HMY - Harmoney Corp Limited

[nztx]

I dont necessarily disagree with any of that.

But for context its worth noting the business IPO’d waaaay to early and is/was on the verge of scaling against its relatively fixed cost base. It has a net lending margin (ie after interest expense and incurred credit losses) of 9.7% which is truely exceptional - and at its run rate was about to scale.

I would guess HMY will respond to rising risk environment by pricing the risk up which will ultimately slow growth in NZ.

AU’s book will be bigger than NZ’s in a year and that is where all the growth is. Macro environment outlook much more benign.

But if worrying about the cycle and where one sits in it this isnt the stock for you.

I'm interested in at what point the financing cost on their Borrowings gets repriced & hiked upwards ?

Has to happen doesn't it ?

Sooner or later the RB here & in OZ are going start sucking some bath water back in as well ..

[Muse]

I'm interested in at what point the financing cost on their Borrowings gets repriced & hiked upwards ?

Has to happen doesn't it ?

Sooner or later the RB here & in OZ are going start sucking some bath water back in as well ..

we sorta went thru this already - post 468 page 47

that happens everyday but will take a bit of time to manifest in the financial results.

the NZ book has had durations of between 2 and 3 years. So some of the loans in the book today are a blended compilation of loans written anywhere from up to say 2.5 years ago and now. the old loans fall out as they run off and replaced by newly priced loans.

An application comes in and gets priced. The price depends on what the swap rate is of the day, the warehouse providers margin, and then whatever HMY's chosen margin is on top of that.

lots more detail in 468.

[Ferg]

page 47

This is page 13 for me so I might be waiting a while to get to page 47......you can change the number of posts per page under Forum Actions > General Settings > Thread Display Options > Number of posts to show per page: choices are 5, 10, 20, 30, 40 & 100. 40 works for me. I believe the default is 10.

[Muse]

This is page 13 for me so I might be waiting a while to get to page 47......you can change the number of posts per page under Forum Actions > General Settings > Thread Display Options > Number of posts to show per page: choices are 5, 10, 20, 30, 40 & 100. 40 works for me. I believe the default is 10.

ah i didnt know you could do that. still a newb.

post 468 then for the avoidance of doubt

[Rawz]

Impairment expense was 4.5% FY18, 4.1% FY19, 4.8% FY20. Then dropped to 3.9% last year, FY21.

Half year FY22 was 3.80% So safe to say FY22 will be similar to last year.

It will be interesting to see where FY23 and 24 comes in and yes it wont be a record low.. however I do think the book is relatively clean, 90day arrears have been consistently falling. I do believe HMY are cautious lenders, their initial reaction during the onset of covid was to turn the lending tap off. lots of their competitors didnt do that. Their risk committee are clearly cautions lenders.

Half of HMYs story is using their superior technology to hunt down and market to premium A grade borrowers.... the coming couple of years is going to test this story. I have said it before and ill say it again, consumer lending is a never ending conveyor belt.. and on the conveyor belt is lots of good customers wanting a holiday, or car or money to build a new deck or whatever.. HMY say they can pick these ones out..

Lots of people hear unsecured consumer lending and they get the ****s.. but just remember if it was really bad the AA rated banks wouldnt be doing it.. tell me again what my ANZ platinum visa card with a $20k limit is secured against - yes nothing, only my good name, just like HMY borrowers (btw i only have the card for the airpoints )

[Muse]

Impairment expense was 4.5% FY18, 4.1% FY19, 4.8% FY20. Then dropped to 3.9% last year, FY21.

Half year FY22 was 3.80% So safe to say FY22 will be similar to last year.

It will be interesting to see where FY23 and 24 comes in and yes it wont be a record low.. however I do think the book is relatively clean, 90day arrears have been consistently falling. I do believe HMY are cautious lenders, their initial reaction during the onset of covid was to turn the lending tap off. lots of their competitors didnt do that. Their risk committee are clearly cautions lenders.

Half of HMYs story is using their superior technology to hunt down and market to premium A grade borrowers.... the coming couple of years is going to test this story. I have said it before and ill say it again, consumer lending is a never ending conveyor belt.. and on the conveyor belt is lots of good customers wanting a holiday, or car or money to build a new deck or whatever.. HMY say they can pick these ones out..

Lots of people hear unsecured consumer lending and they get the ****s.. but just remember if it was really bad the AA rated banks wouldnt be doing it.. tell me again what my ANZ platinum visa card with a $20k limit is secured against - yes nothing, only my good name, just like HMY borrowers (btw i only have the card for the airpoints )

aye - 3.8% incurred credit losses to average proforma book. But get this rawz: on actual statutory receivables (lets ignore the irritating & temporary proforma adjustment) it is 2.18% ( 2.3% for FY21). that's crazy good for an unsecured lender. and the disestablished and off balance sheet peer to peer business had 8% credit losses (which was way up on previous half and full year periods).

That's why they should have waited longer before the IPO'd but I suppose they wanted the capital and the markets for fintech were hot - these proforma adjustments drive me and everyone else crazy. It suited them at the time (hey - what if peer to peer debt was on balance sheet what would our accounts look like then) as it adjusted for an accounting anomoloy but core lending and p2p have such vastly different economic and credit outcomes and mashing the two together in proforma figures hides the true impact of both.

thank f*** they don't facilitate peer to peer lending anymore and the book should wind up this calendar year

[Rawz]

Oh my goodness! Wow that is very pleasing to read. I have only ever looked at the proforma numbers.. yes 2.18% is incredible compared to their NLM.

very much looking forward to that peer to peer rubbish to fall off. Not long now. I suspect a lot of investors are not interested until such time.

[Muse]

Oh my goodness! Wow that is very pleasing to read. I have only ever looked at the proforma numbers.. yes 2.18% is incredible compared to their NLM.

very much looking forward to that peer to peer rubbish to fall off. Not long now. I suspect a lot of investors are not interested until such time.

statutory/warehouse net lending margins are even better than the proforma NLMs

10.9%!

1H FY22 Warehouse NIM and NLM
interest income: $31.343m
interest expense: ($6.772m)
incurred credit losses: ($4.105m)
net lending margin: $20.466m

average stat receivables: $376.603m

annualised net lending margin: 10.9%


A while ago they had this investor day preso that said if we hit $1bn average book what sort of PBT can we expect to do. That started with the assumption that NLM would be 10%, but at the time the proforma book had done something like 6 & 7% in FY20 & FY21 and I was wondering how on earth they expected to do that (only two ways, lower interest expense while maintain interest income and lower credit losses). As I dug into it I saw the warehouse business has a fundamentally different economic profile from p2p and the proforma adjustments were completely masking what was happening and particularly as the entire business would transition to warehouse. And then the asset backed securitisation (albeit only one so far) which I don't think anyone really understands how cheap it is (1.45% margin over hedged base rate) and is only showing up in 2 months of financial results so far (November and December). The proforma results which ulimately grab all the attention will be phased out and holding all else equal will shoot up significantly as the transition to warehouse is complete.

So that got my interest big time.

NLM's in the mid single digits is considered good. NLM's in the high single digits are extremely good. double digit is exceptional.

[jimdog31]

how hard would it be to tell us how big the loan book is currently? bemused

[percy]

statutory/warehouse net lending margins are even better than the proforma NLMs

10.9%!

1H FY22 Warehouse NIM and NLM
interest income: $31.343m
interest expense: ($6.772m)
incurred credit losses: ($4.105m)
net lending margin: $20.466m

average stat receivables: $376.603m

annualised net lending margin: 10.9%


A while ago they had this investor day preso that said if we hit $1bn average book what sort of PBT can we expect to do. That started with the assumption that NLM would be 10%, but at the time the proforma book had done something like 6 & 7% in FY20 & FY21 and I was wondering how on earth they expected to do that (only two ways, lower interest expense while maintain interest income and lower credit losses). As I dug into it I saw the warehouse business has a fundamentally different economic profile from p2p and the proforma adjustments were completely masking what was happening and particularly as the entire business would transition to warehouse. And then the asset backed securitisation (albeit only one so far) which I don't think anyone really understands how cheap it is (1.45% margin over hedged base rate) and is only showing up in 2 months of financial results so far (November and December). The proforma results which ulimately grab all the attention will be phased out and holding all else equal will shoot up significantly as the transition to warehouse is complete.

So that got my interest big time.

NLM's in the mid single digits is considered good. NLM's in the high single digits are extremely good. double digit is exceptional.

That NIM is incredible.Never seem one above 10.