European peer-to-peer business lender October has warned investors that the pandemic will have a negative impact on returns that may not be felt until next year.
A portfolio update by October’s chief risk officer Marc Sebag said most borrowers are still repaying loans but warned there is wider uncertainty on how businesses will respond once state support is withdrawn from the first quarter of 2021.
October offered all borrowers a three-month repayment freeze between April and June but revealed that 98 per cent still carried on paying.
A further three to nine-month payment break was offered to high risk sectors in July such as those in tourism, events, restaurants and fitness.
These were taken by 10 per cent of relevant borrowers.
Of those who took the payment freeze, 88 per cent have now repaid the first instalments.
Out of the thousand projects financed on October, 66 are in judicial proceedings and 28 are in amicable recovery proceedings, Sebag said.
He said October has improved its risk scoring model to strengthen its lending criteria and reduce defaults.
Sebag added that it will take time for the effects of the pandemic on October’s loanbook to become fully measurable.
“First, the impact of the crisis on lenders’ portfolios will depend on their level of diversification,” he said.
“But also, there is still a high level of uncertainty on the medium term Covid-19 economic impact.
“Right now, we are still in the eye of the storm.
“Everywhere, states have enabled taxes and social contributions moratoriums, launched state guarantee programmes to support small- and medium-sized enterprises and employment in the next 12 months.”
He warned trouble may start in the first quarter of 2021, when moratoriums end and companies will have to start repaying their state-guaranteed loans.
The Paris-based lender operates in France, Spain, Italy, the Netherlands and Germany.
It participates in the French, Italian and Dutch state guarantee programmes.