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Loan Performance

Defaults and Losses

When you invest in loans, there is always a possibility that some of them won't be paid back on time (Default) or you might lose money (a Loss). Our Credit Risk page contains information on how Defaults are defined.

To help you manage your risk, the table below shows Defaults and Losses levels in the loan portfolio.

It is important to note that a Default does not necessarily mean that there will be a Loss. We take asset security on loans which, if the borrower can’t pay back the loan, can be enforced to sell the asset to get back some or all of the money they owe you. Also, we operate discretionary Provision Funds for most of our Investment Accounts to help cover any Defaults and Losses but they could become depleted so we can’t guarantee that there will never be a loss.

We have reviewed our credit risk model and how we publish our Defaults & Losses in light of FCA Policy Statement 19/14. Due to changes to our credit risk model the Defaults and Losses information we report is not directly comparable to the Defaults and Losses information we reported before 9 December 2019.

The Data used in the tables below is as at 30 April 2020. Please be aware that due to the developing Coronavirus pandemic there are likely to material movements in our Defaults and Losses positions with Borrowers. In the circumstances, the information in the tables below should not be regarded as indicative of future loan performance.

The Provision Funds we offer do not give you a right to a payment so you may not receive a pay-out even if you suffer loss. The funds have absolute discretion as to the amount that may be paid, including making no payment at all. Therefore, investors should not rely on possible pay-outs from the Provision Funds when considering whether or how much to invest.

Please see also our Provision Fund policy

The figures are shown as percentages of the total amounts of loans originated in each calendar year.

  2013 2014 2015 2016 2017 2018 2019 2020

For All Loan Types offered to Borrowers

1. LOANS ORIGINATED £9,195,745 £38,054,022 £26,357,578 £101,120,427 £210,636,113 £292,095,910 £252,463,997 £50,037,941

The total amount of loans originated in each calendar year. Please note that any increases to loan facilities provided for forbearance to borrowers have been included in the year a loan was originated. As such the loans originated totals by year may increase from those previously reported.

2. INTEREST RATE 12.5% 11.7% 10.5% 9.1% 7.5% 7.5% 7.2% 6.9%

This is the annual interest rate due to lenders, before any losses, if they had diversified (spread) their investment perfectly across all loans originated in the year in question (with the investment spread proportionately across the total amount originated on all loans). Investors in Investment Accounts with capped interest rates would not have received these interest rates. These rates are not a guide to interest paid to any individual investor either in the past or in the future.

3. ACTUAL DEFAULT RATE 53.4% 33.4% 14.1% 32.2% 15.2% 4.2% 1.5% 0.0%

The sum of loans originated in a calendar year with a risk category marked Default divided by the total Loans Originated in that calendar year. This reflects defaults that arise at any time over the life of a loan and is not an annualised figure.

4. EXPECTED DEFAULT RATE 0.0% 0.0% 0.4% 1.2% 1.8% 4.2% 7.4% 7.0%

The expected default amount on the unrealised balance of loans originated as a percentage of the total amount of loans originated in each calendar year. The expected default amount is based on an average of the Probability of Default assessed at 30 April 2020 on unrealised loans weighted by principal loan balance outstanding on them.

5. EXPECTED DEFAULT RATE AT LOAN ORIGINATION N/A N/A N/A N/A N/A N/A N/A 7.9%

The expected default rate based on the average Probability of Default on the total amount of loans originated in each calendar year at origination of the loans.

Please Note: Our Credit Risk model used to determine Probability of Default has changed. All loans were assessed using the revised model as at 31 October 2019. For loans originated from 9 December 2019, the revised Probability of Default method is used to assess an Expected Default Rate based on the total amount of those loans at origination. This information is not directly comparable with information on Expected Default Rate based on our old Probability of Default contained in our former Defaults and Losses page. Should you need to access that former page please do so here.

6. CURRENT ACTUAL LOSS RATE 6.1% 9.4% 1.5% 3.6% 2.7% 0.6% 0.1% 0.0%

The sum of the actual and estimated loss on loans originated in a calendar year with a risk category marked Default divided by the total loans originated in that calendar year. This reflects losses that arise at any time over the life of a loan and is not an annualised figure.

7. LOANS REALISED 100% 100% 97% 84% 83% 61% 14% 1%

The proportion of total loans originated in a calendar year which have now been repaid or are included as Current Actual Losses (not now expected to be repaid).

Please Note: These figures include Defaults and Losses for loan types we have discontinued: (a) Renewable energy loans and (b) Secured SME term loans not secured by a first charge on a property.

For Current Loan Types Offered To Borrowers

(Note: these figures do not include loan types that have been discontinued – data including discontinued loan types is shown in the All Loan Types Section above)

  2013 2014 2015 2016 2017 2018 2019 2020
1. LOANS ORIGINATED £6,071,745 £21,590,522 £20,387,078 £79,947,627 £200,480,738 £291,495,910 £251,943,997 £49,797,941

The total amount of loans originated in each calendar year. Please note that any increases to loan facilities provided for forbearance to borrowers have been included in the year a loan was originated. As such the loans originated totals by year may increase from those previously reported.

2. INTEREST RATE 13% 12.7% 10.4% 9.0% 7.4% 7.5% 7.2% 6.9%

This is the annual interest rate due to lenders, before any losses, if they had diversified (spread) their investment perfectly across all loans originated in the year in question (with the investment spread proportionately across the total amount originated on all loans). Investors in Investment Accounts with capped interest rates would not have received these interest rates. These rates are not a guide to interest paid to any individual investor either in the past or in the future.

3. ACTUAL DEFAULT RATE 62.1% 46.7% 13.5% 37.6% 13.0% 4.2% 1.5% 0.0%

The sum of loans originated in a calendar year with a risk category marked Default divided by the total Loans Originated in that calendar year. This reflects defaults that arise at any time over the life of a loan and is not an annualised figure.

4. EXPECTED DEFAULT RATE 0.0% 0.0% 0.4% 1.9% 1.7% 3.9% 5.7% 7.1%

The expected default amount on the unrealised balance of loans originated as a percentage of the total amount of loans originated in each calendar year. The expected default amount is based on an average of the Probability of Default assessed at 30 April 2020 on unrealised loans weighted by principal loan balance outstanding on them.

5. EXPECTED DEFAULT RATE AT LOAN ORIGINATION N/A N/A N/A N/A N/A N/A N/A 7.9%

The expected default rate based on the average Probability of Default on the total amount of loans originated in each calendar year at origination of the loans.

Please Note: Our Credit Risk model used to determine Probability of Default has changed. All loans were assessed using the revised model as at 31 October 2019. For loans originated from 9 December 2019, the revised Probability of Default method is used to assess an Expected Default Rate based on the total amount of those loans at origination. This information is not directly comparable with information on Expected Default Rate based on our old Probability of Default contained in our last Defaults and Losses page. Should you need to access that former page please do so here.

6. CURRENT ACTUAL LOSS RATE 5.5% 6.7% 0.0% 4.4% 0.8% 0.6% 0.1% 0.0%

The sum of the actual and estimated loss on loans originated in a calendar year with a risk category marked Default divided by the total loans originated in that calendar year. This reflects losses that arise at any time over the life of a loan and is not an annualised figure.

7. LOANS REALISED 100% 100% 97% 84% 83% 61% 14% 2%

The proportion of total loans originated in a calendar year which have now been repaid or are included as Current Actual Losses (not now expected to be repaid).

This table uses data as at 30 April 2020.