Cormac Leech: A Banking Analyst's Perspective on P2P Keynote address by Cormac Leech, of Liberum, at LendIt Europe 2014. The title of this presentation is A Banking Analyst's Perspective on P2P.

1. The Market Place Lending (MPL) investment opportunity
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
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

2. How big? How risky? How much alpha?
Why is MPL sustainable?
Key risks
How to invest?
Conclusions
The Market Place Lending (MPL) investment opportunity
2

3. 0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
10.0%
-­‐
5
10
15
20
25
Prosper
$m Lending
C lub
$m
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
10.0%
0.0 0.5 1.0 1.5 2.0 2.5
Z opa RateS etter
Funding
C ircle LendInvest
Wellesley
&
C o. Assetz
Thincats
MPL yields offer attractive returns, with $40bn+ of
deployment capacity by 2016e in US & UK
The Market Place Lending (MPL) investment opportunity
• $40bn of deployment by 2016:
From 2014 to 2016, we estimate UK
annual deployment will increase from
$2bn to $7bn and US deployment will
increase at from $6bn to $33bn
• US strong growth,120% CAGR, but
margin compression: yield margin
compression likely as competition
increases
• UK slightly slower growth, 90%
CAGR, but yield expansion: yields
likely to rise as platforms increase
credit risk. Arrival of institutional
capital supports higher credit risk
appetite.
US: MPL 3y potential yield and annual volume
2014-16e change
UK: MPL 3y potential yield and annual volume 2014-16e
change
Source: MPL companies, Liberum, Moneysupermarket, Bloomberg, IPD
5y Junk Bonds
Property
Equities
2yr Cash ISA
Non Investment Grade 2y Bonds
$bn annual volume
2016
total UK
volume:
$7bn
2016
total US
volume:
$33bn
$bn annual volume
3

4. Consumer finance MPL – likely to be surprisingly resilient
through the cycle in UK & US…
The Market Place Lending (MPL) investment opportunity
• Zopa performed well through
financial crisis: net yield has
averaged 7.0% since 2005 and
remained above 4.5% even during
2008 global financial crisis
• UK overall : Overall UK consumer
finance loans show similar consistent
returns over time averaging 8.9%
• US overall: Likewise for US credit
card data
Zopa Net Yield
Source: Zopa
All UK Consumer Loans Net Yield under £5,000
Source: Bank of England, Liberum
US Credit Card Net Yields
Source: Federal Reserve, Liberum
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Adj
Net
Y ield Adj
Annualized
Default
Average
Net
Y ield
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
2005 2006 2007 2008 2009 2010 2011 2012 2013
Net
Y ield Writeoff Average
Net
Y ield
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
18.0%
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Net
Y ield C harge
off Average
Net
Y ield
4

5. MPL SME finance/ property lending data set more limited….
but still encouraging for ‘Through The Cycle’ returns
The Market Place Lending (MPL) investment opportunity
• LendInvest: 7 year track record with
annual avg returns of 10.0% with
zero loan losses
• Funding Circle: 5 year average net
yield of only 4.0% but with signs of
improvement more recently. Funding
Circle has yet to go through a
recession- Credit model relatively
unproven.
• For the UK overall, corporate
lending has generated average
returns of 4.6% but was more
impacted by the aftermath of the
financial crisis both in terms of lower
gross yields and high writeoffs..
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
S BA
C harge-­‐Off
Rate
Average
Source: LendInvest Note: Projected loss basis
Source: Funding Circle data, Liberum estimates
UK Non Financial Corporate Lending annual net yields US SME Annual Loan Writeoffs- SBA
Source: SBA, Liberum
Source: Bank of England, Liberum
LendInvest Loans: Annual Gross, LLPs, Net Yields
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
2008 2009 2010 2011 2012 2013 2014
Net
Y ield Loan
Losses Average
Net
Y ields
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Net
Y ield Write
Off Average
Net
Y ield
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
2H10 1H11 2H11 1H12 2H12 1H13 2H13 1H14
Net
Y ield Loan
losses Average
Net
Y ield
Funding Circle Loans: Gross, LLPs, Net yields* by Cohort
5

6. MPL yields 2-5% ‘more than ‘expected’ based on wholesale
ABS market data
The Market Place Lending (MPL) investment opportunity
• Low WACCS: We estimate
SpringLeaf and Ondeck loans have
average costs of capital of 4-5% -
based on recent securitisations.
• High quality yields: The ratio of
gross yield to chargeoffs is 5.2x for
Springleaf and 4.1x for Ondeck.
• Zopa WACC likely below 3%: avg
ratio of gross yield to chargeoffs is
8.0x (much better than Spring leaf or
OnDeck).
$m Amount Rate
Class A Notes 500 2.4%
Class B Notes 40 3.5%
Class C Notes 19 4.5%
Class D Notes 33 5.0%
Sub total 592 2.7%
Equity 52 20.0%
Total implied cost capital 644 4.1%
SpringLeaf Funding Trust – estimated cost of capital
Source: Springleaf, Bloomberg, Liberum
$m Amount Rate
Class A Notes 157 3.2%
Class B Notes 18 6.9%
Total 175 3.5%
Equity 8 30%
Total implied cost capital 183 4.7%
OnDeck – estimated cost of capital
Source: Ondeck, Bloomberg, Liberum
SpringLeaf asset net yields and ratio charge-offs to
gross yields
Source: Springleaf, Liberum
OnDeck asset net yields and ratio charge-offs to gross
yields
Source: Ondeck, Liberum
Zopa asset net yields and ratio charge-offs to gross yields
Source: Zopa, Liberum
-­‐
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
0%
5%
10%
15%
20%
25%
30%
2010 2011 2012 2013
C harge
Off
Net
Y ield
Ratio
gross
yield
to
charge
offs
(RHS )
-­‐
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
0%
10%
20%
30%
40%
50%
60%
2009 2010 2011
Loan
losses
Net
yield
Ratio
gross
yield
to
charge
offs(RHS )
-­‐
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Adj
Annualized
Default
Adj
Net
Yield
Ratio
gross
yield
to
charge
offs
(RHS )
MPL
net
yields
should
be
c5%
based
on
ABS
market
6

7. Market Place Lending (MPL) – bigger story than just P2P
The Market Place Lending (MPL) investment opportunity
7

8. How big? How risky? How much alpha?
Why is MPL sustainable?
Key risks
How to invest?
Conclusions
The Market Place Lending (MPL) investment opportunity
8

9. Traditional banking- 12th Century solution to ‘Market for
Lemons’* problem!
The Market Place Lending (MPL) investment opportunity
*The Market for "Lemons": Quality Uncertainty and the Market Mechanism. http://www.iei.liu.se/nek/730g83/artiklar/1.328833/AkerlofMarketforLemons.pdf
Timeline: Banking 1100 to present
Banking: a pre-internet solution to i) network needs and ii) information requirements in financial services
1100
1397 1694
1695 1818
1880
1913
1930
1986
1989
1998
2005
2007 2008
2012
Knights Templar est.
European wide/
Mideast banking
until the 14th
century.
The Medici Bank of
Florence established
& operates until
1494.
Scottish parliament
est. the Bank of
Scotland.
Scottish parliament
est. the Bank of
Scotland.
The first savings
bank of Paris was
est.
The Rothschild
family establishes
European wide
banking.
The Federal
Reserve Act created
the Federal Reserve
System.
Start of online commerce
Berners-Lee
invents
Internet.
Zopa was founded.
Paypal Founded
Financial crisis that
led to the failure and
bail-out of a number
of the worlds biggest
banks.
Run on Northern
Rock.
Washington Mutual
collapses, at the
time the largest bank
failure in history.
Banks start to close
branches.
9

10. Traditional banking model…. increasingly anachronistic…
The Market Place Lending (MPL) investment opportunity
Timelines: Banking / AltFi/ Crowd sharing
*Market for Lemons: The Market for "Lemons": Quality Uncertainty and the Market Mechanism
http://www.iei.liu.se/nek/730g83/artiklar/1.328833/AkerlofMarketforLemons.pdf
Crowd sharing in
other industries
as ‘lemons’*
problem solved.
Traditional
Banking
Digital payments
sector
Marketplace
lending
sector
Start of online commerce
1989 2005 2007 2014
Financial crisis that led to the
failure and bail-out of a number of
the worlds biggest banks.
Washington Mutual
collapses, at the time
the largest bank
failure in history.
Banks start to close
branches due to
shifting customer
behavior
1998 – Paypal
Founded
Berners-Lee
invents
Internet.
1994 - Amazon
founded
1995 –
EBAY founded
“Banking may be on the cusp of …the
most radical reconfiguration in
centuries”, Andrew Haldane- Chief
Economist Bank of England, Aug 2013
2005 -ZOPA Founded
2006 – Lending Club
Founded
2013- UK government
lends via Funding Circle
2013- Xoom IPOs for
$0.5bn
2009- Chicago Sun Times
Files for bankruptcy
2011 - Borders declares
Bankruptcy
2013 - HMV
declares bankruptcy
2013 –
Blockbuster goes into
administration
2014 AirBnB valued
$10bn
2014 - UBER
valued $18bn
2014 - Alibaba IPOs
for $168bn
2014- P2PGI IPO
2014- Union Bank buys
loans originated by LC
2014- Ondeck file IPO
valuation e$1.5bn
2014- Lending Club file
IPO valuation e$5bn
2014 - Square valued
at $5bn
2014 - Apple
Pay is launched
Dis-intermediated
incumbents start
to fail…
10

11. Internet sourced credit information has become a robust
way to underwrite loans effectively and cheaply
The Market Place Lending (MPL) investment opportunity
Web-enabled game changers in lending
Big Data,
social media
Real time
health
check for
companies
Bank A/C
Scraping
Market cap
Credit
Scoring
Can run credit check on any
individual or company in UK for
£18 in seconds
Experian $16bn
Equifax $9bn
FICO $2bn
Use of big data to enhance credit
scoring
Linkedin $24bn
Facebook $190bn
Automated analysis of borrower’s
bank a/c; cash flow health
Market cap $0.3bn
Real time health check for
companies. Intuit serve c1% of
Global small businesses
Intuit mkt Cap: $23bn
Xero mkt cap: $2bn
11

12. The Market Place Lending (MPL) investment opportunity
No efficiency gains in banking since 1900
• Unit cost of financial intermediation
relatively constant for the last 30
years at just under 2%
• No economies of scale suggests an
oligopoly
Net US revenues of financial intermediaries as % intermediated assets (i.e. unit cost of intermediation)
Source: Has the U.S. Finance Industry Become Less Efficient? On the Theory and Measurement of Financial Intermediation; Philippon Thomas, http://bit.ly/1gRuAEB
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
12

13. 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
Source: Finance vs. Wal-mart: Why are Financial Services so expensive, Thomas
Philippon, 2012
Source: Finance vs. Wal-mart: Why are Financial Services so expensive, Thomas
Philippon, 2012
Source: Finance vs. Wal-mart: Why are Financial Services so expensive, Thomas
Philippon, 2012
US Retail Trade as % of GDP US Financial Intermediation as % GDP
13

14. MPL offers efficiency; lower systemic risk; better credit
access
The Market Place Lending (MPL) investment opportunity
• MPL operating costs are 60% lower
than banks: implies better rates for
both savers and borrowers
• MPL enjoys considerable
Government support:
• Decentralised financial system
improves financial resilience for
bank regulators by eliminating
single ‘points of failure’
• UK Government sees MPL as
additional credit access channel
for SMEs
39
19 20 28
29
135
270
0
100
200
300
400
500
600
700
Branch
FDIC
CS/Collection
Billing/Fraud
Origination
G&A
Other
IT
Marketing
TotalOPEX
OPEX/TotalBalanceOutstanding(bps)
Peer 2 Peer
Government endorsed
Attractive Rates
Convenient & flexible
425bps Lower
Operating Expenses
Cost base comparison 2015e: Banks vs. Lending Club (costs as % loans outstanding)
Source: McKinsey / Lending Club
220
10
170
100
30
30
35
100
695
0
100
200
300
400
500
600
700
Branch
FDIC
CS/Collection…
Origination
G&A
Other
IT
Marketing
TotalOPEX
OPEX/TotalBalanceOutstanding(bps)
Banks
Cost inefficiencies
High margins
Restrictive lending
UK Govt lending via MPL platforms: £75m
Source: Liberum
Systemic Risk Comparison: Traditional Banking vs MPL
Source: Liberum
Traditional Banking Structure MPL market structure
0
10
20
30
40
50
60
70
MarketInvoice Zopa Funding Circle
14

15. UK retail investment in P2P could increase 35x once in
ISAs- to c£50bn of outstanding balances
The Market Place Lending (MPL) investment opportunity
Current total NISA outstanding balances (£bn), potential P2P market size if NISA eligible, £bn
Source: www.gov.uk, Zopa, Funding Circle, RateSetter
• P2P lending likely to become ISA-able
(tax-free retail wrapper) in UK in 2015
• Using ZOPA (3yr term) as an example:
• After tax Zopa net yield for top
45% marginal tax rate payer is
2.2% currently vs. 2.4% in best
available cash-ISA (equivalent
weighted maturity)
• Once ISA-able the tax free
ZOPA return increases to 4.0%
which is 67% higher than the
equivalent bank deposit
• If P2P was to take just 10% of the total
cash and equity ISA market, UK gross
P2P balances would increase 35x to
£47bn
• Influx of capital implies MPL net
yields likely to fall…
Best cash NISA rate vs. i) 3yr Zopa yield net of tax and ii) Zopa yield if NISA- able
* 45% Tax rate
Source: Zopa, moneysuperamrket.com, Liberum
£Bn
0
10
20
30
40
50
P2P Loans
Outstanding
P2P Loans10%
of Market
3,470%
-­‐
100
200
300
400
500
Total
IS A P2P
Loans
Outstanding
P2P
Loans10%
of
Market
S tock C ash
3,470%
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
4.5%
C ash
IS A Z opa
Net
Y ield
post
tax* Z opa
Net
Y ield
via
IS A
15

16. Survey data suggest MPL still in early adopter phase
implying 10-20x upside in terms of public participation rates
The Market Place Lending (MPL) investment opportunity
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
P2P Survey of UK Population
Source: Liberum Consumer Survey
UK population penetration rates by investment type
Source: Liberum
MPL investments
could easily reach c
30% penetration of
population- c mid
point of equity and
cash ISA takeup
0%
5%
10%
15%
20%
25%
30%
35%
40%
Aware
of
P2P Would
consider
investing
in
P2P
Have
invested
already
in
P2P
Have
already
invested in
P2P
Equity
Investors
Potential
P2P take up
Cash ISA Holders
14% 50%2%
• P2P will move from ‘early adopter
phase’ to mass market phase over
the next 5-10 years..
16

17. How big? How risky? How much alpha?
Why is MPL sustainable?
Key risks
How to invest?
Conclusions
The Market Place Lending (MPL) investment opportunity
17

18. Lack of transparency and misalignment of interests are two
key risks for MPL
The Market Place Lending (MPL) investment opportunity
What key issues for MPL do critics flag Ways to address/ our view..
Alignment
of
incen=ves:
Pla$orms
should
have
capital
at
risk
(Wellesley
&
Co
already
operate
in
this
way).
CEO
compensa?on
should
be
linked
to
net
3
year
yields
remaining
above
a
minimum
threshold
(
e.g.
2%)
Insufficient
‘skin
in
game’:
Many
lenders
rely
heavily
on
pla$orms’
credit
risk
assessment;
pla$orms
incen?ves
not
aligned
with
lenders
Transparency
&
regula=on
key
to
long
term
health
of
sector.
Without
ra?ng
agencies,
transparency
is
vital
to
avoid
MPL
becoming
the
next
sub
prime
crisis.
Retail
lenders
must
have
info
to
make
informed
decisions.
Mis-­‐selling
risks:
i)
Lack
of
disclosure
around
loan
type
on
some
pla$orms
with
returns
to
lenders
inconsistent
with
credit
risk.
Simplicity
should
not
mean
opacity.
ii)
Some
Retail
investors
apparently
using
rate
offered
as
risk
proxy
heuris?c.
iii)
Risk
that
Provision
funds
are
implicitly
posi?oned
as
guaranteeing
capital.
Web
enabled
credit
assessment
technologies:
new
ways
to
solve
‘market
for
lemons’
problems:
XERO
/
YODLEE/
Big
Data/
Experian
etc..
Lack
of
borrower
rela=onships:
adverse
selec?on
problems,
leading
to
poor
lending
decisions.
Frequent
external
audit
requirements;
regulatory
oversight
by
FCA/
SEC
of
lending;
transparency
clearly
segregated
clients
accounts;
investor
scru=ny.
Fraud
risk:
Significant
risk
that
a
pla$orm
engages
in
fraud
nega?vely
impac?ng
the
sector’s
interna?onal
reputa?on.
Banks
likely
to
respond
too
slowly:
Impeded
by
employment
contracts;
social
contract
;
Short
term
CEO
incen?ves
;
‘Denial’
mind-­‐set.
Pro-­‐ac=ve
digital
response
by
banks:
improved
user
experience;
step
change
improvement
in
efficiency
by
closing
branches
inves?ng
in
digital
offering
18

19. Transparency an emerging point of differentiation
The Market Place Lending (MPL) investment opportunity
• Simplicity of basic offering shouldn’t
limit information availability
• Lack of transparency increases risk of
high profile failure- adversely
impacting MPL sector
• Transparency lower in the UK under
the mantra of simplicity
Transparency by platform
‘Transparency score’ by platform
Source: Liberum
Prosper
Lending
Club
Funding
Circle Lendinvest Zopa RateSetter Wellesley
Expected Net Yields Yes Yes Yes Yes Yes Yes Yes
Loan Losses Yes Yes Yes Yes Yes Yes Yes
Historical Net Yield Yes Yes Yes No No Yes No
Historical Loan Losses Yes Yes Yes Yes Yes Yes Yes
Downloadable loan book Yes Yes Yes No No No No
Use of Proceeds / Borrower
Profiles Yes Yes Yes Yes Yes No No
Max size of loan Yes Yes Yes Yes Yes Yes Yes
How many intermediaries No No No No No No No
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
0
2
4
6
8
10
Prosper Lending
C lub Funding
C ircle Lendinvest Z opa RateS etter Wellesley
19

20. Despite the risks, banks/ former bank executives betting on
MPL sector
The Market Place Lending (MPL) investment opportunity
Equity Investment
Equity Investment
& Buying Loans
Banks investing in / through platforms
Former bank executives etc joining/ investing in market place lending
Equity Investment Buying Loans Buying Loans Loan Referrals
Board Members
John Mack (CEO Morgan
Stanley)
Larry Summers (US
treasury secretary)
Mary Meeker
(Kleiner Perkins)
Investor
John Mack (former CEO
Morgan Stanley)
Investor
Dick Kovacevich
(former CEO Wells
Fargo)
Investor
Nigel Morris (founder
Capital One)
Investor
Lachlan Murdoch
20

21. How big? How risky? How much alpha?
Why is MPL sustainable?
Key risks
How to invest?
Conclusions
The Market Place Lending (MPL) investment opportunity
21

22. $250bn equity market cap for US & UK MPL sector by 2025e
The Market Place Lending (MPL) investment opportunity
Avg Balances
MPL Balances
MPL Revenue
Equity Market Cap
Mortgages Consumer SME Total
17,829 4,847 1,264 23,940
1,729 1,212 379 3,320
18 24 10 52
106 109 36 250
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
$bn
22

23. Some listed MPL equity opportunities…
The Market Place Lending (MPL) investment opportunity
Funds Market Cap
2
$m P/NAV Yield
1
P2PGI 348 1.1x 8.4%
GLI Finance 133 1.2x 8.6%
Invoice Finance Market Cap
2
$m P/Revenue 2015e 2015e P/E
Basware 674 3.5x 30.3x
Tungsten 540 10.4x NA
Listed / IPOing Market Cap
2
$m P/Revenue 2014e P/Revenue 2015e
TrustBuddy 60 4.7x 2.5x
Lending Club (exp.
valn) 5,000 22.7x 13.4x
Valuation metrics for listed MPL securities
1. 2015e for P2PGI, 2014e for GLIF; 2. as of 15
th
Oct
Source: Bloomberg, Liberum estimates
23
• UK listed MPL funds offering yield and
capital appreciation
• Significant revenue potential from
combination of e-invoicing and MPL
• Listed/ IPOing P2P platforms

24. Case study: Basware – Arrowgrass JV unlocking value via
innovation
The Market Place Lending (MPL) investment opportunity
Source: Preliminary Liberum Estimates
Preliminary analysis
Basware not under Liberum coverage
“Basware and Arrowgrass Capital Partners
LLP to jointly develop a new e-invoicing
based factoring service”, September 2014
total spend across the Basware
Commerce Network
‘Basware 2013 annual report’
Estimated valuation impact for Basware of Arrowgrass JV
EURm
Basware E-processing annual volume 600,000
Financed by JV % 10.0%
JV Financed volume 60,000
Processing balances 7,500
Margin 2.0%
JV revenue EURm 150
Cost income ratio 20%
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%
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25. How big? How risky? How much alpha?
Why is MPL sustainable?
Key risks
How to invest?
Conclusions
The Market Place Lending (MPL) investment opportunity
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26. 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.
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27. Disclaimer
The Market Place Lending (MPL) investment opportunity
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