Why we are getting nervous about Twino

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Our experience with Twino has been good until now....

Interest rates were good during 2016 – often 12% or higher. It was possible to invest with a sterling account. Twino provided a guarantee to buyback all loans more than 30 days overdue. A lot of loans went 30 days overdue…. That can be expected when you are charging interest rates of almost 150%. However, there have been some changes and events recently that are making us cautious. We have been cutting our exposure to Twino recently. Here’s why:

7 reasons we are getting nervous about Twino

  1. Twino have provided an estimate for their 2016 revenues on their website, but no estimate for earnings. This is a concern to us.
  2. They have informed us that audited figures for 2016 will not be available until the end of 2017, which they are blaming on the ‘pace of auditing’. There may be several genuine reasons for this, but a slow audit is usually not a good sign. We do not understand why it would take almost 12 months to produce audited figures.
  3. The level of defaults on recent originations appears to be extremely high. We have seen the data for one investor, where 86% of instalment loans (with payment guarantees) purchased since March moved to ‘defaulted’ status (more than 30 days overdue), with a further 9% delayed. Other investors have reported similar performance. Twino explains that their system overstates the true level of delinquencies but even allowing for this, the credit performance seems extremely weak. 
  4. There is very little information provided about the health of the entire Twino group. We would like to see consolidated financial statements for the entire group, and explanations of the funding structure. The information provided so far contains several inter-group transactions that have not been explained properly and investors are not receiving the full picture. The only financial statements made available for the Twino lending subsidiaries are the 2015 statements for the Georgian entity.
  5. In March 2017 Twino introduced ‘payment guarantees’ rather than buyback guarantees. This change means that investors are now left owning non-performing loans for up to 2 years, and relying on Twino to make the payments due. The loans cannot be sold on the platform. The lack of financial information about the Twino group makes this an uncertain risk profile. 
  6. A large number of staff were recently terminated. There have been no public announcements about this but the terminations were attributed to efficiency savings. We have no reason to doubt there were efficiency opportunities, but this creates an additional perception issue around the company. It is rare for a start up business that is doing well to undertake significant cuts to employee numbers. 
  7. Monthly loan originations have recently dropped to €7 million from a consistent €11-12 million. This could be due to several factors, but Twino have mentioned that it is at least partly because less funds are being given back to investors each month through the buyback guarantees. If there is strong demand for the loans on the platform, we don’t think the reduction of cashflow from buyback guarantees should have significantly reduced originations, particularly as the buyback payments were being funded by Twino in any case. 

11 thoughts on “Why we are getting nervous about Twino

  1. Pingback: Twino's auditors raise 'going concern' risks following failed expansion strategy

  2. Rene Reply

    Will you post an updated review now that the new financial information is released?
    It looks like you were right – 2017 was an appalling year for Twino. But based on their 2018 report they appear to have turned a corner.

    • Oscar Harrington Post authorReply

      Hi Rene. Check out the new post we have published today where we cover the new results.

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  4. claude Reply

    After reading this review, I decided to withdraw my investments by selling them on the platform. That was successful and fast due to the fact that their primary market serves at the same time as secondary, where all the loans are being recycled among investors (not very reassuring).
    I only have two remaining small amounts locked in defaulted loans, supposedly the Twino will repay them, that remains to be seen.

    • Oscar Harrington Post authorReply

      Hi Jim. We continue to have some concerns. The Twino 2016 financials were not released until April 2018. In 2016 the business was loss making (which is acceptable for a rapidly growing business like Twino) but their non-performing loans were getting close to 50% which is concerning. On top of this, loans were sold at a loss of €22 million. There were also plans mentioned for major expansion in Russia and Kazakhastan where they have no track record or experience. The quality of reporting on the Twino site remains, in our view, very poor. Everything may be totally fine, but we see a lot more potential downside than upside for loan investors.

    • Oscar Harrington Post authorReply

      Hi Olavi. Unfortunately they still haven’t released any new financial information since our post. We note that they have switched back to offering more buyback loans rather than payment guaranteed loans, presumably in response to investor feedback. Twino seems to have flat volumes this year. That’s surprising for a sector that’s growing quickly. Unfortunately it’s hard to know what is happening in the background.

  5. Pingback: Murepilved Twino kohal? Või näen ma tonti seal, kus seda pole? – Tasane Investor

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