Latitude boss Ahmed Fahour calls for more regulation as lender mulls BNPL exit

Outgoing Latitude boss Ahmed Fahour has called for swift regulatory action on BNPL as the lender mulls a complete exit from the controversial sector.

Latitude chief executive Ahmed Fahour will step down at the end of March. Picture: Ian Currie

Outgoing Latitude Financial boss Ahmed Fahour has called for swift regulatory action on buy now, pay later (BNPL) platforms as the consumer lender mulls a complete exit from the controversial sector.

Latitude on Friday confirmed it was reviewing its small presence in the BNPL space, due to the “uncertainty surrounding the future regulatory environment”.

The review follows last year’s failed $335m bid to take over Humm’s consumer finance business and amid intense scrutiny of the largely unregulated industry.

In an options paper released by the federal government in November, it pitched three alternatives for regulating BNPL, and is currently seeking feedback from stakeholders on how far its reach should go.

Former ASX-listed player Openpay collapsed earlier this month as surging interest rates, increased competition and the threat of regulation hang over the industry.

Mr Fahour, who will step down as Latitude chief executive next month, said regulation was desperately needed to prevent further pain in the industry.

And while BNPL represented only an “immaterial” part of the Latitude business - about 0.3 pre cent of receivables - the company would soon make a decision on whether to walk away completely.

“We’re reviewing ... whether we even want to keep going in that tiny space,” he said on Friday.

“We’re much more interested in the regulated business, our interest free, sales finance business - it’s a big part of our business.

“And quite frankly a little bit more regulation would be a good thing.

“We’ve always argued that it is unfathomable that you don’t do a credit check before somebody does a loan in buy now pay later.

“You have to be careful and responsible, and I don’t want to be in a business, I don’t want to have any activity where all players don’t play in the right way.

“We think it’s important that all players who do financial services do it responsibly by doing a credit check.”

Mr Fahour will step down as Latitude chief executive next month, with the company announcing his replacement, Bob Belan, on Friday.

Mr Belan joined Latitude after it bought Symple Loans in November 2021, a business he co-founded in 2018.

In the final full year under Mr Fahour’s leadership, Latitude reported a $153.5m cash NPAT in the 12 months to December, down 23 per cent from the previous year.

Lending volumes were up 8 per cent to $7.95bn but surging interest rates are putting ongoing pressure on the company’s margins.

Volumes in its Pay division were up 7 per cent to $6.25bn as credit card spending rebounded, while a surge in personal loans drove volumes in its Money division 12 per cent higher at $1.7bn.

However Mr Fahour said that for every 100 basis points increase in the cash rate, Latitude took a $40m hit to its funding costs.

Latitude will pay a second-half dividend of 4c per share, fully franked – down on the 7.85c payment in the first half.

Mr Fahour said the dividend cut would enable the company to retain more cash for potential acquisitions.

“The board and all of us see some immediate opportunities to grow organically even further in the coming period,” he said.

“Also we see a number of inorganic opportunities emerging in the second half of this year and we want to have our business, our platform and our capital ready to be deployed to take advantage of the market disruption that’s emerged.”

To cut costs, the company slashed its workforce from around 1300 at the start of 2022 to 1000.

In a note to clients, Macquarie said that while Latitude’s second half performance was broadly in line with its forecasts, margin pressures from rising funding costs remained a concern.

“With further rate rises on the horizon, we see LFS facing a challenging revenue environment given rising funding costs, potential consumer stress driven by rising rates and possible difficulty repricing sales finance contracts,” it said.

Mr Fahour said he would spend time holidaying with family before deciding on his next professional move.

“I said late last year that there’s a couple of community projects that I am really interested in and I intend to do that,” he said.

“And then I guess in the second half of the year, there’ll hopefully be some interesting things pop up where I can look at the next chapter of my life.”

Mr Belan will be paid a base salary of $1.3m plus incentives.

As part of his remuneration deal, he must also maintain a minimum shareholding of 7 million Latitude shares for five years starting from his commencement date.

Latitude shares were trading 3.7 per cent lower in afternoon trade at $1.31.