Basically you are right, for CCP, the Covid-19 substantial negatives were absorbed in H2FY20, and if this was an overreaction, we will see recovery of that in FY21 and FY22. However it manifests itself in the accounting, for PDLs it will mean a lower ratio of effective PDL amortisation to Collections. That applies to PDLs already bought as at 1 July 2020.
For forward-flow agreements, most have been renegotiated at a cheaper price, so like what happened immediately after the GFC, if things transpire to be better than expected, these will “over earn”. CCP may let the price rise in Australasia by later bidding what it thinks is a fair price for PDLs, and thus win kudos from the sellers, and make it less attractive for new entrants.
For the two banks that did not agree to renegotiate forward-flow agreements, if things turn out to be better than expected, then the provision taken up in FY20 would be partly reversed. This is likely to be overtly shown in the accounts as a provision reversal.
Whatever way you look at it, it seems to me that things may turn out well.
I have one negative gnawing at the back of my mind, and that is that CCP has substantially bought and collected on charged-off credit card debt. This is expected to grow in the medium term, and that is good for CCP. However, new BNPL facilities are eating into the credit card space, so in the long term CCP would have to adapt to a new source of PDLs, and that would not be as easy to negotiate to buy, and later to collect on, as credit card charge-offs are. This is a topic for another day, but I am sure CCP is aware of the issues, and gearing up to handle them.
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