Been going back through the financials and noticed that Consumer Lending provision has increased from 24% to 27% of the total loan book (and if I look back at FY2020 results, they increased this provision from ~18.7% to ~24% which signals that they in fact increased the provision rather than stabilise or reduce it).
I know that the lending book was impacted as a result of the runoff (i.e. people were more cautious about taking loans hence the gross value of the loan book fell from ~230m in Dec19 to ~184m in Jun21), but are they trying to grow this too aggressively and taking in more credit risk than they have traditionally done (they flagged entry into the auto-loans and other pilot projects.....these are the areas where I think they increased the provision in FY2020)?
Consumer Lending EBITDA relative to the Gross value of the loan book still looks to be ~13%, and if they are writing off ~27% of the loan immediately (as they suggest in their presentation - "up-front loss provisioning"), perhaps it's slightly better than this (although they claim to monitor this frequently), but it still seems to be below their ROE target.
Perhaps jumping at shadows, but would appreciate anyone who has looked into this part of the business to comment/advise
CCP Price at posting:
$30.01 Sentiment: Hold Disclosure: Held
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