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Retail Outcomes Calculations

How are the returns on the 2020 loan performance page calculated?

This page explains how the return and default metrics on the 2020 retail outcomes statement page are calculated. 

The metrics cover loans acquired—both new originations and existing loans purchased from other investors on our secondary market—through the conservative and balanced lending options between 1 January 2020 and 17 April 2020. They assume that loans are held until maturity i.e they are held by investors until all repayments have been made.

 

Actual annualised return - 11 months after acquisition

The actual annualised increase in the value of an investment after fees and defaults, 11 months after the loans were acquired by investors. This increase is expressed as a percentage of the average outstanding balance of the loans during that period.

 

Below shows how the return of an investment can be calculated in any given month:

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The value of an investment is determined by adding two components together:

  • The cash returned to investors via repayments (including recoveries from defaulted loans)
  • The value of the outstanding loan balance (we calculate the value of the outstanding balance at 100% of the outstanding amount for loans that are not defaulted, and 0% for loans that are defaulted)

 

Expected annualised return - 11 months after acquisition 

Our estimation for the annualised return 11 months from the loans being acquired. The expected return is calculated at the time loans were acquired by investors.

 

The expected return takes a large number of factors into account, including:

  • A loan’s term, interest rate and risk band.
  • The criteria used to determine a loan’s eligibility and how it is priced.
  • The projected performance of loans purchased from other investors on our secondary market (including the impact of the 1.25% transfer payment paid by the buyer of the loan).
  • Historical performance of loans with similar characteristics.

 

Expected annualised Lifetime return

Our estimation for the annualised return over the entire lifetime of the loans. It is calculated at the time loans were acquired by investors.

 

The expected lifetime return takes a large number of factors into account, including:

  • A loan’s term, interest rate and risk band.
  • The criteria used to determine a loan’s eligibility and how it is priced.
  • The projected performance of loans purchased from other investors on our secondary market (including the impact of the 1.25% transfer payment paid by the buyer of the loan).
  • Historical performance of loans with similar characteristics.

 

The expected annualised lifetime return is shown as a range to reflect there is always a degree of uncertainty when estimating future loan performance.

 

Actual defaults - 11 months after acquisition 

The total amount defaulted 11 months after the loans were acquired, expressed as a percentage of the loans’ initial outstanding balance.

 

The below calculation shows how the actual default is calculated:

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Expected defaults - 11 months after acquisition 

Our original estimation of the total amount defaulted 11 months after the loans were acquired, expressed as a percentage of the loans’ initial outstanding balance. The expected defaults are calculated at the time loans were acquired.

 

Expected lifetime defaults

Our original estimation of the total amount defaulted over the entire lifetime of the loans, expressed as a percentage of the loans’ initial outstanding balance. The expected defaults are calculated at the time loans were acquired.

 

The expected annualised lifetime defaults is shown as a range to reflect there is always a degree of uncertainty when estimating future loan performance.

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