Loan Ratings



  • Hi all,

    I was reading this article written on LendingClub, one of the leading US P2P platforms.

    Talks about how investors who invested in P2P in US in 2007, and "invested in 100 or more A-rated loans didn’t lose money despite the collapse (few years later) in the real estate and stock market".

    In the context of FS, how would you interpret if a loan is A-rated? Which aspects of the factsheet?

    Disclaimer: I don't mind slowly investing and being a bit picky in my notes just to make sure my returns stay stable and tenacious in the long run. Understand that others may have a different perspective?



  • @mastrich you can usually see their default rates (DP rating and/or FS ratings) in the factsheet. Low ones are really high quality.



  • @jomni thanks - how do you interpret it when the DP rating is N/A? And what would be a low rating to you?

    What's FS rating?



  • I have the same concern as well @mastrich !



  • Good article Ts



  • @jomni as @mastrich says, what is DP rating / FS rating? And where can you see it in the factsheet?



  • @antoniomc27 said in Loan Ratings:

    @jomni as @mastrich says, what is DP rating / FS rating? And where can you see it in the factsheet?

    Hi @antoniomc27,

    Mm.. if you're FS Malaysia investor, most probably you wouldn't see it as the DP rating is only shown in FS Singapore notes.



  • @lipozami Ah yes. I’m form SG. DP is a rating agency for SME’s.



  • @lipozami how would you interpret if a loan is A-rated? Without the dp/fs rating @jomni mentioned/?



  • @mastrich I wouldn't say A-rated, but I normally decide whether a note is safe by placing a higher reliance on financial statements and bank statement.

    Then only I consider the guarantee and director, industry and how long the company existed.

    Mm.. I would actually look at the consistency of the net profit and interest coverage ratio. (net loss is a big red flag for me unless the company just started it trading or had a very good reason given at the note comment section).

    Then, at its balance sheet, I'll have a look at its equity and whether it is net current liability or asset position.

    At the ratio side, I'll, as mentioned above, see the interest coverage ratio, as well as the payable turnover.

    Last but not least, of course it bank account balances and average debit and credit to see whether it had the ability and whether the repayment made to us is a very big amount when compared to the average monthly debit and credit.



  • @lipozami said in Loan Ratings:

    how long the company existed.
    Mm.. I would actually look at the consistency of the net profit and interest coverage ratio. (net loss is a big red flag for me unless the company just started it trading or had a very good reason given at the note comment section).
    Then, at its balance sheet, I'll have a look at its equity and whether it is net current liability or asset position.
    At the ratio side, I'll, as mentioned above, see the interest coverage ratio, as well as the payable turnover.
    Last but not least, of course it bank account balances and average debit and credit to see whether it had the ability and whether the repayment made to us is a very big amount when compared to the average monthly debit and credit.

    How long do you take to review this in such a detailed way? Sometimes I get lazy halfway lol


  • Funding Societies

    This is a great thread! Always happy to see investors helping each other earn better returns & minimise risk! Thanks @mastrich



  • @interesting said in Loan Ratings:

    @lipozami said in Loan Ratings:

    how long the company existed.
    Mm.. I would actually look at the consistency of the net profit and interest coverage ratio. (net loss is a big red flag for me unless the company just started it trading or had a very good reason given at the note comment section).
    Then, at its balance sheet, I'll have a look at its equity and whether it is net current liability or asset position.
    At the ratio side, I'll, as mentioned above, see the interest coverage ratio, as well as the payable turnover.
    Last but not least, of course it bank account balances and average debit and credit to see whether it had the ability and whether the repayment made to us is a very big amount when compared to the average monthly debit and credit.

    How long do you take to review this in such a detailed way? Sometimes I get lazy halfway lol

    Mm... to be honest not long. Maybe around 10 min to make decision. But some notes, they have 2 or 3 years consecutive losses without a good reason or sometimes worse, due to high staff cost (could indicate directors take too much money out from the company). Some only profit cause of their other income instead of their revenue.

    My point is, what I considered as safe note, it took me 10 min to glance through and making decision. But some notes, just a quick glance at the P&L would be enough.


 

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