Collection House, Wallet Wizard owner Credit Corp shares buoyant on loan book uplift

Collection House, Wallet Wizard owner Credit Corp shares buoyant on loan book uplift

Shares in Credit Corp (ASX: CCP), the owner of Wallet Wizard, Collection House and more, are on the up in early trade today after the company announced its loan book had grown by 32 per cent in the December half.

Though the group reported a decline in net profit after tax by 30 per cent in 1H23, shareholders appear to be pleased with the consumer loan book expanding to $331 million.

The dip in NPAT was attributed to Credit Corp’s market expenses from ‘rapid’ loan book growth, as well as costs arising from increased US resourcing and run-off in the core ANZ debt buying segment.

CCP says it is on track for record full year consumer lending segment earnings - expected to recover strongly over the second half of the fiscal year.

“Loan book growth will moderate over the second half, while the record starting book will drive increased interest revenue,” CCP said.

“US collections will improve as elevated resourcing is converted into collections. High project costs incurred in the first half will not recur over the balance of the year.”

The company added that strong consumer demand produced record gross lending of $201 million during the half, and that arrears and losses remained within pro-forma.

Credit Corp CEO Thomas Beregi said that loan book growth had been achieved while maintaining credit standards and rationing the volume of longer-duration auto loans.

“Wallet Wizard credit settings remain conservative and short durations coupled with relatively small loan sizes will contain risk should economic conditions deteriorate,” Beregi said.

In terms of the company’s US arm, CCP said strong purchased debt ledger (PDL) investment reflected growth in purchases under ongoing buying arrangements, as market sale volumes increased towards pre-pandemic levels.

As a result of this increased level of investment, the company’s US resourcing expanded ‘significantly’ during the half including growth across all three of its sites in the country and offshore resourcing from the Philippines and Australia.

While US resourcing was yet to produce a commensurate increase in collections, Beregi said it placed Credit Corp in a strong position for further growth as PDL supply conditions improved.

“US charge-off volumes are growing and increased resourcing will enable Credit Corp to service recent and future purchases, growing collections and earnings over the medium-term,” he said.

During the half CCP acquired embattled debt collector Collection House for $11 million, plucking it out of administration after the firm struggled for two years during the COVID-19 pandemic.

In this latest update, Credit Corp said Collection House was now on track to make a positive contribution over the full year after implementing cost restructuring initiatives.

“All key clients have been retained and the expanded collection services segment presents an opportunity to enhance client relationships and improve margins through ongoing integration,” CCP said.

Shares in CCP are up 8.86 per cent to $23.95 per share at 11.22am AEDT.

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