Consumer lender Plenti Group has countered significantly higher funding costs in recent months by raising loan rates, managing to arrest much of the decline in its margin while continuing to grow its book at a more modest pace.
In its September half financial results released yesterday, Plenti reported an average funding cost for loans in the portfolio of 3.5 per cent during the half – but for loans originated in October the funding cost was 6.3 per cent.
Plenti started putting up rates in June. The net interest margin for the September half was 5.3 per cent – down from 6 per cent in the March half.
Originations of A$558 million were up 18 per cent on the previous corresponding period but down from originations of $629.5 million in the March half. The loan book grew 69 per cent year-on-year to $1.5 billion.
Revenue was up 71 per cent to $63.7 million, while expenses were up 44.6 per cent to $60 million.
Plenti made a pre-tax loss of $4.9 million but an income tax benefit of $7.6 million meant it reported a net profit of $2.3 million.
On a cash basis, after adjusting for the movement in its provision for expected credit loss and other non-cash items, the company declared a profit of $1.4 million.
Automotive lending is Plenti’s biggest business segment, with $898 million of loans. Auto loan originations fell from $381.6 million in the March half to $302 million in the latest half.
Originations in the other segments continued to grow. Personal loan originations grew from $195.9 million in the March half to $203.2 million in the latest half and the book grew to $484 million.
Renewable energy loan originations grew from $51.9 million to $52.6 million half-on-half and the book grew to $164.8 million.
Plenti Group chief executive Daniel Foggo said demand for personal loans was increasing. “People are out spending money and we think the demand will continue.”
In the renewables segment higher energy prices are prompting people to buy solar panels and household batteries.
Foggo said credit quality was good, with 90-day arrears at 28 basis points. Receivables written off as uncollectable fell from $7.4 million in the March half to $6.4 million in the September half.
Next week, Plenti will launch a revamped Plenti Lending Platform, a managed investment scheme that gives retail investors exposure to its loan pool. The platform is being simplified, offering three investment options instead of five, and restructured to allow a wider range of loan types to be included in the pool.
The platform is a throw-back to Plenti’s early days in the market (it launched as RateSetter in 2014), when it was a peer-to-peer lender. It has proved to be a relatively low-cost source of funds this year and the company has put renewed focus on it.