Last update - March 2018
A Mintos lender recently blew up
In June 2017, Mintos lender Eurocent announced that it was in serious financial difficulties. We covered these problems in a recent post. Eurocent has now defaulted on its Mintos ‘buyback guarantee’ commitments. It looks increasingly likely that Mintos investors will suffer some losses.
This has inevitably led investors to pay more attention to the quality of the other lenders on the Mintos platform. Last year, we listed 9 lenders that we would not touch right now. We have now broadened our analysis to cover all of the Mintos lenders. We highlight the lenders with the strongest features. We continue to be big fans of the Mintos platform, however we are allocating most of our capital to the highest rated lenders listed below.
It has been difficult up to now to compare each lender on the Mintos platform
Unfortunately, the information provided by Mintos about each lender is not consistent. Some lenders have not provided any information since March 2016. Others provide very regular updates. Information is provided in different currencies, languages and accounting policies. The quality of information provided varies enormously. Some information is audited, in many cases it isn’t. There should be minimum standards of reporting and disclosure. At the moment, Mintos allows the lenders to choose what they disclose. This results in lenders failing to disclose important information that may not be convenient for them, such as a history of losses, or rising levels of bad debts.
Key financial information of each Mintos lender
The table below captures the key financial information for each lender. This can be useful to quickly lookup the profile of each lender, and compare the strengths and weaknesses of each one.
We have excluded from the analysis Pangmaobao, as no useful or recent financial information has been provided by Mintos about them. In the interim we would avoid allocating funds to their loans.
All Figures in EUR million (annualised where appropriate):
Our Mintos lender ratings
Our Mintos lender ratings are based on 5 characteristics – profitability, capitalisation, size, track record and the quality of their reporting. We have allocated marks out of 20 for each metric, giving a total score out of 100.
Top rated Mintos lenders
Mogo and ID Finance earned the equal highest scores. Mogo is a popular lender on Mintos as the loans are both secured by vehicles and most receive buyback guarantees. Mogo reported very good results in Q1 17 and appears to have a successful business model. ID Finance is another lender that is well capitalised and has produced strong results over the last 2 years.
We think investors can have some confidence in any lender achieving a score of 60 or better. Lenders meeting this benchmark include Credit Star, Capital Service, iute Credit, Banknote, Cream and IFN Extra Finance. We particularly like the quality and frequency of reporting by Credit Star and Capital Service, and allocate some capital to their loans.
Our views on the new lenders
Mintos have introduced many new lenders recently including Dindin, Bino, Pimpay, Sebo, Watu, Kredit24, Invipay, Varks.am and Rapicredit. In our view, many of these new lenders are high risk, with a very limited track record and poor levels of disclosure. We don’t see any advantage in including these in a Mintos portfolio until they have been able to grow significantly larger and demonstrate profitability and a credible lending record.
We are surprised for example, that a company like Bino, that only started lending in 2017 would be invited onto the Mintos platform, particularly when no information about the capitalisation of the company is available. Several of these companies have not provided any information on their profitability, which implies to us that they are likely to be loss making currently. It is almost impossible to determine how likely these businesses will be able to honour their buyback guarantees in the future.
We also have some concerns and doubts about some of the countries the new lenders are operating in, including Kazakhstan, Kenya, Moldova, Columbia, Armenia and Russia. These countries are not investment grade and Mintos investors are not earning substantially higher returns to invest in these countries. For example, the Kenya government bond has a yield of over 13%, higher than Mintos investors are receiving to fund loans made there by a tiny startup business (Watu).
Lastly, we have doubts about the ability of these businesses to manage the currency risk they face. These businesses are lending in local currencies, and borrowing in euros. If there is a significant depreciation of these currencies (which frequently happens), we are concerned that these businesses might be exposed. None of the lenders have disclosed if, or how, the currency risk is being managed.
In March 2018 Mintos introduced two new lenders that achieved high ratings. Credissimo, a tech focused lender, achieved an initial score of 85, taking it to the top of our ratings. Credissimo scored well due to its very conservative balance sheet, profitability and high quality reporting. The second new lender to achieve a strong rating of 77 is 1pm plc, a British lender. The company scores well on several measures. It is a public company with good quality of disclosures, a record of profits over several years, and is one of the larger lenders on the Mintos platform. We do note however that it only offers loans in sterling, and the interest rates available may not be as attractive as those from other lenders.
Our views on some of the lower rated lenders
Of the lower rated lenders, Kredito Garantas, Debifo and ITF Group were all included in our 2017 list of 9 lenders we would avoid right now.
Lendo is the number 2 lender on Mintos by amounts borrowed. Lendo is a startup with no real trading history prior to 2016. It has received a reasonable amount of equity to use to get to a break-even profit level. One concern we have is that the business lost €1 million during 2016 due to FX differences between the Euro and the Georgian Lari. This suggests that their FX exposure has not been fully hedged.The Lari continued to depreciate during 2017, and we have concerns that Lendo may have made further losses as a result.
Mintos has recently confirmed to ExploreP2P that the obligations of Getbucks are guaranteed by its parent, MyBucks. As a result, we have provided the financial information and a score for the parent MyBucks. In January 2018 MyBucks announced substantial losses, and we have revised our ratings accordingly. The MyBucks share price has fallen almost 50% over the last 12 months, and the business appears to be facing substantial challenges, including an average cost of funding of 16%.
Hipocredit is a startup mortgage business. It used to be an affiliated company of Mintos, however it is now owned by new shareholders. During 2016 the previous owners of Hipocredit appear to have withdrawn €500k of equity, leaving it with only €135k. It’s not clear why this was done. The business made a small profit in 2016. We cannot recommend purchasing Hipocredit loans currently, as they have recently been selectively buying back loans from Mintos investors (which they are allowed to do under the assignment agreement with Mintos investors). This has resulted in Hipocredit ‘cherry picking’ the best performing loans, and leaving behind investors with defaulted loans.
Lenders receiving marks in the 40-59 range need to be treated with caution. Some of them are small but promising, and others will need to demonstrate a successful lending record and profitability, to be rated higher. We would suggest only allocating a modest amount of funds to investors in this category right now.