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The non-bank lender announced a drop in originations for the quarter ended 30 September 2023 as it continues to tighten its risk settings.
Non-bank lender Prospa Group Limited (Prospa) revealed in its results for the quarter ended 30 September 2023 originations of $141.4 million, down 31 per cent on the previous corresponding period (down from $205.1 million in the first quarter of the financial year 2023) as a result of its ongoing risk appetite revision over the past 12 months.
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Additionally, the non-bank lender reported closing gross loans ending at $828.9 million for the quarter, an increase of 7.9 per cent on the same period last year (up from $768.3 million).
Prospa’s total revenue also increased, up by 16.2 per cent to $74 million from $63.7 million in Q1 FY23 with a stable portfolio yield of 34.9 per cent.
According to the non-bank lender, this was bolstered by “further improvements in the operating cost base”, with employee expenses down 15.7 per cent ($15.2 million) on the previous year.
Prospa co-founder and chief executive Greg Moshal said originations have “tempered in line” with its tightened risk appetite as the lender’s closing gross loans and revenue “remain steady despite ongoing challenges in the macro-economic environment”.
“Our focus remains on improving the overall credit performance of the loan book, and pleasingly, we are starting to see signs of improvement in early arrears, indicating that the tightening of credit risk settings is producing the desired effect,” Mr Moshal added.
The non-bank lender’s active customers grew by 13.3 per cent to 20,300, showing an increase of 2,400 customers on Q1 FY23 (17,900), with tighter credit settings resulting in lower lending sizes.
According to Prospa, it continues to manage its credit performance due to ongoing macro-economic uncertainty.
The lender stated in its update that early loss indicators were showing signs of improvement, which has indicated that its tightened credit settings are “driving improvements in credit performance, with elevated losses being isolated to the loans originated prior to H2 FY23”.
In its results for the financial year ended 30 June 2023, Prospa flagged that it will continue to work on providing profitable and sustainable lending to small businesses as it anticipates a period of ongoing economic uncertainty impacting the sector across Australia and New Zealand.
The lender has reiterated its focus on improving credit performance of its loan book while still generating profitable growth and “delivering outstanding products and services as the premier online lender to small business”.
“We are progressing on our strategic roadmap with the roll-out of new product pricing and features, including functionality to cross-sell capital products via our Business Account,” Mr Moshal continued.
“As we continue to scale the Business Account, we look forward to adding new features that provide value for customers and shareholders.”
[RELATED: Prospa anticipates uncertainty in SME sector]
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