LFG - Liberty Financial Group

[Dona Ferentes]

They finally got this away, today .... closed at $7.00 so a healthy stag for some


Liberty Financial Group - 15 December 2020 12:30PM AEDT ##

Listing date	15 December 2020 12:30PM AEDT ##
Company contact details	https://www.liberty.com.au/ Ph: +61 3 8635 8888
Principal Activities	Specialty finance
GICS industry group	TBA
Issue Price	$6.00
Issue Type	Stapled securities
Security code	LFG
Capital to be Raised	$320,700,000
Expected offer close date	11 December 2020
Underwriter	Credit Suisse (Australia) Limited (Underwriter and Lead Manager)

 

[Dona Ferentes]

Chief executive CEO James Boyle said the economic recovery and improving housing markets will drive growth in 2021.

“We are seeing a resurgence in demand for housing – it’s like the traditional spring season was delayed and is making its way to market now,” he said.

About one in 10 Liberty customers are classified as non-prime, or “custom”, meaning they would not meet the lending criteria of major banks.

"We have always been there to help customers that mainstream [banks] don’t do as well at,” Mr Boyle said. “There haven’t been as many of those customers around during the [strong economic] times. Perhaps there will be more going forward. We think we are well placed to help customers that have been hit with one-time impacts from the pandemic – as well as mainstream customers.”

“We are feeling pretty optimistic about 2021,” Mr Boyle said.
“

"We think the government has done an exceptionally good job at managing not only the pandemic but the economic fallout from the pandemic, and what we are seeing from our customer base is pretty good signs that our customers are feeling better about the path forward. “While we are cautious in our optimism, and appreciate the support the government has put in place will have to be wound back over the course of next year, it does feel like because we have got the virus under control for now, the economy is recovering and we are seeing the benefit of that in terms of existing customers and demand from new customers."

 

[Dona Ferentes]

“We are feeling pretty optimistic about 2021,” Mr Boyle said.

James Marlay (Livewire Markets): Liberty Financial Group was floated back in 2020, and the share price has about halved since then. It has a trailing yield of about 13% or 12.5%. Buy, hold or a sell?

Andrew Hamilton <Antares> (SELL): .We're definitely a sell on Liberty. And the reason is this - they're not what's called an authorised deposit-taking institution like a bank. So they can't take deposits from people. That means their funding is not as cheap as a bank. And when interest rates go up, as we all know they have been, with the RBA raising rates, they can't pass through their higher cost of funding as quickly on their asset side and the yield on their assets to their customers isn't going up as quickly. So they're getting effectively a net interest margin crunch. So whilst the banks can potentially benefit in this phase of the cycle, we think non-bank lenders like Liberty have the opposite, they have downside

James Marlay: Okay, it's a sell from Andrew. Pete, buy, hold or sell for you?

Peter Gardner <Plato> (SELL): Sell from us as well, unfortunately. It's worth noting on that NIM, that Liberty Financial's NIM dropped by 10 basis points by the end of the last six months, more than it had during the entirety of the last six months. And this is where the banks' NIMS have been generally going up, albeit trailing off towards the end, and so you haven't seen that kind of flow through. So I agree with everything Andrew said.

 

[Dona Ferentes]

Non-bank lender Liberty says higher interest rates have depressed profits after its interest margin contracted and provisions for loan losses rose.

Liberty reported an underlying interim net profit of $69.6 million, down 34 per cent on the previous first half, as expenses also rose and fee income fell.

Funding costs were higher and Liberty said more customers were “seeking repayment variations” to deal with higher interest rates, although this had reduced over the half as official rates stabilised.

Liberty originated a record level of new loans during the half, but impaired loans rose by 51 per cent to $204 million.

Wage inflation and higher technology spend lifted expenses by $6 million on the previous half.

The net interest margin of 2.54 per cent contracted by 34 basis points, but remains higher than the major banks.

Looking forward, Liberty said funding costs should return to long term averages while “economic indicators support improving credit demand."
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how have they been tracking .. growth , margins

since listing