Despite revenue headwinds, Latitude’s cash profit of $232 million rose 4% on lower costs and higher lending volumes, particularly in personal lending, where volumes increased by 42% by taking market share from the big banks.
Despite the focus on rising household debt as a share of disposable income, Fahour said debt as a share of asset value was at historic lows.
This measure, which takes into account the rise in property prices, compares liabilities and assets, and reflects “the enormous capacity of households and businesses to absorb credit to finance growth, investments and purchases” , did he declare.
Tackle the Majors
In Mr Fahour’s three years at the helm of Latitude, it has gone from fifth-largest personal loan provider to second-largest, overtaking Westpac, NAB and ANZ, and beaten only by Commonwealth Bank. “We’re moving forward aggressively,” the former NAB executive said.
This follows the development of rapid loan approval systems and comes with Latitude’s purchase of Humm, a deal that is expected to yield $100 million in additional annual pre-tax profits and will help Latitude sell more loans. personal.
Investors seem optimistic about the deal and Mr Fahour’s strategy to pitch it to big banks.
“The company has talked about the opportunities it sees in areas where the big four banks just aren’t focused and/or can’t move fast enough and it seems to be paying off,” said Luke Cummings, Chief Investment Officer. at Harvest. Track asset management.
Harvest Lane is a shareholder of Humm and is therefore considering Latitude before potentially receiving its shares in consideration for the acquisition.
“We think Ahmed Fahour is a very good operator and the company seems to have a technological advantage over many of its competitors,” he said.
“The value of the synergies alone apparently makes Humm’s bolt-on BNPL operations appealing and the focus on funding larger ‘lifestyle’ purchases seems reasonable given consumers’ propensity to upgrade everything. , from their phone to their home, and the constant desire to consume now and pay later.
Latitude said return on equity was 17% and it had $2.3 billion of headroom in warehouse financing facilities.
It will pay a final dividend of 7.85 cents per share, bringing the full-year payout to 15.7 cents, representing a dividend yield of 7.7%.
Monday afternoon is also an important event for Latitude. Forty-two percent of the company’s issued capital, or about 430 million shares – which was 65 percent at the time of the IPO and was locked up with its shareholders KKR, Deutsche Bank and Varde – will come out of escrow. .
Mr. Fahour said he had received undertakings that the large number of shares would not be dumped in the market.
“They have told me in the strongest possible terms that they are long-term owners, that they like the business, that they have invested heavily in it and that they will do nothing to harm the course of the stock,” he told analysts on the earnings call.
“Nothing indicates to me that in the short term they intend to sell the shares at this price on the market.”
Plans are expected to be made to sell shares through an institutional bookbuild over the next six months.