In September 2020 I wrote a critical post “Creditstar: no audit, no problem?“. Recently Creditstar promised that their 2020 financial report will be audited by KPMG and in accordance with Estonian Financial Standards. It is a big improvement when compared to previous situation, but is it good enough for investing?
A comment I received from industry insider who wished to remain anonymous for the time being: "I have same concerns at the moment. They do not disclose book quality and considering their business (fast loans) 8% impairment is probably massively understated.
I would suspect if they really get audited by KPMG there will be a large one off write off. If they go to IFRS even larger. Both in the scale where their equity might not be enough to absorb the hit.
Thus, the unwillingness to get audited by prudent auditor and/or go to IFRS."
I agree especially with Urs Kessler and the Mifid-investor. Applying IFRS to their toxic loan-portfolio might even reveal that there is no equity left. Maybe it's not hopeless though, Covid seems to retroceed and maybe a signigicant part of delayed debts can be recovered. And just observing, applying IFRS could allow them to reduce their bonds liability in their balance too, using the fair value reporting option, depending on the bonds' performance.
I really hope that Credistar resolves all the issues you refer to. I like the simplicity of Lendermarket's platform and I would be more relaxed if Creditstar becomes "almost investable" :) Kristaps, excellent global analysis of Creditstar, helps a lot!
I will make a wild guess here that from 150 MEUR their current share of overall book is aprox 30-40 MEUR and its mostly all in Estonian portfolio. If they would move to IFRS9 their equity would be negative. I wonder how their pledge structure works - are any bond holders, Mintos, happy with companies non selling defaults policy. They keep all their defaults inside and expect similar repayments from markets like PL and ES as historically in Estonia - what is far better performing market in terms of collection. Would be really interesting to understand how much of their overall book is actually current and what part is 90+ days overdue. Income over 150 MEUR book considering APR-s is far too low. Overall its another typical Creditstar report – no Audit, no IFRS standards more words about CO2 and going green in office rather than hard facts and numbers. Company is making in Q1 1,5 MEUR provisions from close to 150 MEUR book – look at any other companies provisions in similar space (impairment costs are multiple times higher - Ferratum, 4Finance etc). Very worrying quality on Mintos lately – Polish and Spanish books are single digit in current (2-3-4% current while rest is constantly overdue 90+% of portfolio). Over few months they upload on a single issue date millions worth of loans to cover pending payments + interest rates. There is no way they are issuing millions in PL or ES during single day since they are barely present on those markets , so question is if the uploaded cases are real at all and work on P2P logic? How come all they book goes constantly overdue and other companies keep 70-80-90%+ current rates? Lately on Lendermarket rates are 15%+2% cashback. While most companies are moving towards cheaper funding and quality Creditstar is moving in another direction. Mintos would be wise to suspend their Polish and Spanish operations from platform before its too late…maybe they have done so already since no new PL or ES loans uploaded only Estonian.
There is almost 40 million euros worth of portfolio on Mintos and maybe another 10 million on Lendermarket. It is clear there is something terribly wrong in the way they account for their loan-portfolio and there are also rumors on-line that same Creditstar loans are being placed on multiple platforms... This IS going to end up badly. Investors will be losing a lot of money once again.
A comment I received from industry insider who wished to remain anonymous for the time being: "I have same concerns at the moment. They do not disclose book quality and considering their business (fast loans) 8% impairment is probably massively understated.
I would suspect if they really get audited by KPMG there will be a large one off write off. If they go to IFRS even larger. Both in the scale where their equity might not be enough to absorb the hit.
Thus, the unwillingness to get audited by prudent auditor and/or go to IFRS."
I agree especially with Urs Kessler and the Mifid-investor. Applying IFRS to their toxic loan-portfolio might even reveal that there is no equity left. Maybe it's not hopeless though, Covid seems to retroceed and maybe a signigicant part of delayed debts can be recovered. And just observing, applying IFRS could allow them to reduce their bonds liability in their balance too, using the fair value reporting option, depending on the bonds' performance.
I really hope that Credistar resolves all the issues you refer to. I like the simplicity of Lendermarket's platform and I would be more relaxed if Creditstar becomes "almost investable" :) Kristaps, excellent global analysis of Creditstar, helps a lot!
I will make a wild guess here that from 150 MEUR their current share of overall book is aprox 30-40 MEUR and its mostly all in Estonian portfolio. If they would move to IFRS9 their equity would be negative. I wonder how their pledge structure works - are any bond holders, Mintos, happy with companies non selling defaults policy. They keep all their defaults inside and expect similar repayments from markets like PL and ES as historically in Estonia - what is far better performing market in terms of collection. Would be really interesting to understand how much of their overall book is actually current and what part is 90+ days overdue. Income over 150 MEUR book considering APR-s is far too low. Overall its another typical Creditstar report – no Audit, no IFRS standards more words about CO2 and going green in office rather than hard facts and numbers. Company is making in Q1 1,5 MEUR provisions from close to 150 MEUR book – look at any other companies provisions in similar space (impairment costs are multiple times higher - Ferratum, 4Finance etc). Very worrying quality on Mintos lately – Polish and Spanish books are single digit in current (2-3-4% current while rest is constantly overdue 90+% of portfolio). Over few months they upload on a single issue date millions worth of loans to cover pending payments + interest rates. There is no way they are issuing millions in PL or ES during single day since they are barely present on those markets , so question is if the uploaded cases are real at all and work on P2P logic? How come all they book goes constantly overdue and other companies keep 70-80-90%+ current rates? Lately on Lendermarket rates are 15%+2% cashback. While most companies are moving towards cheaper funding and quality Creditstar is moving in another direction. Mintos would be wise to suspend their Polish and Spanish operations from platform before its too late…maybe they have done so already since no new PL or ES loans uploaded only Estonian.
There is almost 40 million euros worth of portfolio on Mintos and maybe another 10 million on Lendermarket. It is clear there is something terribly wrong in the way they account for their loan-portfolio and there are also rumors on-line that same Creditstar loans are being placed on multiple platforms... This IS going to end up badly. Investors will be losing a lot of money once again.
Hi Kristaps.
I would like to read your comments about
https://blog.lendermarket.com/lendermarket-limited-audited-annual-report-2020-published/
Thanks!