An update on credit performance and provision fund coverage ratio calculations for August.
Important changes to reporting going forward
Plenti is considering listing on the Australian Stock Exchange in September 2020. Accordingly, our data update coverage and frequency – including data on our blog, our marketing website, and in your member account – will change to ensure that we comply with the disclosure requirements for publicly listed companies.
Credit performance update
Throughout the Covid-19 period, we have sought to keep investors updated on our credit performance and our expectations regarding the Provision Fund’s ability to protect investors from loss.
Pleasingly, we are yet to observe any meaningful impact on borrower arrears levels, which continue to be broadly consistent with this time last year.
Additionally, over the past three months we have seen a significant decline in the number of Plenti borrowers in hardship (or payment deferral) arrangements. Currently, only 1.48% of RateSetter Lending Platform loans are under financial hardship arrangements, which we understand is less than half the level being experienced by Australia’s largest consumer lenders including the big four banks.
Changes to expected credit losses
Over recent months, we have experienced strong repayments from borrowers in arrears as well as higher than average early repayments across the RateSetter Lending Platform loan book. These two factors, combined with a relatively high proportion of new loans being for the purchase of renewable energy equipment, which from our experience perform relatively well from a credit perspective, have led to expected RateSetter Lending Platform credit losses reducing by over $1 million over the last month, to $11.97 million.
Provision Fund coverage ratio
The Provision Fund buffer is $17.79 million as at 19 August 2020. Accordingly, the Provision Fund coverage ratio is now ~149% of expected credit losses.
We are pleased that despite the significant economic disruption caused by Covid-19, the Provision Fund continues to compensate investors for all borrower late payments and defaults and the Provision Fund coverage ratio remains above 100%.
We note that the Provision Fund is not an insurance product nor a guarantee (you should read the PDS for more information about the Provision Fund.)
Written bySimon Cordell
Simon joined Plenti in April 2016, having headed up Consumer Risk and Small Business Risk at American Express. His team considers all aspects of the credit lifecycle.