In our note, Looking at the current opportunities, we explored the upside opportunities that current conditions present. We note i) improving yields on new business, helped by the relatively short contractual (and even shorter actual) duration of the loan book, and ii) improving covenants. As competitors with weaker balance sheets, less focused business models, higher capital requirements and worse historical loss experiences withdraw, so RECI can cherry-pick higher risk-return opportunities. Our recent notes have shown why RECI has downside resilience, given its credit processes, high-quality security, diversity, problem-account resolution and low exposure to high-risk sectors.
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