P2P and marketplace lending securitization ticks up

Institutional investors and ratings agencies are becoming more and more involved in the sector.

Investment in P2P and marketplace loans via securitisations grew 7.6 per cent in the three months to October to $2.6bn compared to the third quarter of 2016, according to Peer IQ.

Securitisations within the fintech lending space have grown rapidly in the US with to date, cumulative issuance equalling $23.8bn across 96 deals, with the UK some way behind but also growing. The second quarter of 2017 saw issuance of P2P and marketplace lending securitization reach $3bn worth of deals, representing a 76 per cent year-on-year growth rate.

The period saw issuance from some of the largest marketplace lending firms including Lending Club which issued its first self-sponsored deal with prime loans with borrowers having FICO scores of at least 660. 

A new entry to the securitisation market came from private student loan originator College Avenue with a deal size of nearly $161m.

DBRS, Peer IQ says, continues to lead the rating agency league table, while Kroll dominating the unsecured consumer sub-segment while Goldman Sachs, Deutsche Bank, and Morgan Stanley continue to top the issuance league tables with over 49 per cent of MPL ABS transaction volume.

Peer IQ said the credit support requirements remain stable as rating agencies are getting more comfortable with collateral performance.

“We see deterioration in credit performance, but investors are well protected due to structural features. Demand remains robust in a “risk-on” environment,” the firm said in statement.

“Over the last 12 months we have observed substantial tightening in the credit facility market. Tightening is driven by new entrants such as Cross River Bank, Macquarie, BNP Paribas and the willingness of large bulge bracket banks to underwrite warehouse lines at much smaller deal sizes. For instance, financing costs in the warehouse market have tightened from L+450 for unsecured personal loans to approximately L+250,” it added.