1. P2P LENDING Conference Notes  VŠE, February 2015  Daniel Drahotský Head of Financial Markets Division

2.  Unsecured lending intermediated by online platforms  Prosper (2005), LendingClub (2006)  Other players: ZOPA, SoFi, FundingCircle, OnDeck, CircleBack, Common Bond, UpStart…  In the beginning: simple listings of loan proposals  Proposals with limited or no credit scoring  Miserable collection process P2P Lending 2 Chart: Symfonie Capital

3.  Purpose of loans:  Refinancing  Credit card payoff  Home improvement  Small business  Major purchases  Car financing  Medical expenses  Home buying  Moving and relocation  Vacation Purpose of P2P consumer loans 3 77.7%

4.  Improvements:  P2P platforms hiring credit professionals  Credit scoring improved  Collection process improved  Creation of internal „reserve/insurance“ funds  Compulsory diversification  Institutional investors involved  Equity investors (Blackrock, T.Rowe Price, Google, Sequoia, Kleiner, …)  Loan buyers (hedge funds)  Referral deals to traditional banks  1 st large IPO: LendingClub  Dec 11, 2014: IPO @ $15/share  company value > $1,000,000,000 at IPO ($8.2 bn today)  NYSE: LC P2P Lending Improving, Going Public

5. High Hopes - LendingClub 3M post IPO

6.  mid 2014: LendingClub + Prosper:  500,000 loans  $6 bn of consumer debt  0.2% out of the est. $3,000 bn U.S. market  Growing fast: Lending Club (3Q/2014) Still small, but growing fast 6

7. Risks for investors  Deliquencies on loans negatively correlated to GDP  Deliquencies on consumer loans as a function of unemployment

8.  Headwinds:  Limited institutional interest  Terra incognita for traditional asset managers (pension funds, insurance companies, mutual funds)  No independent mark-to-market pricing  problematic valuation  Hedge funds only  Still difficult to create a reasonably sized portfolio of needles found in the haystack(s)  Tailwinds:  Scarcity of bank financing  increased capital requirements  Lower costs of borrowing  “New, new thing”  Platform improvements  Almost no regulation  no capital requirements, no banking licence, no/limited consumer/depositor protection, …  Low yield environment, lack of other fixed income opportunities The future... 8

9.  Daniel Drahotský Head of Financial Markets Division drahotsky@jtbank.cz Let’s talk P2P…