In their penultimate financial report, the directors of Volt Bank have highlighted the company’s exposure to “onerous” technology contracts that are expected to generate additional costs in the current financial year.
Volt Bank’s bottom line loss soared to A$84.3 million in the 12 months to the end of March, according to annual financial statements lodged last week with regulators.
The operating performance was markedly worse than the 2021 net loss of $38 million.
Volt surrendered its banking licence last month after it failed to complete a $200 million capital raising earlier this year.
The latest annual accounts, which were finalised in early August by the bank’s board on a non-going concern basis, show the company stood little prospect of survival without a large injection of capital support.
In the 2022 financial year, Volt suffered an 82 per cent slide in net operating income to only $1.5 million.
The revenue decline was mostly due to a sharp dip in non-interest income, which fell to $1.8 million compared to $8.5 million in 2021.
Volt almost broke even managing its deposits and lending books after recording a loss of only $315,000 from interest-related activities.
However the biggest contributors to the bottom line loss were soaring operating expenses and asset writedowns, that when tallied together ballooned by 78 per cent to more than $82 million in the year ending in March.
Information technology costs incurred by the company more than doubled to $23.4 million.
The existence of what the board described as “onerous contracts” forced the company to book an $8.2 million provision to cover residual technology costs expected to flow from the decision to cease operating as bank.
“The Group have contracts for services and subscription licenses which will be terminated, resulting in unavoidable costs of meeting the obligations under these contracts which will exceed the economic benefits of the contract,” the board states in notes to the accounts.
“A provision has been established to reflect the net cost of exiting from these onerous contracts, which is the lower of the cost of fulfilling them and any compensation or penalties arising from failure to fulfil them.”
Volt’s board, which is chaired by former HSBC Australia chairman Graham Bradley, has written down the value of technology assets that the company is currently trying to sell.
Volt acquired the mortgage broking platform of the Australian Mortgage Company for $13.46 million in July 2021.
Goodwill on that transaction to value of $9.2 million has been written down to zero.
Despite the heavy writedown and no evidence of any buyer the board said it would continue its effort to sell the mortgage platform.
“The write down of goodwill and identifiable intangibles are non-cash,” the directors said in the report.
“Despite writing down the technology assets on the basis that the Group have no observable evidence of binding offers, the Group will continue to pursue opportunities to sell these assets.”
The absence of any buyer for the company’s technology indicates that investors who collectively sunk more than $198 million into the business are not likely to receive much in the way of a capital return.
According to the latest balance sheet, Volt has a net asset surplus of only $9.2 million.
Volt’s share register included ASX-listed mortgage aggregator AFG and collapsed debt collector, Collection House.