Interest rate rises are expected to continue dominating national headlines for the months ahead but this hasn’t stopped Aussie borrowing behaviour as witnessed by neolender Plenti Group (ASX: PLT) which issued 11% more loans through the June quarter than the March quarter.
Where prior corresponding period metrics tend to be the ones reported the most, comparison to the March FY22 quarter is probably more significant in this instance given the 11% quarter-on-quarter loan portfolio growth took place when RBA interest rates rose 0.25% in May and 0.50% in June. A further 0.50% increase announced in July had already been expected in an attempt to curb macroeconomic inflation but this had little impact on borrowing patterns at Plenti which is popular amongst more tech-savvy consumers chasing the lowest possible rates.
For the quarter ending 30 June 2022, Plenti reported a loan portfolio of $1.44 billion which represented a 90% increase on the previous June quarter, and an 11% increase on the March FY22 quarter. Included in this was $289m in new loan originations over the quarter which were a mix of automotive, renewable energy and personal loans.
“Plenti has delivered yet another strong quarter, driving substantial loan portfolio growth, further diversifying funding, and continuing to deliver Cash NPAT profitability,” said Plenti CEO, Daniel Foggo.
While loan origination growth was slower through the June quarter than March, which was expected based on RBA interest rate rises, Plenti commenced passing these increases on to new customers which have impacted new business, but steadied the lender’s margins as higher funding costs have been passed on.
From that $1.44 billion loan book, Plenti generated $30.5 million in revenue (unaudited) which is a mix of administration and interest fees.
“The strength of our business model has allowed us to increase loan yields to offset changes to funding costs to deliver another quarter of positive Cash NPAT,” added Foggo.
“Plenti continues to deliver technology and customer experiences to differentiate our offerings and achieve our mission of building Australia’s best lender.”
The neolending space continues to be one watched very closely with further RBA interest rate rises expected, further tightening household budgets and the broader cost-of-living. At the higher level, rate rises are expected to result in further mortgage pressure where delinquencies are already rife across the buy-now-pay-later (BNPL) sector as Australians struggle to meet their financial obligations.
For Plenti, annualised net losses for the June quarter was 0.57% which the Company is satisfied with, emphasising their strong credit performance. To put that in perspective, embattled BNPL operator Zip Co (ASX: ZIP) was carrying 3.3% of their book as bad debts as of 31 December 2021.
The weighted average Equifax credit score across Plenti’s loan portfolio remained at a record 837 at the end of the June quarter
With a digital-only application process and lower overhead expenses than the major banks, Plenti is able to offer loans with lower interest rates than traditional lenders. The Company inflected into net profit when reporting a $0.5m profit in their half year results.
Alfred Chan is a Business Reporter at The Sentiment specialising in ASX-listed small cap companies, a bloodstock enthusiast and former equities analyst.
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