Zip targets home loan growth goals

Buy now pay later lender Zip says it is seeing moderating bad debts as customer numbers and transactions decline.

New Zip Group CEO Cynthia Scott at their Sydney offices. Picture: John Feder/The Australian

Buy now pay later player Zip may soon be a player in the mortgage market as the company explores “being a next gen” financial services provider, as the consumer lender ruled off a $5.7m after tax profit.

Unveiling its full year earnings on Tuesday Zip said the turnaround was driven by the lender’s American business, which delivered record earnings alongside the Australia New Zealand operation.

But Zip chief executive Cynthia Scott told investors the lender was now looking at offering more services to existing customers in a bid to grow its market penetration as it pushes for further profits.

Ms Scott, who took on the running of Zip in August last year after two years running the Australian business, said “there won’t be any Zip home loans being offered in the near future” the company was exploring ways it could play in the market.

Ms Scott pointed to the 100,000 or so of Zip’s customers who refinance their home loan each year.

“There is an opportunity for us in a capital-like way to look, exactly as you say, as sort of a lead gen revenue generation model so that we are not the producer of that product, and we’re not the balance sheet funder of that product,” she said.

This comes as Zip ruled off a 14.5 per cent decline in total transaction volume over the year to $3.6bn alongside an increase in revenues.

This saw Zip making more cash per transaction, despite the decline, with $417.4m in revenues over 2024.

Customer numbers also slipped 2.9 per cent in the year to circa 6 million.

Zip US chair Larry Diamond said the lender was hopeful for its partnership with online payments provider Stripe, which was expected to drive new business

This came as bad debts, an issue which dogged the lender as it pushed into overseas markets, declined 18 basis points, with Zip flagging pans to further reduce arrears.

Zip reported bad debts remained below its target band, at 1.3 per cent of total transaction volume.

RBC analysts said Zip’s outlook was “incrementally positive”, with moderating bad debts.

Zip told investors it was entering the new financial year with a strengthened and simpler balance sheet after extinguishing convertible notes and repaying all existing corporate debt.

The lender also refinanced $2.4bn in funding facilities.

The buy now pay later lender also lifted its loan margins to 3.8 per cent, up from 2.8 per cent last year.

Zip told investors it was seeking to grow its cash earnings by 1-2 per cent in the coming two years.

The lender is seeking to raise its operating margin from 7.9 per cent to as high as 17 per cent.

Zip shares traded down on the news, falling 7.27 per cent or 16c by 12.30pm to $2.10.