Credit risk performance update - July 2022
We are pleased to publish our Q2 2022 performance update on our statistics page.
In Q2 2022, we have continued to focus on understanding the impact of cost of living challenges on our active loan customers and the overall impact on portfolio performance.
Both expected annual returns and expected annual loss rates have remained relatively stable compared to our Q1 2022 update.
We are also pleased to inform you that the interest rate diversion to the Shield will be reduced for the 2017-2019 cohort. The 2020 and 2021 cohorts will continue to pay the target interest rate.
Expected annual returns
Expected annual losses Expected annual returns
Both expected annual returns and expected annual loss rates have remained broadly stable compared to our Q1 2022 update.
Expected annual losses have been updated to reflect the most recent portfolio performance and the latest economic forecast. We continue to closely monitor the impact of the cost of living challenges on the economy, UK consumers and our active loan customers.
Overall expected annual losses on the active portfolio remained relatively stable at 4.0% in Q2 2022, compared to 4.1% in Q1 2022. However, we may see an increase in loss rates if loan customers fall into financial distress as the cost of living increases. This will be monitored extremely closely.
Expected annual returns have remained relatively stable and broadly aligned with the Q4 2021 performance update.
Average returns on past cohorts (2014-2019) are 4.5% p.a. for Growth investments and 3.8% p.a. for Flexible, compared to 4.4% and 3.8% in Q1 2022, respectively.
The 2020 and 2021 cohorts' average returns are 2.6% p.a. and 4.5% p.a. for Growth and 1.9% and 4.0%p.a. for Flexible, respectively, which are stable compared to the Q1 2022 performance update.
We are pleased to inform you that the interest rate diversion to the Shield will be reduced for the 2017-2019 cohorts. The 2020 and 2021 cohorts will continue to pay the target interest rate.
The Lending Works Shield
The Shield cash balance has remained relatively stable at £1.2m in Q2 2022, compared to £1.1m in Q1 2022. Shield cash utilisation continues to be maximised to pay arrears and default to retail investors.
Next update
Our next statistics page update will be in October 2022.
The Lending Works Shield does not give you a right to a payment so you may not receive a pay-out even if you suffer loss. The Lending Works Trustee has absolute discretion as to the amount that may be paid, including making no payment at all. Therefore, investors should not rely on possible pay-outs from the Lending Works Shield when considering whether or how much to invest. For more information click here.