I learnt this the painful way on this one.
here is the problem. The below snapshot was taken from their investor presentation on 31 August 2022
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the illustrative example is what needs to be focused on. The theory goes, for secured lending, losses run at ~21% of net interest margin. For unsecured lending, losses run at 31% of NIM. Sounds ok in theory.
How are they actually doing? According to latest quarterly, "losses continue to trend lower in 1Q24 to <4.9%."
so this is running at ~44.5% of NIM, well above anything given in the illustrative table. The loss rates are un-sustainible, more capital required, until no-one is prepared to put up more capital...
yes MME can make very fast credit assessments, but it does not seem to make enough right ones...
I am open to criticism if its justified...
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