How are lending stocks holding up as interest rates rise as fast as they have?
Nick Sundich, May 3, 2023
Just how would Lending stocks would perform amidst higher interest rates? Theoretically they would do better, but that is not guaranteed when interest rates rise as fast as they have. This is not just because of uncertainty surrounding consumers’ ability to pay, but even the company’s ability to meet repayments of their own financing facilities.
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2 Lending stocks provide updates today
Personal lender MoneyMe (ASX:MME) unveiled 3Q23 results. Overall it is better off than 12 months ago, but some metrics went backwards compared to the previous quarter. Gross revenues amounted to $61m, contract revenues were $375m, the NIM was 13% and customer receivables were $1.18bn. These were up 75%, 9% and 2% from 12 months ago, but all down ~5% quarter on quarter. Its NIM was 13%, up from 11% 12 months ago but down from 14% just 3 months ago. Its undrawn funding was up 154% thanks to its refinancing just a couple of months ago, but it only had $14m in unrestricted cash.
Turning now to Humm (ASX:HUM), which provides commercial finance as well as consumer finance. Group volume was $965.2m, up 11% from 12 months ago. But commercial and consumer lending could not have been more different. Its commercial arm grew 39% to $382.2m while consumer finance was down 2% to $583.0m.
What does this mean?
Just as is the case with big banks, lending stocks are not as well off from rising rates as you may think. Demand for new loans and net interest margins are down. So lending stocks aren’t necessarily the place to be right now.
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