Debt buyer Credit Corp expects to report a net profit of A$10-15 million for the year to June – well down on last year’s result. The big drop is a result of the impairment of its purchased debt ledger and additional provisioning arising from the impact of COVID-19.
Credit Corp released an “unaudited results update” yesterday, saying that since March its customers have been less prepared to agree to and maintain repayment plans.
Impairment of the purchased debt ledger has reduced its carrying value by 13.5 per cent. Loan loss provisions are expected to increase from 19 per cent of the gross loan book to 24 per cent.
“This initially produced a sharp decline in collections and rising loan book arrears,” the company said.
More recently, an increased willingness to make one-off repayments has brought purchased debt ledger collections for May and June back to pre-COVID levels.
“Credit Corp expects persistently elevated levels of unemployment, the impact of which will be severe for the company’s credit-impaired customers, who are exposed to the risk of unemployment for a prolonged period. As temporary support is reduced, PDL collections will fall while loan book arrears will rise,” it said.
The company said it was renegotiating ongoing debt buying arrangements to achieve more sustainable pricing.
In its own lending business, it has suspended auto and small business lending and it has halved approval rates for its core product, Wallet Wizard.
In 2018/19 the company made a net profit of $70.3 million. It said the net profit for 2019/20 would be $75-80 million before impairments and provisions.
The company said it has no net debt and undrawn funding lines of $375 million.
“Recent discussions with major clients in all jurisdictions demonstrate an increased interest in debt sale,” it said.