Humm - the sound of progress

Hummgroup has had a record 2021 financial year in the capital markets with more than A$1 billion (US$730.8 million) in issuance. Bianca Spata, group treasurer, and Dennis Koh, head of group funding, at humm in Sydney, discuss opportunities for further growth including the role of sustainability-labelled issuance.

What led to the issuance record and how will humm maintain and potentially expand on this volume?

SPATA Two factors supported our issuance over the past 12 months. The first is that market conditions have been really conducive. With the AOFM [Australian Office of Financial Management]’s early backing, issuance returned to market earlier than expected. Collateral-pool performance across the board, the absence of banks from the market and the hunt for yield from investors have also supported deal flow and strong pricing outcomes for issuers.

The second point is growth across our buy-now, pay-later (BNPL) and SME books. This allowed us to bring larger transactions to market, and more frequently. Going forward, we feel positive about market conditions and support for asset-backed securities (ABS). We have every intention of building on the traction established in the Australian and New Zealand markets over the past year.

KOH New investors continue to show strong interest in our ABS transactions and, while they may not always choose to invest the first time, a key focus for us is continuing to build these relationships. Investor education and engagement is important, especially for offshore investors that may not always be familiar with our market.

Humm has also brought its Australian commercial lending book back to market after a six-year absence. What were the challenges and what does this signify for the business?

SPATA This was a huge achievement and it was something we had been planning for some time. We faced a couple of challenges. Our commercial business had changed enormously since we were last in the market so we had to spend a lot of time walking investors and rating agencies through this journey.

The second challenge was addressing the continued uncertainty in the SME sector as a result of the pandemic. We had to be sure the structure of the ABS transaction was investor-friendly and that buyers would feel adequately protected should the book be affected going forward.

Looking forward, we are really excited by the opportunities in this space and our book has continued to grow and perform strongly over 2021. We are focused on becoming a frequent issuer in this asset class and we expect to bring another transaction to market this calendar year.

In February, humm launched its BNPL product, humm pro. What differentiates this from other BNPL products?

KOH This product gives SMEs instant control over what they borrow, when they repay and what they are willing to pay for their lending. It also has various key innovations compared with other products aimed at this sector.

For example, our product offers a fixed, upfront, percentage-based fee rather than compounding interest. It can also be used anywhere MasterCard is accepted – not just at selected suppliers or merchants – and it has flexible repayment options the customer can decide on after purchase, depending on cash-flow needs.

From a funding perspective, the plan is to fund this in a private setting first while we establish a track record but later to include it in our capital-market issuance.

Humm has taken a leadership position in green ABS. What is next for this part of the funding story?

SPATA Green-energy lending is a key focus of ours and we have now financed more than A$2.2 billion in residential solar panels in Australia. Solar and battery adoption in Australia is expected to more than double by 2025 and we think there is enormous growth opportunity in the sector. With this in mind, we recently announced plans to enter the virtual power-plant market, which is predicted to become the key vehicle for solar and battery distribution over the medium term.

Health and wellbeing is also a focus across our BNPL business. We saw an untapped opportunity several years ago to provide Australians with an interestfree financing option to make essential services in this space more affordable. This opportunity was nicely aligned with our differentiation as the bigger BNPL provider, which enables us to support BNPL transactions of up to A$30,000.

Our focus on green energy and support for social wellbeing means green, social and sustainability-linked bonds could all be on the agenda in the future. We are keen to do our part in continuing to see this market build out and to support growth across this sector in Australia.