Latitude expects further growth as Symple integration continues

For Latitude Financial Services, growth in Australia and New Zealand will be driven by the integration of Symple Loans and continued innovation in its credit products, according to Andrew Robinson, the lender’s Melbourne-based head of funding. The issuer says the Symple acquisition could also lead to future securitisation of personal loans in New Zealand – which would be a first for the company.

What has growth in Latitude Financial Services’s lending portfolio been like in Australia and New Zealand? In particular, how has higher cost of living and inflation affected loan and credit card books, including arrears and defaults?

Despite the challenging environment, the first half of 2022 saw strong volume growth: our personal loans book was up 16 per cent on the second half of 2022 and our 28° credit card product went up 23 per cent. However, continued elevated prepayment rates delivered flat receivables growth overall.

Looking ahead, we expect prepayment rates to normalise and we believe rising interest rates are a potential catalyst for this.

Our Pay and Money books continued to perform well. We are yet to see any material increase in arrears or defaults and our net charge-offs remain historically low, at 2.4 per cent of average gross receivables for the first half of 2022.

The buy-now, pay-later [BNPL] space, once the darling of the personal finance sector, has softened this year. Where does Latitude expect to drive growth in its business and will further acquisitions play a role?

BNPL represents less than 1 per cent of Latitude’s receivables and we provide it as part of a full suite of payment options rather than viewing it as a driver of core growth.

We believe there is good growth potential in continuing to innovate and enhance our traditional Money and Pay products. We expect the ongoing integration of the Symple business to drive increased volume as we bring variable rate loan products to market, offer new loan features and improve customer experience.

In our Pay business, we expect rising interest rates to increase the attraction of our interest-free sales finance products, while the work we have done on in-store unassisted applications is proving very popular with customers and merchants. We have experienced a strong rebound in the use of our travel friendly 28° credit card this year and we expect growth to continue alongside the surge in travel and holidays.

With the announced divestment of our insurance business, we are well positioned to explore further opportunities that may emerge in the consolidation of the consumer finance industry. But, as seen by our approach to the hummgroup transaction, any acquisition needs to be the right fit at the right price.

Latitude has not issued a credit card securitisation transaction in Australian dollars since 2020. Does it expect to resume issuance from this programme in the next year? Should the market expect increased size or a change in duration to suit investor needs?

With the recent redemption of Series 2017-2 under our Australian Master Trust, we have receivables available to recycle into a new transaction. We seek to balance our public and private warehouse funding, and there is potential for us to do a trade – we will see how the market evolves.

The great thing about credit card receivables and our master trust structures is that we can create maturity profiles to match investor demand with our funding requirements. The instruments we issue have soft-bullet maturities and are issued under non-amortising structures. This gives investors certainty in size and duration of investment, backed by our track record of redeeming transactions on their expected redemption date.

Latitude has only ever printed credit card-backed ABS in New Zealand. Does it expect to offer a personal loan securitisation in New Zealand dollars in the foreseeable future?

Founded on the principle of “others before self”, La Trobe Financial incorporates ESG principles into all facets of our business, from our commitment to reducing our impact on climate change by going carbon-neutral in 2021 to providing borrowers who have been excluded from mainstream lenders with access to a mortgage.

We aim to establish an ESG mandate within our credit fund to allow our retail investors to invest in ESG-linked mortgages and are working toward enabling our RMBS investors to invest in bonds backed by ESG-linked mortgages. Watch this space.

What is the outlook for the business into 2023?

The next evolution for our New Zealand personal loans portfolio is to move it onto the Symple origination platform, to unlock the growth potential already described. We expect this process will be completed by the end of the year.

Once this is done, the New Zealand portfolio will be well placed to consider bringing a trade to market.