3
Estonia 53% 70% 74% 78% 107% 77% 49% 52% 57% 71% 73%
Finland 42% 65% 34% 56% 71% 66% 17% 19% 30% 53% 83%
Spain N/A 19% 16% 20% 32% 26% 34% 36% 34% 85% 39%
Slovakia N/A N/A 5% 10% 29% 14% 56% 63% 78% 251% 39%

You can find additional related information about the recovery process from these articles:

 

Performance of recovery process – January 2017

KEY TAKEAWAYS

  • Estonia’s loan recoveries have slightly dipped during the past month for period before 2016 but still showing an overall upward trend in 2016. The past years average, from Q4 of 2015 to Q3 of 2016, Estonian loan recovery is still hovering near 64%.
  • Finlands loan recoveries saw slight increases for Q3 and Q4 of 2014, but the past years average has decreased 5 basis, from 52% to 47%, compared to a month ago.
  • The average recoveries for Spanish and Slovakian loans continued to decrease for the period of 2015 and forward, with recoveries of 42% and 84% respectively. Still past years averages are showing better performances with 50% for Spanish and 122% for Slovakian loans.

PRINCIPAL RECOVERY RATES ACROSS MARKETS

Despite the slight decreases in the past couple of months, the overall recovery levels have been quite stable for Estonia’s and Finlands loan recoveries. Spanish and Slovakian loan recoveries are also showing improved numbers across 2016, which aligns with our increased efforts in improving and optimizing the collection process for the past year. The data in the table below is as of 10.01.2016.

Quarter 2014 Q1 2014 Q2 2014 Q3 2014 Q4 2015 Q1 2015 Q2 2015 Q3 2015 Q4 2016 Q1 2016 Q2 2016 Q3
Estonia 54% 71% 74% 79% 110% 79% 49% 51% 59% 66% 78%
Finland 41% 56% 34% 57% 72% 69% 18% 20% 32% 60% 77%
Spain N/A 18% 15% 20% 33% 27% 33% 39% 30% 94% 37%
Slovakia N/A N/A 5% 10% 29% 14% 56% 68% 81% 292% 47%

You can find additional related information about the recovery process from these articles:

 

See how much investors have earned with our Refer-A-Friend program

A few months ago we announced our Refer-A-Friend program. This simple system lets you earn money for simply telling friends about the value of Bondora. The program is available to all our investors. Anyone who joins with your custom referral link and becomes an investor on our site, gets 5 EUR added to their account for their first investment. When you refer them, you get 5% of everything they have invested over the first 30 days. You get paid inside 20 business days after their first 30 days on the site. As long as your friend invests at least 10 EUR and follows our terms and conditions that all investors have to follow, the money is yours.

Average investor earned 168€ of extra income in three months

For the first time since launching the program we’re proud to share the results of those who have supplemented their earnings with referral bonus cash.

Starting from late September, 137 investors have been participating in the personal referral program. These 137 investors have invited additional 240 investors to Bondora, which makes 1,75 new investors per referrer.

Refer-A-Friend program user statistics

The average earned bonus was €168 and our highest earned bonus by referring investor to date is €1,534. Bondora has paid out a total bonus of €23,063 to our users. To date the total investment balance of our referrals has reached €461,263.

Refer-A-Friend program earnings

Join and earn more

More than 130 of our users have discovered how easy it is to send a quick message to a friend. When you invite someone to seek higher investment returns with Bondora, you’re sharing the value of your experience while earning easy income.

The more people you refer the more you earn!

Join the Refer-A-Friend program

Performance of recovery process – December 2016

KEY TAKEAWAYS

  • Estonia’s loan recoveries improved showing the strongest performance (75%) since Q3 of 2015.
  • This also outpaces the past year average of 64% ranging from Q4 of 2015 to Q3 of 2016.
  • Finland also experienced a dramatic increase in recoveries. The 90% is well above every quarter since Q1 of 2014. This represents an increase of 38 basis points over the past year average of 52%.
  • Spain and Slovakia each decreased compared to Q2 of 2016 with. The recoveries in those countries were 46% and 59% respectively.
  • The average recovery among all four countries is just over 2/3 of the value of the principal.

PRINCIPAL RECOVERY RATES ACROSS MARKETS

Estonia and Finland have both managed to sustain an uptrend for the previous five quarters. Since Q3 of 2015 both countries have made measurable improvements in recovery performance. Spain has also illustrated a similar trend until this latest data. We’re hopeful this is a momentary lapse. Slovakia has been less predictable, however the country has the highest past year average recovery figure which is encouraging. The data in the table below is as of 11.12.2016.

Quarter 2014 Q1 2014 Q2 2014 Q3 2014 Q4 2015 Q1 2015 Q2 2015 Q3 2015 Q4 2016 Q1 2016 Q2 2016 Q3
Estonia 54% 72% 75% 80% 114% 83% 50% 52% 62% 66% 75%
Finland 41% 57% 33% 56% 74% 72% 20% 21% 342 64% 90%
Spain N/A 19% 13% 19% 34% 28% 34% 42% 30% 101% 46%
Slovakia N/A N/A 5% 10% 30% 15% 57% 77% 83% 347% 59%

You can find additional related information about the recovery process from these articles:

 

Performance of recovery process – November 2016

Let’s have a look at the monthly results for loan recoveries at Bondora.

KEY TAKEAWAYS

  • Estonia experienced a small increase in recoveries reaching 69% compared to 67% last month. This marks a continued upward trend which started in Q3 of 2015.
  • Finland saw a modest decline in recoveries hitting 72% compared to 83% seen last month. However, the performance for the month is the second highest for the country in the last three consecutive quarters.
  • Many of the figures say more about the strength of recoveries in September rather than weakness in October. Spain also dipped with 118% compared to 133%. Slovakia, while still very strong reached 429% compared to 548% last month.
  • All countries showed a significant increase in recoveries compared to the previous quarter totals for 2016.

PRINCIPAL RECOVERY RATES ACROSS MARKETS

Recoveries in each country for the month represent, at minimum, 2/3 value of the principal. Investors in Spain and Slovakia have experienced greater than 100% principal recovery for two consecutive months. Our increasingly robust litigation efforts in Spain are showing results as the 118% recovery is a dramatic improvement over just 30% for the same quarter in 2015. The data in the table below is as of 08.11.2016.

Quarter 2014 Q1 2014 Q2 2014 Q3 2014 Q4 2015 Q1 2015 Q2 2015 Q3 2015 Q4 2016 Q1 2016 Q2
Estonia 55% 72% 76% 80% 116% 84% 48% 50% 63% 69%
Finland 37% 58% 32% 56% 74% 75% 21% 23% 34% 72%
Spain N/A 19% 13% 19% 35% 30% 35% 42% 31% 118%
Slovakia N/A N/A 5% 11% 31% 16% 59% 85% 88% 429%

You can find additional related information about the recovery process from these articles:

 

Performance of recovery process in Bondora – October 2016

The monthly results are in for October for recoveries on our platform. Let’s see how we did.

KEY TAKEAWAYS

  • After the significant increase of the recovery rates in September, Estonia’s principal recovery declined slightly from 71% to 67% in Q2 of 2016.
  • Slovakia’s principal recovery improved drastically from only 23% up to 548% in second quarter of 2016 due to increased recoveries in June.
  • Finland’s principal recovery for Q2 was down slightly from 102% to 83% in Q2.
  • Spain saw an improvement in recoveries from 79% up to 133% for the month, averaging around 80% across two quarters of 2016.

PRINCIPAL RECOVERY RATES ACROSS MARKETS

Our principal recovery efforts in Estonia and Finland, our two largest markets, are showing just a slight decline yet both are seeing a more than ⅔ of principal recovered. Spain & Slovakia are in with a big improvements with Spain showing a more than 100% principal recovery for the month. The programs we have in each country to help with recoveries seem to be working well for our investors. The data in the table below is as of 10.10.2016.

Quarter 2014 Q1 2014 Q2 2014 Q3 2014 Q4 2015 Q1 2015 Q2 2015 Q3 2015 Q4 2016 Q1 2016 Q2
Estonia 55% 73% 76% 78% 117% 85% 47% 51% 58% 67%
Finland 37% 59% 32% 56% 74% 78% 22% 24% 35% 83%
Spain N/A 19% 13% 19% 36% 30% 33% 43% 31% 133%
Slovakia N/A N/A 5% 11% 32% 16% 60% 95% 88% 548%

You can find additional related information about the recovery process from these articles:

 

Performance of recovery process in Bondora – September 2016

Recovery Rates have been consistent across the board.

KEY TAKEAWAYS

  • Recovery rates in Estonia averaged 36% last month. For the last 3 quarters, Q4 of 2015 and the first 2 quarters of 2016, we are seeing an increase in recovery rates on a monthly and quarterly basis. Quarterly recoveries increase from 53% to 60% to 71%.
  • Recovery rates in Finland average 102% versus 108% last month. Here we have a slight decline from the previous month. The last 3 quarters we have seen declining monthly recoveries although our recovery process is improving. The last 3 quarters saw recoveries of 26%, 34%, and 102% respectively.
  • Recovery rates in Spain average 79% versus 95% last month, a slight decline. Like Finland, we are seeing a slight decline in recoveries over the last 3 quarters. The last 3 quarters in Spain saw recoveries of 43%, 34%, and 79% respectively. We just started using the legal process and litigating for recoveries here. We will be updating with how this process goes.
  • Recovery rates in Slovakia for the loans still outstanding there are improving. Monthly we have an increase from 1% up to 23%. Quarterly recoveries are at 110%, 96% and 23% respectively.

PRINCIPAL RECOVERY RATES ACROSS MARKETS

Below you can see the recovery rates across markets per quarterly cohorts. The cohorts are made of loans that defaulted in that particular quarter. The data in the table is as of 12.09.2016.

Quarter 2014 Q1 2014 Q2 2014 Q3 2014 Q4 2015 Q1 2015 Q2 2015 Q3 2015 Q4 2016 Q1 2016 Q2
Estonia 56% 75% 78% 80% 122% 91% 45% 53% 60% 71%
Finland 38% 52% 32% 56% 74% 82% 24% 26% 34% 102%
Spain N/A 19% 13% 19% 34% 28% 34% 43% 34% 79%
Slovakia N/A N/A 5% 11% 32% 17% 61% 110% 96% 23%

You can find additional related information about the recovery process from these articles:

 

Performance of recovery process in Bondora – August 2016

Once again we bring you the monthly update on the performance of Bondora’s recovery process across four countries – Estonia, Finland, Spain and Slovakia.

KEY TAKEAWAYS

  • Recovery rate in Estonia has averaged around 50 per cent while slowly but steadily rising under the current process. Legal litigation has recently been combined into the process to further boost recoveries.
  • Recovery rate in Finland averages around 30 per cent and similarly to Estonia has been relative stable. Recent changes to recovery process have had a positive effect for the recovery rate. Legal litigation has replaced the debt collection process starting from August. All the debt cases under the old recovery process should be filed by September 2016. All the new cases are now filed automatically.
  • Recovery rate in Spain has remained at around 45 per cent during the current process and is close to the performance in Estonia. Similarly to Finland, the recovery rate has seen a increase in the last quarters. Legal litigation will also be used in the future in a combined process to deliver highest possible recoveries. First cases will be filed in September.
  • Recovery rate in Slovakia has remained high during the past year, averaging around 90 per cent. Slovakian operations were closed in first days of 2015. Since then the remaining portfolio has continued to be serviced. The 246 loans in default have been all been processed by one debt collection agency which started in the end of 2015. This month a second debt collection agency took over the portfolio that was not activated. The recovery team anticipates that legal litigation will be started for all cases that remain in the portfolio in Q4 2016. The priority today is to clear up the backlogs in Finland and Spain.

PRINCIPAL RECOVERY RATES ACROSS MARKETS

Below you can see the recovery rates across markets per quarterly cohorts. The cohorts are made of loans that defaulted in that particular quarter.

Quarter 2014 Q1 2014 Q2 2014 Q3 2014 Q4 2015 Q1 2015 Q2 2015 Q3 2015 Q4 2016 Q1 2016 Q2
Estonia 55% 74% 77% 79% 121% 92% 44% 52% 57% 57%
Finland 37% 52% 32% 56% 76% 84% 25% 27% 35% 108%
Spain N/A 19% 13% 20% 35% 29% 36% 46% 39% 95%
Slovakia N/A N/A 5% 11% 33% 18% 62% 121% 92% 1%

HOW ARE RECOVERY RATES MEASURED?

We calculate the recovery rate by comparing actual principal cash flow (net of write-offs) that occurred after the default with principal cash flow that we would have expected from the loan in case it had paid according to the agreed schedule. This measure allows us to determine the expected capital loss on loans that default.

Data is aggregated to larger cohorts and recent data are excluded as otherwise outliers will skew the results too much (e.g. 1 customer repaying the full amount after default at once). On the Bondora level this means excluding the last three months of defaults and using country based quarterly cohorts. Data on individual portfolios should likely be viewed on a higher level either using yearly country based cohorts or simply quarterly cohorts across all countries.

HOW TO FIND RECOVERY RATES USING BONDORA STATISTICS?

You can easily find information on recovery rates on the entire Bondora portfolio through the Recovery Rate chart on Public Statistics. The same chart is also available for the portfolio of each individual investor in your Personal Statistics page. Simply adjust the period, country, planned, actual and group by filters to pull out the numbers shown above.

Recovery Rate Chart

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Some tips to help you master the Recovery rate chart:

  • The period filter looks for loans that defaulted in the specific time range.
  • The country filter allows to look at defaults from a specific country
  • The status filter segments the data based on the loans current status (Defaulted = loan is still in default; Full recovered = the loan has been repaid in full; Restructured = a new payment schedule has been agreed; Sold = loans you have sold – this is only applicable to your private portfolio)
  • The recovery status filter allows you to analyze the performance based on the latest high-level collection and recovery stage assigned to the loan
  • Planned and actual filters make it possible to determine how the recovery rate is calculated. You can for example compare planned interest vs. actual interest received or planned principal vs. actual principal received.

HOW CAN I USE THE RECOVERY RATE?

The recovery rate helps you understand how much of the principal balance of loans in default you are likely going to receive. This figure can be used to adjust future cash flows and arrive at a risk-adjusted yield-to-maturity of your Bondora portfolio. You can do this for your portfolio through the Cash Flow page Settings section. The Forecast settings provide you recommended ratios calculated on your portfolio historic cash flow that can be used instead of taking them from recovery rate charts.

 

Setting Section

 

cash flow settings

 

 

 

 

 

 

 

 

 

 

 

 

WHY DON’T YOU CALCULATE THE RECOVERY RATE ON THE PRINCIPAL BALANCE?

Some customers have criticized the recovery rate calculation stating that a borrower who defaults is liable to return the principal balance at once. This criticism is valid from a legal perspective but not from a financial. The right to demand immediate payment of the principal balance is stipulated in the agreements to make enforcing the contract economic. The cost of collection and recovery would be excessive if enforcement steps would need to be taken for each missed payment. This clause makes it possible to substantially reduce the number of steps necessary to enforce the contract and get the borrower to start making payments under the agreed schedule.

The right to demand immediate payment of the principal balance does not mean it is reasonable to expect this to happen. Consumers take out loans to pay for larger purchases in affordable monthly payments. Loans would not be required nor interest paid on them if people would have the capital available themselves. Borrowers having financial difficulties are even less likely to have this sort of capital available. Therefore the main objective of collection and recovery is to restore the cash flow, or part of it. The success of these activities are measured by looking how much of the cash flow was restored.

Performance of recovery process in Bondora

Last week we walked through our servicing, collection and recovery process. Today we will demonstrate the performance of the recovery process across different countries.

KEY TAKEAWAYS

  • Recovery rate in Estonia has averaged around 50 per cent under the current process. Legal litigation has recently been combined into the process to further boost recoveries.
  • Recovery rate in Finland averages around 30 per cent and similarly to Estonia has been relative stable. Legal litigation will replace the current process in August as the recovery rates were higher under the old process.
  • Recovery rate in Spain has remained at around 45 per cent during the current process and is close to the performance in Estonia. Legal litigation will also be used in the future in a combined process to deliver highest possible recoveries.

PRINCIPAL RECOVERY RATES ACROSS MARKETS

Below you can see the recovery rates across markets per quarterly cohorts. The cohorts are made of loans that defaulted in that particular quarter. Debt collection agencies have been used since 2015 Q3.

Quarter 2014 Q1 2014 Q2 2014 Q3 2014 Q4 2015 Q1 2015 Q2 2015 Q3 2015 Q4 2016 Q1
Estonia 56% 76% 79% 81% 125% 96% 45% 55% 54%
Finland 39% 53% 32% 56% 77% 87% 26% 28% 39%
Spain N/A 19% 13% 19% 35% 31% 38% 51% 45%

ESTONIA:

  • Recovery rate in Estonia has averaged around 50 per cent under the current process.
  • The recovery rate was approximately 20 percentage points higher when legal arbitration was used. This practice was stopped due to regulatory changes effective from July 2015.
  • Legal cases are now being filed against loans that have gone through debt collection agents. Old cases are expected to be filed by end of the summer and thereafter it will be an on-going process. Therefore we expect the performance of the combined process to further increase recovery rates in the future.

FINLAND:

  • Recovery rate in Finland averages around 30 per cent and similarly to Estonia has been relative stable.
  • The recovery rate varied between 30 and 90 per cent when local courts were used.
  • Legal litigation in Finland will be started automatically when loan defaults as we have now developed an API to process the legal cases. The technology will be rolled out over the next month and thereafter all old cases will be filed and new cases will be filed automatically. Debt collection agencies will not be used post default.

SPAIN:

  • Recovery rate in Spain has remained at around 45 per cent during the current process and is close to the performance in Estonia.
  • The recovery rates were on average twice lower when using European Payment Order legal process.
  • Local legal litigation will be started in Spain for cases that have gone through debt collection agents. We expect to file the cases during August and thereafter set up a recurring process. The combined process, according to local market data, is expected to be close to levels achievable in Estonia and Finland.

HOW ARE RECOVERY RATES MEASURED?

We calculate the recovery rate by comparing actual principal cash flow (net of write-offs) that occurred after the default with principal cash flow that we would have expected from the loan in case it had paid according to the agreed schedule. This measure allows us to determine the expected capital loss on loans that default.

Data is aggregated to larger cohorts and recent data are excluded as otherwise outliers will skew the results too much (e.g. 1 customer repaying the full amount after default at once). On the Bondora level this means excluding the last three months of defaults and using country based quarterly cohorts. Data on individual portfolios should likely be viewed on a higher level either using yearly country based cohorts or simply quarterly cohorts across all countries.

HOW TO FIND RECOVERY RATES USING BONDORA STATISTICS?

You can easily find information on recovery rates on the entire Bondora portfolio through the Recovery Rate chart on Public Statistics. The same chart is also available for the portfolio of each individual investor in your Personal Statistics page. Simply adjust the period, country, planned, actual and group by filters to pull out the numbers shown above.

Recovery Rate Chart

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Some tips to help you master the Recovery rate chart:

  • The period filter looks for loans that defaulted in the specific time range.
  • The country filter allows to look at defaults from a specific country
  • The status filter segments the data based on the loans current status (Defaulted = loan is still in default; Full recovered = the loan has been repaid in full; Restructured = a new payment schedule has been agreed; Sold = loans you have sold – this is only applicable to your private portfolio)
  • The recovery status filter allows you to analyze the performance based on the latest high-level collection and recovery stage assigned to the loan
  • Planned and actual filters make it possible to determine how the recovery rate is calculated. You can for example compare planned interest vs. actual interest received or planned principal vs. actual principal received.

HOW CAN I USE THE RECOVERY RATE?

The recovery rate helps you understand how much of the principal balance of loans in default you are likely going to receive. This figure can be used to adjust future cash flows and arrive at a risk-adjusted yield-to-maturity of your Bondora portfolio. You can do this for your portfolio through the Cash Flow page Settings section. The Forecast settings provide you recommended ratios calculated on your portfolio historic cash flow that can be used instead of taking them from recovery rate charts.

 

Setting Section

 

cash flow settings

 

 

 

 

 

 

 

 

 

 

 

 

WHY DON’T YOU CALCULATE THE RECOVERY RATE ON THE PRINCIPAL BALANCE?

Some customers have criticized the recovery rate calculation stating that a borrower who defaults is liable to return the principal balance at once. This criticism is valid from a legal perspective but not from a financial. The right to demand immediate payment of the principal balance is stipulated in the agreements to make enforcing the contract economic. The cost of collection and recovery would be excessive if enforcement steps would need to be taken for each missed payment. This clause makes it possible to substantially reduce the number of steps necessary to enforce the contract and get the borrower to start making payments under the agreed schedule.

The right to demand immediate payment of the principal balance does not mean it is reasonable to expect this to happen. Consumers take out loans to pay for larger purchases in affordable monthly payments. Loans would not be required nor interest paid on them if people would have the capital available themselves. Borrowers having financial difficulties are even less likely to have this sort of capital available. Therefore the main objective of collection and recovery is to restore the cash flow, or part of it. The success of these activities are measured by looking how much of the cash flow was restored.