Non-bank lender humm Group is producing a turnaround featuring rapid growth in receivables and the rollout of a co-funding model that may further propel its now dominant commercial finance business.
One year after the appointment of finance industry veteran Stuart Grimshaw as CEO, humm’s FY2024 results suggest humm’s torrid years are well behind them.
The humm division now known as flexicommercial was a minor component of the business only two years ago. Now flexicommercial represents the bulk of the balance sheet: $3.0 billion out of $4.9 billion in receivables, and commercial’s book doubled in size over the last year.
Repeat business from SME customers financing tools of trade and “an increasing focus on agriculture, medical and other sectors” is driving growth.
humm has ceased its direct to customer model and thrown its lot in with the booming broker channel.
Commercial’s funding mix is also changing and may underpin growth.
Beginning this week, humm has partnered with MA Financial in a deal in which MA Financial will acquire up to $1 billion worth of its commercial asset finance loans via the firm’s private credit managed funds in a forward flow arrangement.
flexicommercial will continue to originate, credit assess, service and collect loans.
humm will receive origination fees, servicing fees and an excess spread.
There are “no credit losses for humm” under this model.
The average loan via flexicommercial is $130,000 with 13,350 deals settled last year.
Humm says 80 per cent of loans are approved on the same day and once approved, 100 per cent of loans are settled that day.
While the entire humm book was subject to hard-headed repricing during the year, humm saw its net interest margin in commercial sliced to 3.5 per cent from 4.1 per cent, though the NIM stabilised over the second half.
A doubling in the bad debt charge in this division resulted in a small fall in net profit for commercial to $31.6 million over the year to June 2024, from $34.2 million in 2023.
Earnings from consumer cards, formerly the core of humm, were stable around $8.2 million.
At the group level net profit lifted to $7.1 million from $2.9 million.
humm prefers to analyse its performance on the basis of ‘normalised cash profit’ . Over the full year this cash profit fell 20 per cent to $60.6 million from $75 million.