The Australian purchased debt ledger market is in “run-off” thanks to the ongoing impact of COVID stimulus measures, substantial loan prepayment, subdued personal lending and the continuation of some forbearance measures introduced by lenders at the onset of the pandemic.
Debt buyer Credit Corp detailed this situation in its 2021/22 financial report, released yesterday, and said it expects these conditions to continue.
Credit Corp chief executive Thomas Beregi said: “We started 2022 with the expectation of a recovery in purchased debt ledger supply over the course of the year. While all major Australian and New Zealand credit issuers who were selling immediately prior to COVID have returned to sale, as the year got underway volumes failed to show any recovery.
“Key lead indicators, including aggregate unsecured credit statistics, suggested that any recovery might be deferred for an extended period.”
The company said it “enters 2022/23 with no sign of any re-growth in debt ledger sales volumes in Australia and New Zealand”.
It purchased A$97 million of debt in Australia and New Zealand in 2021/22, which was up on the $67 million it purchased in 2020/21 but well below the levels of previous years. In 2018/19 it purchased $143 million of debt.
The company was able to offset the fall in “regular direct-from-issuer investment” by acquiring business from Radio Rentals and Collection House and increasing its purchased debt ledger investment in the United States.
It acquired Collection House’s Australian debt ledger book in December 2020 and its New Zealand PDL book in February. Last December, it bought Thorn Group’s Radio Rentals division.
Beregi said the company was on the lookout for similar opportunistic investments.
US debt buying increased from A$79 million in 2020/21 to $223 million in the year to June. The company had some difficulty handling this growth, reporting that “collections did not reach levels commensurate with the amount of investment”.
The problem was that it was not able to hire enough staff to work on collections. It has redeployed a Philippines-based team to the US business to take up the slack.
Beregi said the US debt buying pipeline for the current financial year is strong, with $180 million contracted already.
The consumer loan portfolio, which includes Wallet Wizard personal loans, grew from $193 million in 2020/21 to $267 million in the year to June.
The company made a net profit of $100.7 million – an increase of 14.3 per cent over the previous year. On a cash basis, profit increased 9 per cent to $96.2 million. Return on equity was 17 per cent.
Revenue was up 10 per cent to $411.2 million. The value of income generating assets grew 39 per cent to $835.7 million.
The Australian PDL business accounted for $230 million of revenue, the US PDL business $87.3 million and the consumer lending business $93.7 million.
The company has net debt of $99 million and undrawn funding lines of $212 million. It has a $100 million consumer ending warehouse, which it is in the process of extending.