Mintos Insight: July 2022 | Mintos Blog

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The average YTD net return on Mintos (which has over 42% of the market share in Europe15) is 3.3%16 before we consider the effects of investments in Russian loans (see below for further explanation).

At the beginning of the year, the supply of loans on Mintos was on the low side resulting in an average interest rate of around 9% (in EUR). However, the loan supply has been steadily growing, with the average interest rate rising to around 14% (in EUR) at the end of June.

A significant part of the year has been characterized by the flow-on effects of the war in Ukraine, affecting the ability of Russian lending companies to transfer money to Mintos because of sanctions and restrictions. And even though it’s still difficult to predict (with certainty) the extent to which this has impacted investment returns, we’ve considered three general (and non-binding) scenarios, where we’ve made assumptions about possible outcomes:

1) Optimistic scenario

Mintos recovers all or most of the current exposure in the medium to long term. A precondition to this is the lifting of some of the existing restrictions imposed due to sanctions and retaliation measures on sanctions by the Russian Central bank. 

2) Pessimistic scenario

There are significant long-term losses and slight chances of any meaningful recovery. This arises because of the current limitations on the ability to receive payments from lending companies and the potential downturn in the Russian economy due to imposed sanctions.

3) Realistic scenario

The truth is that it’s not known how the situation will resolve. Currently, we estimate that it will most likely be somewhere in between the two scenarios above. Recoveries depend on the effects of sanctions and internal policies in Russia on the lending companies, the availability of alternative payment routes, plus the ability of the lending companies to maintain liquidity and solvency. 

To estimate the potential impact on YTD returns in the realistic scenario, we’ve assumed a 50% loss (only for the sake of this example, there is still too much uncertainty to make any precise loss estimates). Taking this into consideration, the current YTD return on Mintos could decrease to -3.5%. 

For the remainder of 2022, however, we have a positive outlook considering the attractive 14% average interest rate (in EUR) achieved at the end of June. So all else being equal, we expect the average net return to grow healthily over the rest of this year.

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