Once again, returns on Bondora remained steady for another month, as Estonian returns fared the best out of all loan origination countries.
As always, performance charts by country are broken down by number of loan issuances over the given period, with Orange representing <50 loans, Blue 51-200, and White >200.
Yearly Performance
Returns for 2019 were down only 0.6% compared to July. Spanish and Finnish loans drove this slight decline, while Estonian loans for 2019 remained at the same level as July, 20.4%.
Quarterly Performance
The first quarter of 2019 reflected the same 0.6% decrease in yearly portfolio performance for 2019. Returns for Q1 2019 came in at 29.2% in August, with returns for the previous quarter at 26.7%, down from 27.5% last month. Similarly to July, quarterly returns did not deviate more than 1% for the past two years.
Finland
In Finland only C rated loans had a higher return rate in August at 17.4%. All other return rates were similar when compared to July, with HR rated loans experiencing a drop of 1.7% down to 39.1%
Estonia
Both B rated loans (12.7%) and C rated loans (17.3%) saw their returns rise slightly on the month. This aided in overall returns in Estonia remaining steady in August.
Spain
Spanish E rated loans rose to a return rate of 21.6%. However, they did so on the lowest number of originations, less than 50 in total. F rated loans, which have the highest number of Spanish originations, dropped to a 32.2% return rate from 34.0%.
Economic News
According to the World Health Organization, Estonia has been hard at work to make medicine in the country affordable and accessible to everyone. Over the past two years, the country has made it easier and simpler to pay for prescription medication. The WHO explains, “When their spending on prescriptions in 1 year exceeds €100, the government immediately covers half of any further costs until patients have paid €300 in total, after which the government pays almost all (90%) of any further costs.” This has significantly reduced the out-of-pocket medical expenses for Estonian residents.
The European Central Bank announced that it would be launching a new bond-buying program as well as cutting their deposit rate to a historical low of -0.5% in an attempt to stimulate the region’s economy once more. ECB president Mario Draghi sees this move as important given the current economic climate of the region, and urged individual nations to spark economic growth on their own. “In view of the weakening economic outlook and the continued prominence of downside risk, governments with fiscal space should act in an effective and timely manner,” said Draghi. “In countries where public debt is high, governments need to pursue prudent policies that will create the conditions for automatic stabilizers to operate freely. All countries should reinforce their efforts to achieve a more growth-friendly composition of public finances,” he added.
Unfortunately, there is speculation that this attempt to stimulate the EU economy will not work as intended. ING chairman Hans Wijers told CNBC, “We are not convinced that the current efforts of the ECB will have the required effect … it is our impression that using this instrument now, probably the negative effects will outweigh the positive effects.” Wijers went even further, saying that this plan could backfire, causing significant uncertainty for consumers who may increase their savings and reduce their spending as a result.
The EU slowdown has hit the Spanish economy hard. As a result, the country’s economy is expected to grow slower than expected in 2019, with this growth decline to last through 2021. Even as Spain has outpaced the rest of the EU over the past several years, the country’s central bank has revised its growth expectations for the country in 2019 down to 2% from 2.4% previously. Oscar Arce, the Bank of Spain’s director general for economics, cited the global risks factoring into the revised growth rate. “We are especially concerned about the external risks building around the Spanish economy, the potential increase in trade tensions and geopolitical risks,” Acre said.
The news is no better in Finland, where the research institute Etla believes there is a 50/50 chance the country falls into a technical recession by 2020. It expects Finnish GDP to grow by only 1.1% in 2019 and 0.9% the following year. The only way the country can generate economic growth, claims Etla, is through an increase in domestic demand. Luckily, the unemployment rate in Finland continues to drop, as 21,000 jobs are expected to be added by the end of the year, lowering the unemployment rate to 6.5%.
