Peer-to-peer lending is making a comeback, with consumer lender Plenti Group reactivating its Plenti Lending Platform and giving it a makeover. Turns out the old P2P approach is a relatively low-cost source of funds in the current market.
When Plenti launched in Australia in 2014 (as RateSetter), it set up a managed investment scheme to offer retail investors exposure to its loan pool.
As the company grew it set up warehouse facilities and accessed the public markets through asset-backed securities transactions. Funding through the managed fund continued but became a bit of an afterthought.
But in its September quarter trading update, Plenti said it has a renewed focus on its “unique retail investment platform”. The average cost of funds raised through the Plenti Lending Platform was an effective rate of 4.1 per cent over the September quarter.
This was “materially lower” than funding costs through its warehouse facilities.
Plenti has a A$1.5 billion loan book and $184.7 million of that sits in the Plenti Lending Platform. The fund has around 10,000 active investors and more than 17,000 loans. It has funded more than $1 billion of loans during its life.
Plenti chief executive Daniel Foggo said the fund held more than $300 million of loans at its peak in early 2020 but as wholesale rates fell during COVID the company shifted the focus of its funding.
Next month Plenti will introduce some changes to the fund, broadening the range of assets it funds. Investment options will be simplified – down from five to three.
The different funding options provide exposure to different loan types and loan durations, ranging from short-term exposures with TD-like returns to higher yielding long-term exposures.
One of the distinctive features of the Plenti Lending Platform is a provision fund, where part of the return on borrowings is held in a sub-fund to act as a buffer in cases of arrears or default. The provision fund has paid out 100 per cent of claims since the fund was launched.
During the September quarter, Plenti’s loan book rose from $1.4 billion to $1.5 billion. Year-on-year, the book grew 69 per cent.
Revenue of $33 million was up 9 per cent over the quarter and up 64 per cent year-on-year.
Annualised credit losses were 69 basis points.
Warehouse funding capacity was increased by $250 million, providing the company with capacity of $340 million.
Plenti said it increased rates in June and July and, despite higher funding costs, its margin picked up in the September quarter.