The Market Place Lending (MPL) investment opportunity

17 November 2014

Cormac Leech Research

+44 (0) 20 3100 2264
cormac.leech@liberum.com

Minh Tran Research

+44 (0) 20 3100 2184
minh.tran@liberum.com

Ropemaker Place, 25 Ropemaker Street,

London EC2Y 9LY / T: +44 (0)20 3100 2000
www.liberum.com

Liberum Capital Limited is authorised and

regulated by the Financial Conduct Authority.
Registered in England and Wales No. 5912554
The Market Place Lending (MPL) investment opportunity

How big? How risky? How much alpha?

Why is MPL sustainable?
Key risks
How to invest?
Conclusions

2
 The Market Place Lending (MPL) investment opportunity

MPL yields offer attractive returns, with $40bn+ of

deployment capacity by 2016e in US & UK
•  $40bn of deployment by 2016:
US: MPL 3y potential yield and annual volume
From 2014 to 2016, we estimate UK UK: MPL 3y potential yield and annual volume 2014-16e
change 2014-16e change
annual deployment will increase from 2016 2016
10.0% total UK
$2bn to $7bn and US deployment will volume:
10.0% total US
volume:
increase at from $6bn to $33bn 9.0%
$7bn $33bn
9.0%
Equities
8.0%
•  US strong growth,120% CAGR, but 8.0%

margin compression: yield margin 7.0%

Property
7.0%
compression likely as competition
5y Junk Bonds
increases 6.0% 6.0%

5.0% 5.0%
•  UK slightly slower growth, 90%
CAGR, but yield expansion: yields 4.0% 4.0%
likely to rise as platforms increase
credit risk. Arrival of institutional 3.0% 3.0% Non Investment Grade 2y Bonds
capital supports higher credit risk
appetite. 2.0% 2.0%
2yr Cash ISA

1.0% 1.0%

$bn annual volume $bn annual volume

0.0% 0.0%
0.0 0.5 1.0 1.5 2.0 2.5  -­‐  5  10  15  20  25

Z opa R ateS etter P ros per  $m L ending  C lub  $m

F unding  C irc le L endInves t

Welles ley  &  C o. As s etz

Thinc ats

Source: MPL companies, Liberum, Moneysupermarket, Bloomberg, IPD

3
 The Market Place Lending (MPL) investment opportunity

Consumer finance MPL – likely to be surprisingly resilient

through the cycle in UK & US…
•  Zopa performed well through Zopa Net Yield All UK Consumer Loans Net Yield under £5,000

financial crisis: net yield has 14.0%

averaged 7.0% since 2005 and 14.0%

12.0%
remained above 4.5% even during 12.0%
10.0%
2008 global financial crisis 10.0%
8.0%
8.0%
6.0%
6.0%

•  UK overall : Overall UK consumer 4.0% 4.0%

finance loans show similar consistent 2.0% 2.0%

returns over time averaging 8.9% 0.0%

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
0.0%
2005 2006 2007 2008 2009 2010 2011 2012 2013

Adj  Net  Y ield Adj  Annualized  Default Net  Y ield Writeoff Averag e  Net  Y ield
Averag e  Net  Y ield
•  US overall: Likewise for US credit
Source: Zopa
card data Source: Bank of England, Liberum

US Credit Card Net Yields

18.0%
16.0%
14.0%
12.0%
10.0%
8.0%
6.0%
4.0%
2.0%
0.0%
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Net  Y ield C harg e  off Averag e  Net  Y ield

Source: Federal Reserve, Liberum

4
 The Market Place Lending (MPL) investment opportunity

MPL SME finance/ property lending data set more limited….

but still encouraging for ‘Through The Cycle’ returns
•  LendInvest: 7 year track record with LendInvest Loans: Annual Gross, LLPs, Net Yields Funding Circle Loans: Gross, LLPs, Net yields* by Cohort

annual avg returns of 10.0% with 16.0% 16.0%

zero loan losses 14.0% 14.0%

12.0% 12.0%

10.0% 10.0%

•  Funding Circle: 5 year average net 8.0% 8.0%

yield of only 4.0% but with signs of 6.0% 6.0%

improvement more recently. Funding 4.0% 4.0%

Circle has yet to go through a 2.0% 2.0%

recession- Credit model relatively 0.0%

2008 2009 2010 2011 2012 2013 2014
0.0%
2H 10 1H 11 2H 11 1H 12 2H 12 1H 13 2H 13 1H 14
unproven. Net  Y ield L oan  L os s es Averag e  Net  Y ields Net  Y ield L oan  los s es Averag e  Net  Y ield

Source: LendInvest Note: Projected loss basis

Source: Funding Circle data, Liberum estimates
•  For the UK overall, corporate
lending has generated average UK Non Financial Corporate Lending annual net yields US SME Annual Loan Writeoffs- SBA
returns of 4.6% but was more
9.0%
impacted by the aftermath of the 8.0%
9.0%

8.0%
financial crisis both in terms of lower 7.0% 7.0%
gross yields and high writeoffs.. 6.0% 6.0%
5.0%
5.0%
4.0%
4.0%
3.0%
3.0%
2.0%
2.0%
1.0%
1.0%
0.0%
0.0%
1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
S BA Averag e
Net  Y ield Write  O ff Averag e  Net  Y ield C harge-­‐Off   R ate

Source: SBA, Liberum

Source: Bank of England, Liberum

5
 The Market Place Lending (MPL) investment opportunity

MPL yields 2-5% ‘more than ‘expected’ based on wholesale

ABS market data
SpringLeaf asset net yields and ratio charge-offs to OnDeck asset net yields and ratio charge-offs to gross Zopa asset net yields and ratio charge-offs to gross yields
gross yields yields

30%  16.0 60%  16.0 12.0%  16.0

 14.0  14.0  14.0

25% 50% 10.0%
 12.0  12.0  12.0
20% 40% 8.0%
 10.0  10.0  10.0

15%  8.0 30%  8.0 6.0%  8.0

 6.0  6.0  6.0

10% 20% 4.0%
 4.0  4.0  4.0
5% 10% 2.0%
 2.0  2.0  2.0

0%  -­‐ 0%  -­‐ 0.0%  -­‐

2010 2011 2012 2013 2009 2010 2011 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

C harg e  O ff L oan  los s es Adj  Annualized  Default

Net  Y ield Net  yield Adj  Net  Y ield

R atio  g ros s  yield  to  c harg e  offs  (R H S ) R atio  g ros s  yield  to  c harg e  offs (R H S ) R atio  g ros s  yield  to  c harg e  offs  (R H S )

Source: Springleaf, Liberum Source: Ondeck, Liberum Source: Zopa, Liberum

SpringLeaf Funding Trust – estimated cost of capital OnDeck – estimated cost of capital •  Low WACCS: We estimate
$m Amount Rate $m Amount Rate
SpringLeaf and Ondeck loans have
Class A Notes 500 2.4% Class A Notes 157 3.2% average costs of capital of 4-5% -
Class B Notes 40 3.5% Class B Notes 18 6.9%
Class C Notes 19 4.5% Total 175 3.5% based on recent securitisations.
Class D Notes 33 5.0% Equity 8 30%
Sub total 592 2.7% Total implied cost capital 183 4.7% •  High quality yields: The ratio of
Equity 52 20.0%
Total implied cost capital 644 4.1% gross yield to chargeoffs is 5.2x for
Springleaf and 4.1x for Ondeck.
•  Zopa WACC likely below 3%: avg
MPL  net  yields  should  be  
c5%  based  on  ABS   ratio of gross yield to chargeoffs is
market   8.0x (much better than Spring leaf or
OnDeck).
Source: Springleaf, Bloomberg, Liberum Source: Ondeck, Bloomberg, Liberum

6
The Market Place Lending (MPL) investment opportunity

Market Place Lending (MPL) – bigger story than just P2P

7
The Market Place Lending (MPL) investment opportunity

How big? How risky? How much alpha?

Why is MPL sustainable?
Key risks
How to invest?
Conclusions

8
 The Market Place Lending (MPL) investment opportunity

Traditional banking- 12th Century solution to ‘Market for

Lemons’* problem!
Timeline: Banking 1100 to present Start of online commerce
Knights Templar est.
European wide/
Mideast banking
until the 14th The Federal Financial crisis that Washington Mutual
century. Scottish parliament The first savings Reserve Act created led to the failure and collapses, at the
est. the Bank of bank of Paris was the Federal Reserve bail-out of a number time the largest bank
Scotland. est. System. of the worlds biggest failure in history.
banks.

Paypal Founded

1100 1695 1818 1913 1986 1998 2007 2008

1397 1694 1880 1930 1989 2005 2012

Berners-Lee
The Medici Bank of Scottish parliament The Rothschild invents Zopa was founded. Run on Northern Banks start to close
Florence established est. the Bank of family establishes Rock. branches.
Internet.
& operates until Scotland. European wide
1494. banking.

Banking: a pre-internet solution to i) network needs and ii) information requirements in financial services

*The Market for "Lemons": Quality Uncertainty and the Market Mechanism. http://www.iei.liu.se/nek/730g83/artiklar/1.328833/AkerlofMarketforLemons.pdf
9
 The Market Place Lending (MPL) investment opportunity

Traditional banking model…. increasingly anachronistic…

“Banking may be on the cusp of …the

Timelines: Banking / AltFi/ Crowd sharing most radical reconfiguration in
centuries”, Andrew Haldane- Chief
Financial crisis that led to the Washington Mutual Banks start to close Economist Bank of England, Aug 2013
Start of online commerce failure and bail-out of a number of
the worlds biggest banks.
collapses, at the time branches due to
shifting customer
the largest bank
Traditional failure in history. behavior

Banking
1989 2005 2007 2014

1998 – Paypal 2013- Xoom IPOs for 2014 - Apple

2014 - Square valued
Digital payments Founded $0.5bn at $5bn
Pay is launched
sector

2005 -ZOPA Founded 2013- UK government 2014- P2PGI IPO 2014- Lending Club file
Berners-Lee lends via Funding Circle IPO valuation e$5bn
invents
Internet.
Marketplace
lending
sector 2014- Union Bank buys 2014- Ondeck file IPO
2006 – Lending Club loans originated by LC valuation e$1.5bn
Founded

1994 - Amazon 2014 AirBnB valued 2014 - Alibaba IPOs

founded $10bn for $168bn
Crowd sharing in
other industries
as ‘lemons’* 2014 - UBER
1995 – valued $18bn
problem solved. EBAY founded

2009- Chicago Sun Times 2013 - HMV

Files for bankruptcy declares bankruptcy

Dis-intermediated 2013 –
Blockbuster goes into
incumbents start 2011 - Borders declares administration
to fail… Bankruptcy

*Market for Lemons: The Market for "Lemons": Quality Uncertainty and the Market Mechanism 10
http://www.iei.liu.se/nek/730g83/artiklar/1.328833/AkerlofMarketforLemons.pdf
 The Market Place Lending (MPL) investment opportunity

Internet sourced credit information has become a robust

way to underwrite loans effectively and cheaply
Web-enabled game changers in lending Market cap

Can run credit check on any Experian $16bn

Credit
individual or company in UK for Equifax $9bn
Scoring
£18 in seconds FICO $2bn

Bank A/C Automated analysis of borrower’s

Scraping Market cap $0.3bn
bank a/c; cash flow health

Real time
health Real time health check for
Intuit mkt Cap: $23bn
check for companies. Intuit serve c1% of
Xero mkt cap: $2bn
companies Global small businesses

Big Data, Use of big data to enhance credit Linkedin $24bn

social media scoring Facebook $190bn

11
 The Market Place Lending (MPL) investment opportunity

No efficiency gains in banking since 1900

Net US revenues of financial intermediaries as % intermediated assets (i.e. unit cost of intermediation)

•  Unit cost of financial intermediation

relatively constant for the last 30
years at just under 2%

•  No economies of scale suggests an

oligopoly

Source: Has the U.S. Finance Industry Become Less Efficient? On the Theory and Measurement of Financial Intermediation; Philippon Thomas, http://bit.ly/1gRuAEB

Net US revenues of financial intermediaries as % US GDP

•  Finance share of GDP is at a

historical – high- surprising vs. similar
intermediation sectors

Source: Has the U.S. Finance Industry Become Less Efficient? On the Theory and Measurement of Financial Intermediation; Philippon Thomas, http://bit.ly/1gRuAEB
12
 The Market Place Lending (MPL) investment opportunity

Productivity gains in Wholesale & Retail trade but not

Finance; inefficient banks cost UK est. £30bn annually
•  Wholesale and Retail trade have become much more efficient due to IT
investment. Opposite is true for the finance industry

•  Internet enabled supply chain innovation has revolutionised retail and

wholesale trade but not finance – so far…

•  Financial sector currently at c8% of GDP, about 2% higher than it

‘should’ be (vs. other sectors and IT investment) =>lost annual income of
$325bn in the US (UK £30bn)- £10 per person / week

US Wholesale Trade as % of GDP US Retail Trade as % of GDP US Financial Intermediation as % GDP

Source: Finance vs. Wal-mart: Why are Financial Services so expensive, Thomas Source: Finance vs. Wal-mart: Why are Financial Services so expensive, Thomas Source: Finance vs. Wal-mart: Why are Financial Services so expensive, Thomas
Philippon, 2012 Philippon, 2012 Philippon, 2012

13
 The Market Place Lending (MPL) investment opportunity

MPL offers efficiency; lower systemic risk; better credit

access
•  MPL operating costs are 60% lower Cost base comparison 2015e: Banks vs. Lending Club (costs as % loans outstanding)
than banks: implies better rates for 700 Banks 700 Peer 2 Peer
100
both savers and borrowers Cost inefficiencies Government endorsed

OPEX / Total Balance Outstanding (bps)

600 High margins 35 600

OPEX / Total Balance Outstanding (bps)

30 Attractive Rates
500 Restrictive lending 30 Convenient & flexible
500
100 425bps Lower
400 400 Operating Expenses
695
300 170
300
10
200 200 135
100 220 29 270
100 28
19 20
0 0 39

CS/Collection…
Branch

G&A

Other

IT
FDIC

Marketing
Origination

Total OPEX

Total OPEX
Branch

G&A

IT
FDIC

Other
CS/Collection

•  MPL enjoys considerable
Government support:
Marketing
Origination
Billing/Fraud
Source: McKinsey / Lending Club
Systemic Risk Comparison: Traditional Banking vs MPL UK Govt lending via MPL platforms: £75m

•  Decentralised financial system Traditional Banking Structure MPL market structure

improves financial resilience for 70

bank regulators by eliminating 60

single ‘points of failure’ 50

•  UK Government sees MPL as
40
additional credit access channel
for SMEs 30

20

10

0
MarketInvoice Zopa Funding Circle

Source: Liberum Source: Liberum

14
 The Market Place Lending (MPL) investment opportunity

UK retail investment in P2P could increase 35x once in

ISAs- to c£50bn of outstanding balances
•  P2P lending likely to become ISA-able Best cash NISA rate vs. i) 3yr Zopa yield net of tax and ii) Zopa yield if NISA- able
(tax-free retail wrapper) in UK in 2015
4.5%
•  Using ZOPA (3yr term) as an example:
4.0%
•  After tax Zopa net yield for top 3.5%
45% marginal tax rate payer is 3.0%
2.2% currently vs. 2.4% in best 2.5%
available cash-ISA (equivalent 2.0%
weighted maturity) 1.5%

•  Once ISA-able the tax free 1.0%

ZOPA return increases to 4.0% 0.5%

which is 67% higher than the 0.0%

equivalent bank deposit C as h  IS A Z opa  Net  Y ield  pos t  tax* Z opa  Net  Y ield  via  IS A

* 45% Tax rate

Source: Zopa, moneysuperamrket.com, Liberum

•  If P2P was to take just 10% of the total Current total NISA outstanding balances (£bn), potential P2P market size if NISA eligible, £bn
cash and equity ISA market, UK gross
P2P balances would increase 35x to  500 50
£47bn  400
40
 300

£Bn
30
•  Influx of capital implies MPL net 3,470%
 200
yields likely to fall… 20
 100
3,470% 10
 -­‐
Total  IS A P 2P  L oans P 2P  L oans 10% 0
Outs tanding of  Market P2P Loans P2P Loans10%
S toc k C as h Outstanding of Market

Source: www.gov.uk, Zopa, Funding Circle, RateSetter

15
 The Market Place Lending (MPL) investment opportunity

Survey data suggest MPL still in early adopter phase

implying 10-20x upside in terms of public participation rates
•  P2P will move from ‘early adopter
P2P Survey of UK Population UK population penetration rates by investment type
phase’ to mass market phase over
the next 5-10 years.. Cash ISA Holders
40%
Potential
35% P2P take up MPL investments
could easily reach c
30% 30% penetration of
25% population- c mid
Equity
point of equity and
Investors
20% cash ISA takeup
15%
Have
10% already
invested in
5%
P2P
0%
Aware   o f   P 2P Would  consider  inves ting   in Have   invested   a lready   in
P 2P P 2P 2% 14% 50%

Source: Liberum Consumer Survey Source: Liberum

Number of obvious catalysts over the next 6-12 months:

•  Sector IPOs: Lending Club (Q4/Q1) / OnDeck (2015) – likely to increase public
trust / confidence in sector
•  UK ISA-ability: An implicit endorsement of sector by UK government- we expect
the first MPL ISA products to launch in mid/ late 2015; building on recent FCA
regulation of the sector

16
The Market Place Lending (MPL) investment opportunity

How big? How risky? How much alpha?

Why is MPL sustainable?
Key risks
How to invest?
Conclusions

17
 The Market Place Lending (MPL) investment opportunity

Lack of transparency and misalignment of interests are two

key risks for MPL
What key issues for MPL do critics flag Ways to address/ our view..

Insufficient  ‘skin  in  game’:  Many  lenders  rely  heavily  on   Alignment  of  incen=ves:  Pla$orms  should  have  capital  at  
pla$orms’  credit  risk  assessment;  pla$orms  incen?ves  not   risk  (Wellesley  &  Co  already  operate  in  this  way).  CEO  
aligned  with  lenders   compensa?on  should  be  linked  to  net  3  year  yields  
remaining  above  a  minimum  threshold  (  e.g.  2%)  

Mis-­‐selling  risks:  i)  Lack  of  disclosure  around  loan  type  on  some  
pla$orms    with  returns  to  lenders  inconsistent  with  credit  risk.   Transparency  &  regula=on  key  to  long  term  health  of  
Simplicity  should  not  mean  opacity.  ii)  Some  Retail  investors   sector.  Without  ra?ng  agencies,  transparency  is  vital  to  
apparently  using  rate  offered  as  risk  proxy  heuris?c.  iii)  Risk  that   avoid  MPL  becoming  the  next  sub  prime  crisis.  Retail  
Provision  funds  are  implicitly  posi?oned  as  guaranteeing  capital.     lenders  must  have  info  to  make  informed  decisions.  

Web  enabled  credit  assessment  technologies:  new  ways  

Lack  of  borrower  rela=onships:  adverse  selec?on  problems,  
to  solve  ‘market  for  lemons’  problems:  XERO  /  YODLEE/  
leading  to  poor  lending  decisions.  
Big  Data/  Experian  etc..    

Frequent  external  audit  requirements;  regulatory  

Fraud  risk:  Significant  risk  that  a  pla$orm  engages  in  fraud  
oversight  by  FCA/  SEC  of  lending;  transparency  
nega?vely  impac?ng  the  sector’s  interna?onal  reputa?on.          
clearly  segregated  clients  accounts;  investor  scru=ny.    

Pro-­‐ac=ve  digital  response  by  banks:  improved  user  experience;   Banks  likely  to  respond  too  slowly:    
step  change  improvement  in  efficiency  by  closing  branches   Impeded  by  employment  contracts;  social  contract  ;    
inves?ng  in  digital  offering   Short  term  CEO  incen?ves  ;  ‘Denial’  mind-­‐set.  

18
 The Market Place Lending (MPL) investment opportunity

Transparency an emerging point of differentiation

Transparency by platform
•  Simplicity of basic offering shouldn’t Lending Funding
Prosper
limit information availability Club Circle Lendinvest Zopa RateSetter Wellesley
Expected Net Yields Yes Yes Yes Yes Yes Yes Yes
Loan Losses Yes Yes Yes Yes Yes Yes Yes
•  Lack of transparency increases risk of Historical Net Yield Yes Yes Yes No No Yes No

high profile failure- adversely Historical Loan Losses Yes Yes Yes Yes Yes Yes Yes
Downloadable loan book Yes Yes Yes No No No No
impacting MPL sector Use of Proceeds / Borrower
Profiles Yes Yes Yes Yes Yes No No
Max size of loan Yes Yes Yes Yes Yes Yes Yes
•  Transparency lower in the UK under How many intermediaries No No No No No No No

the mantra of simplicity How much £ spread rev to broker No No No*** No No No No

Risk band of borrower Yes Yes Yes Yes No No No
Size of Provision Fund if any? NA NA NA NA Yes Yes Yes

‘Transparency score’ by platform

10

0
P ros per L ending  C lub F unding  C irc le L endinves t Z opa R ateS etter Welles ley

Source: Liberum

19
 The Market Place Lending (MPL) investment opportunity

Despite the risks, banks/ former bank executives betting on

MPL sector
Banks investing in / through platforms

Equity Investment
Equity Investment Buying Loans Buying Loans Loan Referrals Equity Investment
& Buying Loans

Former bank executives etc joining/ investing in market place lending

John Mack (CEO Morgan

Stanley)

Mary Meeker
(Kleiner Perkins) John Mack (former CEO Dick Kovacevich
Nigel Morris (founder
Morgan Stanley) (former CEO Wells Lachlan Murdoch
Capital One)
Larry Summers (US Fargo)
treasury secretary)

Board Members Investor Investor Investor Investor

20
The Market Place Lending (MPL) investment opportunity

How big? How risky? How much alpha?

Why is MPL sustainable?
Key risks
How to invest?
Conclusions

21
 The Market Place Lending (MPL) investment opportunity

$250bn equity market cap for US & UK MPL sector by 2025e

$bn Mortgages Consumer SME Total

Avg Balances 17,829 4,847 1,264 23,940

MPL Balances 1,729 1,212 379 3,320

18 24 10 52
MPL Revenue

106 109 36 250

Equity Market Cap
Assumptions:
MPL market share: Mortgages 10.0%, Consumer 25.0%, SME 30.0%,
Revenue as % of Balances : Mortgages 1.0%, Consumer 2.0%, SME 2.5%,
Net Income / Rev % : Mortgages 40.0%, Consumer 30.0%, SME 25.0%,
Net Income: Mortgages $7bn, Consumer $7bn, SME $2bn
PEx assumption: Mortgages 15.0x, Consumer 15.0x, SME 15.0x,
Source: Liberum

22
 The Market Place Lending (MPL) investment opportunity

Some listed MPL equity opportunities…

Valuation metrics for listed MPL securities

2 1
Funds Market Cap $m P/NAV Yield
•  UK listed MPL funds offering yield and P2PGI 348 1.1x 8.4%
capital appreciation
GLI Finance 133 1.2x 8.6%
2
Invoice Finance Market Cap $m P/Revenue 2015e 2015e P/E
•  Significant revenue potential from
combination of e-invoicing and MPL Basware 674 3.5x 30.3x

Tungsten 540 10.4x NA

2
Listed / IPOing Market Cap $m P/Revenue 2014e P/Revenue 2015e
•  Listed/ IPOing P2P platforms TrustBuddy 60 4.7x 2.5x
Lending Club (exp.
valn) 5,000 22.7x 13.4x
th
1. 2015e for P2PGI, 2014e for GLIF; 2. as of 15 Oct
Source: Bloomberg, Liberum estimates

23
 The Market Place Lending (MPL) investment opportunity

Case study: Basware – Arrowgrass JV unlocking value via

‘Basware 2013 annual report’ innovation
Estimated valuation impact for Basware of Arrowgrass JV

EURm

Basware E-processing annual volume 600,000

Financed by JV % 10.0%

total spend across the Basware JV Financed volume 60,000

Commerce Network

Processing balances 7,500

Margin 2.0%

JV revenue EURm 150

“Basware and Arrowgrass Capital Partners Cost income ratio 20%

LLP to jointly develop a new e-invoicing
based factoring service”, September 2014 PBT 120

Net Income 96

Basware share of JV 50%

Attributable net income 48

PEx 20.0x

Equity value of JV to Basware 960

Basware current market cap 550

Implied min upside 75%

Preliminary analysis
Basware not under Liberum coverage
Source: Preliminary Liberum Estimates

24
The Market Place Lending (MPL) investment opportunity

How big? How risky? How much alpha?

Why is MPL sustainable?
Key risks
How to invest?
Conclusions

25
The Market Place Lending (MPL) investment opportunity

Key conclusions

1.  Banking faces disruptive change: on the cusp of the

most radical reconfiguration in centuries – should help save
UK economy £30bn pa (2% of GDP) as banking gets more
efficient

2.  Risk management: Alignment of incentives and

transparency essential

3.  MPL listed equities still good value given the sector
outlook; currently much more diverse range of unlisted
opportunities.

26
The Market Place Lending (MPL) investment opportunity

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