Plenti delivers another record quarter, set to achieve a $1 billion loan book

Plenti’s strong performances this quarter and a $1 billion run rate in June is a step towards it being the “best lender in Australia”.

After solid results in the last two financial years, Plenti Group (ASX:PLT) has now taken its strong form into FY22, delivering another record quarter.

The company reported a 260% increase on its quarterly loan originations, which hit a record $216.4 million.

Its monthly originations also hit a record $83.4 million in June, and represent a $1 billion annual run-rate.

Overall, Plenti’s loan portfolio has now reached $757 million, 96% above the previous corresponding period, and 23% above the prior quarter.

‘Digital disruptor’ in automotive lending

During the last quarter, Plenti has managed to deliver consistent growth across each of its three main verticals – automotive lending, renewable energy, and personal loans.

But the automotive lending segment has been its best performer once again, achieving an 345% growth on pcp for a loan book of around $115 million.

What’s making it even more impressive is that it has only captured a tiny fraction of the market.

“The automotive lending market is not just a large market, but we’ve also only got 2% market share in it,” says Daniel Foggo, founder and CEO of Plenti, who spoke to Stockhead earlier today.

“There’s really a long runway in terms of growing our presence there.”

According to Foggo, the main reason for Plenti’s success in automotive lending is its significant investments in automotive-specific technology and product development as well as sales and distribution capabilities.

This technology has enabled the company to better serve its loan brokers and consumers, particularly in terms of the speed at which it can turn around a loan application.

Foggo points to the certainty around underwriting and the user experience the technology brings as the major reason for the traction in bringing new users to the platform.

“Plenti is the leading digital disruptor in this segment,” says Foggo, adding that its technology can make a credit decision within an hour.

This helps loan brokers with a fast turnaround time, especially as those brokers have to compete not only with traditional bank lenders, but also with car dealerships that often offer car buyers with financing.

Plenti’s growth in this segment was also underpinned by the introduction of a commercial automotive loan program to selected partners which began in mid-May, with the ramp up in these originations consistent with the company’s expectation.

Personal loans and renewable energy lending

Within the personal loans segment, Plenti delivered a 298% growth on pcp in its loan originations to $81.4 million for the quarter.

Foggo says its technology is also able to turn a personal loan application around within just four hours.

“We run up to 80 different rules when we’re analysing a personal loan application, but make it easy for the customer by obtaining a lot of the information from the Credit Bureau,” Foggo explained.

“We’re using really smart technology to make it faster and easier to make a credit decision, which means we can offer faster and better rates than other lenders.”

But will this speed compromise the credit quality of the books?

Not at all, according to Foggo who says Plenti has even improved its new borrower’s average credit score during the quarter to 835, from the 821 recorded at the end of the previous quarter.

And that stacks up well too against the Big Four banks, which only have an average borrower’s credit score of 830, according to Foggo.

Across its loan books, annualised net losses for the quarter were below 75 basis points, reflecting the strong attributes of the portfolio and underlying borrower characteristics.

In the renewable energy lending space meanwhile, Plenti delivered a 47% increase in loan originations on pcp, or 36% growth from the last quarter, to $20.5 million.

This result is impressive considering the company only started lending into the renewable energy space in March this year, after launching its buy-now-pay-later (BNPL) finance option for the installation of residential solar panels and batteries.

The BNPL option allows home-owners to repay their installations over 72 interest-free monthly payments, and has been driven by the continued adoption by its referral partners.

Driving costs down

Plenti has increased the capacity of its secured automotive loan warehouse facility to $450 million from $350 million.

This increase was coupled with a material reduction in the equity that Plenti is required to contribute to the facility, in recognition of the credit performance and credit quality of the underlying loans.

This means the company will have additional cash in the bank to support further growth.

Foggo also says that being a non-bank player has allowed the company to stay nimble as less capital is being required for its operations.

“If we were a bank, we’d need 13 or 14 cents in the dollar to be held as regulatory capital, and we know that equity is not cheap, so this gives us a real advantage over the traditional bank lenders.”

Looking ahead

With a loan book set to reach $1 billion in March 2022, and a cost income ratio of below 35% over the medium term, Plenti believes that it’s well positioned to achieve its financial guidance mapped out in May.

For the coming quarter, Foggo says that Plenti will stay focused on doing what it’s been doing, which he says will sustain the growth metrics for quite some time.

“If we combine the origination growth with the cheaper funding costs, and also leveraging our technology, we clearly are getting close to achieving our financial ambitions.”

Foggo reiterated that Plenti’s ambition is to become “the best lender in Australia”, and says that it’s really just getting started given the large market share it could potentially capture.

Although the Plenti stock price has performed well this year, rising by 25%, Foggo says that he doesn’t monitor it, preferring instead to focus on driving operational performance and see it as a long-term business.

“Plenti is leading the industry in terms of growth, and we are a key beneficiary in terms of the banks’ market share declining in these lending verticals,” Foggo said.

“I believe our stock price valuation is low, considering our recent strong performance.”

This article was developed in collaboration with Plenti, a Stockhead advertiser at the time of publishing.

This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.