LAFDI market report - LAFDI remains under pressure

By Rupert Taylor on Friday 12 February 2016

Alternative Lending

The LAFDI remains under a cloud with another awful performance in both absolute and relative terms.      

Weekly return

LAFDI

-7.69%

MSCI World

-5.10%

Top 5 performing Stocks in last week

1

RM US Equity

4.81%

2

NNI US Equity

3.16%

3

SUS LN Equity

1.46%

4

CACC US Equity

0.66%

5

BAS1V FH Equity

-0.13%

Worst 5 performing Stocks in last week

1

OFX AU Equity

-38.98%

2

WEX US Equity

-18.17%

3

NEWS US Equity

-16.88%

4

PAYS LN Equity

-15.89%

5

TREE US Equity

-15.61%

 

* Returns are calculated for the week to local market close on Thursday.

Sentiment towards market place lending feels like it could be approaching some kind of a nadir with mindless criticism of the sector becoming more widespread. Last week Lord Turner, ex chief of the UK FCA, offered some sweeping concerns about impending losses in the P2P sector.  Sector commentators have refuted the allegations but it feels like the detail might be being ignored in favour of over-simplistic assertions.  Chief amongst these is a perception that p2p is offering credit to SME’s and consumers that have been rejected by banks.  This ignores the fact that the borrowers may not have been rejected and may in fact be choosing p2p due to the greater speed and flexibility that it offers.  Equally some of the rejected applicants may not have been rejected due to poor credit.  Banks simply cannot afford to fulfill some borrowing requests due to their higher cost base. So, for example, smaller SME loan applicants may be turned away simply because of their small size, rather than due to any issue of credit quality.  Given that we will not see where the dangerous lending has occurred until after the next credit down-turn in the meantime we should consider what makes us more fearful?  Intuitively it feels like the sector that transparently discloses all of the loans that it makes may be of less concern than banking loan books which remain totally opaque. 

Interestingly Lending Club Corporation did allow P2P fans to end the week on something of a positive.  The shares gained after CEO Renaud Laplanche announced a $150m buyback, alongside good results and an increase in full year revenue and profit guidance. 

At the bottom of the scale Oz Forex delivered a double dose of bad news when it revealed that take-over discussions with Western Union had terminated.  The company also revealed a downgrading of full year profit targets.  The company is now forecasting underlying EBITDA for FY16 of $35.0 – $37.0 million versus $38.5 – $40.5 million given at the last update in November which represents a downgrade of just shy of 9%. 

Please note – The LAFDI is now available on Bloomberg.  Tickers:

LAFDITR <index> GO for the Total Return Index

LAFDIPR <index> GO for the Price Return Index

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Companies in this Article:

LendingClub
Financial Conduct Authority

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