Now Finance mulls listing as it looks to growth

Now Finance chief Richard Blumberg says the lender is mulling an ASX listing in the next two years as it ramps up growth plans.

Richard Blumberg says Now Finance is ‘not just trying to grow, but trying to grow in the right places’. Picture: Aaron Francis

Now Finance chief Richard Blumberg says the lender is mulling an ASX listing in the next two years, as it ramps up growth plans and disrupts the $60bn personal loan market by axing fees.

The Melbourne-based company is targeting a $1bn loan book over the medium term, and Mr Blumberg is also alert to potential mergers and acquisitions in the relatively crowded personal lending market.

“Finance is about scale and you need to build scale and we are focused on building a $1bn book, and we are pretty confident,” Mr Blumberg told The Australian. “It’s about managed growth, not just trying to grow, but trying to grow in the right places.

“The other opportunity for us is M&A both in Australia and New Zealand, which we are quite focused on.”

A year ago, Now acquired Pepper Money’s personal loan book.

Mr Blumberg said the company was not in a rush to float, given the backdrop of the pandemic and Now’s solid capital position, but it was a consideration over the next two years.

“When it makes sense we will come to the listed market,” he said.

Several of Now’s rivals have joined the ASX in recent months, including personal lending group Harmoney and diversified non-bank lender Plenti. But those stocks continue to trade lower than their respective issue prices, amid lingering concerns about COVID-19 loan losses.

Now — which was established in 2012 with the backing of investment firm Wingate Group — in August obtained its own financial services licence and ceased being an authorised representative of Wingate. That is part of the lender’s strategy to forge ahead independently.

Smaller players are gaining traction in personal loans, with Mr Blumberg estimating the big banks had 90 per cent of the market eight years ago, and now that percentage has dropped into the 70s this year.

Now is using its latest initiative — scrapping establishment, account-keeping and early-­repayment fees across all new ­secured and unsecured personal loan products — as a point of differentiation.

“On an average five-year, $30,000 loan, fees can add up to thousands of dollars over the life of the loan,” Mr Blumberg said, noting the axed fees would not be recouped by increasing interest rates on Now’s loans.

“Our interest rates have remained exactly the same and will remain the same going forward.”

According to RateCity, 11 lenders offer no-fee personal loans but many of those apply conditions to be eligible, such as having several products with the lender or a top-notch credit score.

Mr Blumberg took the blanket approach of axing fees — bar charges for late loan repayments — at Now, which he says is the more transparent approach.

“One financier may talk about a no-fee scenario but it really only relates to a very small proportion of their applicants,” he said.

“We took the big step forward because we think this is where the market needs to go, the personal loan market needs to encourage transparency and make it easier for customers to use.”

Now has a loan book of $400m, after it increased 39 per cent in the 2020 financial year.

About 2 per cent of the loan portfolio reflected borrowers in hardship, including those on loan repayment pauses, reflecting similar levels to those before COVID-19, Mr Blumberg said. Now’s 30 day-plus loan arrears are at 1.1 per cent, while arrears at 90 days or more past due stand at 0.3 per cent.

For the 12 months to June 30, Now reported a net profit of $2.7m, compared to a loss of $515,000 a year earlier, accounts lodged with the corporate regulator show.

Now uses risk-based interest rates and draws on an internal model to provide customers an indication of their rate pricing up front, alongside external data for its credit process.

It has a direct, broker and partnership model, and the latter includes white labelling of loans.