PREDICTIONS of a securitisation boom in the peer-to-peer lending sector last year failed to materialise, but analysts are still optimistic about the market.
The industry first dipped its toe into the debt-packaging trend in 2016 when Funding Circle became the first UK P2P platform to securitise its business loans, followed by Zopa with its consumer portfolio later in the year.
Both platforms said they planned to do more securitisations in the near future.
Ratings agencies such as Moody’s predicted a boom in P2P securitisations, but the only activity in 2017 was a £208.9m Zopa deal led by investment trust P2P Global Investments.
Anthony Parry, senior vice president and manager at Moody’s, argues that there has not been a slowdown, but rather there are now more funding sources for P2P platforms.
“The deals have gone well and performance wise they have been in line or better than expectations,” he said.
“It is a sign that the lenders have diversified their funding sources. Securitisation is one of a number of different sources. Clearly there is significant institutional investment directly rather than through securitisation.”
Parry said there will always be institutional investors who prefer securitisation over direct investment but he said platforms need to be of a significant scale to make it work.
“It makes perfect sense for the lending platforms to diversify their funding sources in order to have a long-term stable funding strategy,” he said.
“There is a critical volume that needs to be reached to make it a sensible funding choice.
“If you look historically the smallest consumer loans deal have been around £100m mark, you won’t see anything below that level.
“Broadly speaking if volumes exceed £1bn then securitisation probably becomes an option.
“I would expect more securitisations this year.”
Ratings agency S&P Global is also expecting more activity and has predicted a 30 per cent increase in securitisations from marketplace lenders around the world during 2018.
Jonathan Kramer, head of capital markets at Zopa, said: “We are pleased with the reception that Zopa loans have had in the asset-backed securities market and believe it reflects confidence both in our underwriting and credit management as well as how we have scaled our business over the last 13 years. Our aim is that the Zopa asset is familiar to the ABS community and expect there to be further issuances in the future, which is aligned with our diversified funding strategy.”
Funding Circle did not respond to requests for comment.
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This article first featured in the March issue of Peer2Peer Finance News, available to read online.