“Again? Oh my bank is killing me! How high can these interest rates go up?”, said many frustrated Aussies who had to scrap their dreams of paying off their mortgages. As interest rates keep going up and the budget is getting tight, they are forced to find alternative avenues to reduce household expenses. This is where a non-bank lender like Wisr (ASX: WZR) would step in to refinance loans, offering lower interest rates with less paperwork to go through. 

Wisr reported a revenue increase of 75% to $21.2 million in Q1 FY23 compared to $12m revenue in previous corresponding period (pcp), still on the right path to cover the $19.9m net loss that they incurred in FY22. Though observing loan origination and loan book growth within the quarter, Wisr also spent more cash for various operational activities totalling $1.8m. This includes 58% increase in finance costs due to increased loan book size and the material increase in funding costs for new loans during the quarter. 

Wisr was first established in 2018 as a rebranding of DirectMoney Finance Pty Ltd targeting the younger and tech-savvy generation. Wisr is able to offer better interest rates on personal loans than the major banks being a smaller company that operates entirely online, therefore able to massively save overhead costs of retail stores. Big banks usually have rigid eligibility criteria and have a large corporate structure and branch network that is very expensive to run. Moreover, Wisr tends to be more flexible with its lending policies and can process loans for applicants that larger lenders have rejected. 

In the September quarter, Wisr made material reductions in operating costs and lifted yield through product price increases. As an illustration, Wisr base interest rate for personal loan was at 6.49% pa back in August 2020, and now it sits at 8.50% pa. Though a series of cost reductions were enacted throughout the quarter, Wisr is pretty much expecting the benefits to be realised in the coming quarters, estimating a 15% reduction in Q2FY23 operating expenses versus Q4FY22. 

Other than observing revenue growth, Wisr locked in 24th consecutive quarter of rising quarterly loan originations  to $186m in Q1 FY23. Moreover, Wisr’s loan book reached $885m – the total $1.4 billion of loan originations minus loans paid off.  

Anthony Nantes, Chief Executive Officer of Wisr, said, “Making prudent material reductions in operating costs, pivoting to a moderate growth trajectory and continuing to protect our margins has put us on the path to deliver profitability in the short term while protecting the business from any sustained economic downturn”. 

“We also know that prime loan books, like Wisr’s, have traditionally performed well through credit cycles; combined with the framework already in place to manage credit quality through the cycle, Wisr is in the strongest position to navigate market conditions whilst delivering a continued growth trajectory.”

Though they have successfully reduced their arrears from 0.98% to 0.89%, the company still struggled with credit loss through the quarter. The Company had to write off an extra 8% of gross loan write-offs, which they claimed to be still well within risk appetite and represents 1.3% of the average Q1FY23 loan book. Given the gaping hole that debt write-offs are leaving in the BNPL sector, the extra write-offs needs to be watched carefully considering that the Company had had an increase in loan receivables from $374.6m in FY21 to 764.8m in FY22.

Wisr is still projecting growth plans to set a path to profitability within 12 months, whilst maintaining consecutive streaks of growth. However, a high growth rate is not extraordinary, especially when the company is in a period of investment.