We’re sharing the first quarterly Mintos Risk Score update since this numerical model for evaluating risk of investing in loans was introduced in October 2020. The current update of the scores and subscores is based on monitoring and evaluation of data from Q3 2020.
Introducing overview with historical updates
In order to give a better overview of the Mintos Risk Score updates for investors, we made a designated Mintos Risk Score updates page.
On the Mintos Risk Score updates page, you will find information about all changes made to Mintos Risk Scores and subscores, and detailed comments about each case, starting with 2021. For your convenience, you can also download a spreadsheet comparing Mintos Risk Scores and subscores quarter by quarter (for now, Q2 and Q3 2020). We will continue providing historical data on this page with every new update.
Overview of changes in the Mintos Risk Scores and subscores based on Q3 2020
The third quarter of 2020 brought mostly positive trends, reducing the risk of investments. Despite the downward trend in risk, the interest rates for loans on the Mintos marketplace continued to increase as lending companies faced competition for investor’s funds. Most of the lending companies have adapted their business model to the new market conditions. Many have started to increase their loan portfolios and have regained profitability.
This is reflected in the most recent update of the Mintos Risk Score.
The Mintos Risk Score is upgraded for loans issued by 12 out of 89 lending companies included in this update. The score is downgraded for loans issued by two lending companies. In two cases, the score is withdrawn (SW) as there are no outstanding investments in loans from the affected lending companies, and no new loans are being placed on the Mintos marketplace by them, either.
The most significant improvement was in the Buyback Strength subscore which was upgraded for loans offered by 23 lending companies, while for loans from 5 companies it was downgraded. This reflects improvements in the financial stability of the lending companies, gained through strengthened equity position, increased profitability, and more diversified funding sources.
The Loan Servicer Efficiency subscore was upgraded for loans issued by 12 lending companies and downgraded in 6 cases. Upgrades came mostly as an outcome of improved risk controls and internal processes of the lending companies, but also as a result of improved financial stability. The downgrades are mostly due to increases in loan provisions, hence weaker financial position on a standalone loan servicer level.
The weakest trend can be observed in the Loan Portfolio Performance subscore, as upgrades were made only for loans issued by 7 lending companies, while in 11 cases they were downgraded. Among the main reasons for downgrades are more volatile issuance volumes when it comes to new loans and a decrease in the proportion of collateralized loans.
When it comes to the Cooperation Structure subscore for loans on Mintos, there were only marginal changes. This subscore was upgraded in 3 cases, and this is because of internal revisiting of the legal cooperation frameworks between Mintos and lending companies. For the affected loans, historically the legal structure was both indirect and direct. The legal data update leaves only one active structure, with a pledge covering all outstanding loans on the marketplace.
In all other cases, the cooperation structure subscore remains unchanged.
To see detailed comments about all the latest changes in the Mintos Risk Scores and subscores, please visit the Mintos Risk Score updates page.
Mintos Risk Score updates schedule
The regular schedule for the Mintos Risk Score updates is quarterly. Exceptions will be made in some cases when there is significant material improvement or deterioration for specific loans on the marketplace, in which case the changes are introduced as necessary.
Note that if you want to adjust your investment preferences based on the most recent Mintos Risk Score updates, please do so as soon as possible.
The Mintos Risk Score is an aggregate of four subscores that are assigned to four different aspects of particular loans as investment opportunities. These subscores rate loan portfolio performance (the portfolio health and historical performance of the loan book), loan servicer efficiency (the capabilities of the loan servicer when it comes to the collection of borrowers’ payments), buyback strength (the buyback obligor’s ability to fulfill contractual obligations, meet liquidity needs, and capital sufficiency), and cooperation structure (the legal setup between the loan issuing company and Mintos). According to the significance we see in each subscore, the weights of the subscores are loan portfolio performance 40%, loan servicer efficiency 25%, buyback strength 25%, and legal structure 10%.
The Mintos Risk Score and subscores are expressed on a numerical scale from 10 to 1, where 10 represents a low risk and 1 represents a high risk. The score can also be shown as “Score Withdrawn”, with a value of 0, when one or more subscores are not available, or simply when there are no loans available for investment by a specific loan issuing company.