Liberty Financial were cautious in their late November prospectus, and at any rate have surpassed key metrics for the December 2020 half year, the non-bank funder’s first report as a listed company.
In a marker of the flexibility at Liberty, at least for now, the lender reported a net interest margin over the first half of 3.07 per cent, up from 2.50 per cent over the first half of the year prior - though the first half NIM is bang on forecast and will decline over the full year.
Average asset growth was four per cent over the half, while new business stepped up to A$2 billion, around $250 million more than the average of the two prior halves, which CEO James Boyle put down to growth in origination networks.
With volume skipping along and NIM best-in-class, Liberty Financial headlined its debut ASX financials with a 20 per cent upgrade to its recent IPO prospectus guidance; now projected as an underlying FY21 NPATA “expected to be in excess of $200 million".
NPATA, an acronym and debatable alternative measure that may linger in Liberty’s reporting “refers to net profit after tax excluding amortisation pertaining to intangibles on a tax effected basis,” or so the prospectus explains.
Management, Liberty explain, “believes NPATA is an important measure of the underlying cash earnings of the business”.
ROA, or return on assets, “is the ultimate performance metric” Peter Riedel, the CFO, said yesterday.
Underlying ROA for the half was 2.0 per cent, up 70 bps from a year ago.
Having surprised in the prospectus with the suggestion its once-core home loan funding may be off the boil, and decline, in the end Liberty eked out a one per cent lift in the mortgage book.
“As expected, stronger growth was achieved in smaller Secured and Financial Services segments.”
At Liberty, “Financial Services” spans SME lending and personal loans. In the secured finance segment, the firm is playing to the staycation trend, with caravans, apparently, revving up as an asset class.
And burying the lede maybe, Liberty are clarifying their strategic to path toward a banking licence, or a modest, less capital intensive version.
Liberty disclosed they made a “new strategic investment” of $2 million, initially in Avenue, the trading name of the fintech Go Blank Ltd, an outfit with high-minded ideas around disrupting business banking and stubbornly optimistic over their prospects of convincing APRA and the Treasurer to rediscover reasons to reboot neobank licensing.
If Avenue crawl their way through the fire trenches left by the summer’s blundering exit of Xinja Bank and surprising agreed merger of 86 400 with NAB, Liberty say they have made a “further commitment of up to $32 million as Avenue obtains ADI status”.
This is small change, but high risk, given LFG’s $1 billion in net assets.
Banking Day is doubtful, leaving Liberty Financial – if they seriously hold any aspirations to operate in the longer term as a bank – to submit the entire enterprise to APRA scrutiny, and to an extent this is the case already for the group’s insurance arm.