There was a recent discussion on the profitability of investments on Bondora; thus, we have decided to provide a detailed breakdown of the interest amounts paid out to Investors across all our markets. The information is covering the period since the inception of the company to September 24, 2015, and includes **a) loan origination amount**, **b) interest paid out to investors** to date; **c) overdue principal repayment amount **(principal repayment that was supposed to be paid out to date, but was not), and **d) gross profit made by Investors** (which is the difference between the interest paid out and the overdue principal).

The numbers in the tables below should allow investors calculating a non-forward looking profitability as of September 24, 2015. Non-forward looking means that the data does not include **a) upcoming interest payments for the duration of the loans**; and** b) upcoming principal repayments that might not be collected**. The non-forward looking principle is used in calculating XIRR (thus, only the actual payments to date are accounted for), which is the most widely used return measure for credit investments.

### All Markets

Rating | Issued Amount,€ | Interest Paid Out,€ | Overdue Principal REPAYMENTS,€ | Gross Profit,€ |

AA | 490,750 | 83,458 | 2,351 | 81,107 |

A | 1,929,035 | 371,137 | 10,264 | 360,872 |

B | 4,688,943 | 839,467 | 60,997 | 778,469 |

C | 7,489,647 | 1,373,845 | 78,001 | 1,295,844 |

D | 8,190,484 | 14,03,478 | 147,633 | 1,255,844 |

E | 5,744,778 | 817,636 | 148,558 | 669,077 |

F | 3,878,011 | 661,298 | 143,532 | 517,766 |

HR | 9,939,252 | 1,734,014 | 867,839 | 866,175 |

Unrated | 1,747,391 | 472,606 | 164,429 | 308,176 |

TOTAL | 44,098,291 | 7,756,939 | 1,623,604 | 6,133,330 |

### Estonia

Rating | Issued Amount,€ | Interest Paid Out,€ | Overdue Principal REPAYMENTS,€ | Gross Profit,€ |

AA | 490,750 | 83,458 | 2,351 | 81,107 |

A | 1,929,035 | 371,137 | 10,264 | 360,872 |

B | 3,675,550 | 710,849 | 48,362 | 662,486 |

C | 5,780,274 | 1,173,449 | 50,548 | 1,122,901 |

D | 4,240,723 | 992,971 | 80,901 | 912,069 |

E | 1,732,710 | 363,806 | 47,499 | 316,307 |

F | 1,748,155 | 389,472 | 75,340 | 314,132 |

HR | 3,110,040 | 784,996 | 177,368 | 607,628 |

Unrated | 1,705,191 | 466,880 | 160,881 | 305,998 |

TOTAL | 24,412,428 | 5,337,018 | 653,514 | 4,683,500 |

### Finland

Rating | Issued Amount,€ | Interest Paid Out,€ | Overdue Principal REPAYMENTS,€ | Gross Profit,€ |

B | 974,793 | 127,020 | 11,480 | 115,539 |

C | 1,597,933 | 195,083 | 23,513 | 171,569 |

D | 3,692,356 | 397,135 | 54,273 | 342,862 |

E | 2,465,850 | 310,530 | 49,853 | 260,676 |

F | 1,019,842 | 145,360 | 22,253 | 123,107 |

HR | 1,996,165 | 310,610 | 184,832 | 125,777 |

Unrated | 41,200 | 5,592 | 3,548 | 2,043 |

TOTAL | 11,788,139 | 1,491,330 | 349,752 | 1,141,573 |

### Spain

Rating | Issued Amount,€ | Interest Paid Out,€ | Overdue Principal REPAYMENTS,€ | Gross Profit,€ |

B | 38,600 | 1,597 | 1,154 | 443 |

C | 111,440 | 5,312 | 3,939 | 1,372 |

D | 234,890 | 11,085 | 9,845 | 1,240 |

E | 1,500,958 | 138,433 | 47,327 | 91,105 |

F | 927,201 | 103,822 | 30,012 | 73,810 |

HR | 4,328,393 | 594,082 | 444,078 | 150,004 |

Unrated | 1,000 | 133 | 0 | 133 |

TOTAL | 7,142,482 | 854,464 | 536,355 | 318,107 |

### Slovakia

Rating | Issued Amount,€ | Interest Paid Out,€ | Overdue Principal REPAYMENTS,€ | Gross Profit,€ |

D | 22,515 | 2,286 | 2,613 | -327 |

E | 45,260 | 4,865 | 3,877 | 987 |

F | 182,813 | 22,642 | 15,926 | 6,716 |

HR | 504,654 | 44,324 | 61,560 | -17,235 |

TOTAL | 755,242 | 74,117 | 83,976 | -9,859 |

Thank you!

This really clarifies the current situation in apples-to-apples comparison.

Thank you, Tauri!

Jevgenijs This calculation gives a very over optimistic picture of the situation which I believedisguises the true situation.

Any loan which has recently defaulted after paying for a year will have 12 months interest set against maybe one month of missed capital repayment, thus showing a high level of profit.

In reality this loan will have received about 20% of interest and lost maybe 80% of capital unless there is successful recovery, resulting in a 60% loss of the invested amount. Unless there is a very high recovery rate I now expect to lose money owing to the very high percentage of defaults, although according to Bondora my current return is still over 20% using your method of XIRR calculation.

Hello, James!

We have always stressed the importance of diversification. I agree that a portfolio consisting of just a few loans can result in substantial losses; however, our risk-based pricing accounts for the expected loss rates in pricing the loans (thus, considerably higher interest rates on higher risk loans).

I have over 2000 loans and every month the interest payments and increase in default total compete for which is the greater amount. It is very hard to understand how this situation gives me a return of over 20% as Bondora shows in my account.

That would need a recovery of nearly all the defaulted amount and there is no sign of that being likely.

Hello, James!

The return figure that you see in the investor dashboard shows XIRR, which accounts for the cash flows to date, and does not account for either interest rate or principal repayments yet to be paid.

I finally realized that you are showing the amounts of Gross Profit, from which we need to subtract the defaulted amount to give the Net Profit. That results in an overall loss for investors.

Hello Jevgenijs,

Thank you for this table, is this the method used to show current ROI (average comparation to other investors)?

Are you aware that this method should be recommended only to mature portfolios? My average portfolio age is about 0.33 so this method would made XIRR artificially high.

I see your post valuable for member discussion, but I can’t applaud to changing official loans statistics table which is now preventing us to see total defaulted loans value and total interest paid out.

Did you feel that numbers were misleading or why did you remove those stats?

Thank you,

Carlos

Hello, Carlos!

We use XIRR for calculating the return on investments, which takes into account the time dimension (when the investments were made and when the incoming cash flow occurred). However, there is a similarity with the approach, as both use payments to date and are not forward looking.

On the “Statistics” page: the reports there have been evolving for a long-time and some of the data presented there was off the current situation. I suggest referring to the Loan Dataset as the most extensive source of information on the current state of Bondora loan book.

If you want to use XIRR on all loans you can do so by using planned payments for the rest of you loans and e.g. no payments for defaulted ones. If you want better predictions you’ll have to have good predictions for future defaults and recovery rates and -times, of course.

[…] [Täiendus 25.09.2015] Bondora blogist leiab antud teema kohta rohkem infot. […]

Hahahaha. Well, I will add a banana because Bananadora (!) only shows half of the story.

Let’s make a very simple example: there is only one loan. The remaining principal is 80 Euro. The borrower paid 25 Euro on interest. The loan will default tomorrow.

Your vision: the lender made a gross profit of 25 Euro although 80 Euro are about to bust. What if the borrower does not pay anymore and what if there is no recovery? There is no more income to cover the 80 Euro.

If you would care for the truth then you would also show how much remaining principal is overdue (not only until to date) and how much principal is already in EAD1.(which you do for both figures in the lender’s overview).

Your own statistics show that 90% of ever paid out interest is necessary to cover defaults. This is a complete other picture and this is the only picture that counts for the investor as the investor has to consider the whole picture. To be clear: There is only a gain for the investor if the interest is higher than the lost principal. This applies today, tomorrow and in 2 Years.

Any investor should go to Bondora’s forum and look for the thread General Bondora Statistics. There you find the whole picture.

I am shocked how you try to convince us that Bondora is great. It is not. Not if you do not get the recovery on track. But this will have to be paid now by the investor themselves.

Bondora made very clear that in your sample case interest collected is 25€ and overdue is 0 up to date because the loan ‘will’ default tomorrow. If loan matures accordingly to loan schedule then interest = 25€, overdue = 80€ and gross profit = -55€.

This in here is just one interpretation showing that 8 million in ‘red’ is not equal to 8 million earned interest and penalties because the methods behind calculating ‘red’ and ‘gained interests’ are different. Bondora calculates loan defaults about all loans if 2 payments are missing, so the whole principal amount will turn to red. How many months do you need to earn the same amount of interest?

I do not get you. If the loan runs accordingly, there is no negative gross profit. Please check.

I do not care if it is a different interpretation or not. I only care what is in my pocket. That is why I use cash flow as a second KPI besides Xirr.

The table abve does not show the real picture. The real pictue is that around 7.5 Mio Euro are already defaulted and it is UNCERTAIN if these will be recovered.

Bondora shows a uncertain gross profit as given and this profit is not there at the moment.

Let’s make another example: If all Borowers repay their principal tomorrow except those 60+overdue, would the average investor have more money in its pockets than he put into Bondora? It would be around 10% more, not per year but over all years since inception and this is pretax.

Bondora screwed their once extraordinary statistics with bad loans sold as good loans in Finland, Slovakia and Spain.

OK, what if Bondora now changes its methodology of calculating defaults? Say that is 120+ days overdue (like some other platforms do!) and instead of 7,5 million is in overdue we will see results of 4 million in overdue (defaults). Is the real picture for you now that 4 million euro has defaulted and it is UNCERTAIN if these will be recovered?

What if we calculate defaults 180+ days overdue? What if 360+ days overdue? What if 2+ days overdue?

If you are getting a loan out of Bondora or bank and will not repay accordingly to schedule then lender has this option to demand from you to pay back whole borrowed amount. You are mad because just after 3 missing payments you owe the whole amount immediately. If you would been in schedule then only next payment is important to do. And what Bondora did with this blog post was evaluating the loans comparing already passed payment dates for all loans.

’60+ days overdue’ and ‘interest paid out’ are being calculated differently. It is not OK to compare them against each other just looking the numbers 7,5 million vs 8 million. If 10 000€ loan defaults after 4 months then how much time it will take to earn 10 000€ worth of interest lets say at rate of 30%?

Of course it is possible for Bondora to extend the time until default but it will not eliminate the fact. It will just make them visible 120 days or 180days later or 360 days later. Think about it.

You do not seem to get that borowers with a remaining principal of 7.5 Mio. EUR do not have the intention to pay back their loan even if you demand them to pay. Now it is either via DCA or court.

You also do not get that the other loans you expect to cover for the loss of 10K are also at risk of going into default.

It is basic math that interest payment have to cover EAD1-Recovery to be break-even. If this is not achievable, then it is a loss for the investor, even as Xirr shows high yield half way. Can you give me a guarantee that all other loans pay back in time ir that there is enough recovery? I bet you not. This is why I can only work with the money in my pocket and this is interest – EAD1 – recovery has to be bigger than 0. In Xirr you have to write off all 60+overdue immediately to get the real picture.

7Mio outstanding principal or it is initial principal or it is outstanding_principal+Interest+late fees?

I was not checking data (as I am getting less and less interest in Bondora and do not like to waste time), but Bondoras explanation looks quite logical for me.

Invested, Received Interest….. time goes and some principals repaid so Bondora show Remaining_Principal and compare with whole interest paid (I think recovered interest must be added too).

Looks logical. Do not know if something hidden there.

The only thing may be that time not included. it means Profit/Invested is about 30%. But it may be profit per 7y. Lets take 3years (when B was most active). So makes about 10% yearly. No? :)

Well, I think this calculation is grossly misleading because it is biased by credits that haven’t run to maturity. A credit that hasn’t run ton maturity can never fully contribute to the losses side of the equation (because it could default or even if it’s already defaulted a big part of the loss is missing) while overrating the income side (even early defaulting loans might show as profitable because they paid some interest early on).

If this should have any value, please show us the same statistics for loans that have run to maturity only, everything else looks like making the books to me.

Hello!

You can find the gross profit amount earned on the fully matured loans in this file: https://goo.gl/yr7gM5

Hope this helps!

Jevgenijs,

thank you. yes, actually that’s very helpful indeed.

Cheers

First thanking Jevgenijs for trying to give us answers to all questions.

I don’t understand the calculation.

Interest Paid Out + Overdue Principal REPAYMENTS – Gross Profit

is the outstanding default?

The complete default principal or only the missed principal payments until today?

In the first case the numbers seem to low for me.

Quite another picture if you look at the numbers of today’s loan dataset_

Country FundedAmount InterestAndPenaltiesPaid OutstandingPrincipal EAD1 EAD2 Recovery

EE 31.916.783,81 € 5.343.969,83 € 15.681.439,84 € 3.301.231,75 € 2740974,1604 899.933,03 €

ES 12.292.537,00 € 859.850,74 € 5.934.394,33 € 2.807.580,48 € 2632659,72 132.280,99 €

FI 17.360.934,00 € 1.499.050,04 € 9.957.935,87 € 2.560.663,99 € 2340532,93 164.153,98 €

SK 829.967,00 € 74.324,59 € 684.061,63 € 547.659,18 € 522588,65 12.200,81 €

So I don’t understand the math you made.

Ok now I got it, sorry. You count the losses in the past.

But it is a very poor model – every month in the future

– the interests go down

– the overdue rates grow, because the part of principal ist growing

– new overdues will come up

and on the other side same recovery will be paid.

In fact the losses outside estonia are humongous, there is as good as no recovery and even the next years all the paid interests will not cover the defaults made until today. Investers will loose their money, there is no way to win.

Correct except for one small mistake: the paid interest will not go down but it may grow at a slower pace than the overdue principal.

As long as interests after taxes grow slower than (overdue principal – recovery) we are on the road to disaster. If this keeps continuing for some time the return rate of bondora will drop like a knife.

Still I should mention that recovery of estionian loans in the past (2009 to 2012) were very sucessfull and for this timeframe the returns were great. For 2013 and onwards it is still to early to tell. But not even Bondora gives a guarantee for the future performance of loans and recovery. It is better not to count on it.