Liberty Financial eyes rate benefit

Liberty Financial expects to see an uptick in demand following the RBA rate cut, says borrowers are still struggling.

Liberty Financial returned to profit growth in the December half. Picture: NewsWire / Andrew Henshaw

Liberty Financial expects an uptick in demand from prospective home buyers following the Reserve Bank’s first rate cut in more than two years.

Speaking to The Australian after handing down the lender’s half-year results, chief executive James Boyle said borrowers were still feeling the pinch from higher rates and inflation, but the downward rate move would help to ease some of that pressure.

“We recognise that borrowers are doing it tough, that high interest rates and inflation pushing cost of living higher has been really challenging,” Mr Boyle said.

“We have seen stabilisation in some of those pressures … and that’s really even before there’s time for this latest rate cut to take impact.

“The relief will be much welcomed and will help continue to stabilise and reduce some of the pressure the borrowers are feeling.”

He expects the non-bank lender to see more demand from borrowers as a result of the rate cut.

“We haven’t yet seen a direct uptick in activity as a consequence of it, but we certainly have a sense that that’s what’s likely to happen,” he said.

“We’re expecting people to be buoyed by that development on rates. I think it’s good for the market and we expect to benefit from increased inquiry as a result.”

Liberty posted net profit of $65.6m in the first six months of the financial year, a 13 per cent jump on the prior corresponding period.

Revenue rose 4 per cent to $302.2m.

Its net interest margin, a key profitability indicator, was stable at 2.46 per cent.

“It was good to be able to return to profit growth,” Mr Boyle said.

“It’s been a really hard period while rates have been going up and staying high. Banks have had the benefit of all of those deposit funds, but non-banks have not, so it’s good to turn the corner and be able to get back into the conversation and offer borrowers alternatives, particularly if the view forward is that rates will continue to come down.”

Bad and doubtful debts fell 4 basis points over the half.

The lender also continued to diversify its loan book in the half, originating 40 per cent of new loans outside of home lending, primarily in its SME and self-managed superannuation fund books.

S&P Global said the result was in line with its expectations as it forecast Liberty’s asset quality to remain sound.

“Loan-loss provisions remained stable at about $97m as of December 31. This reflects the tough conditions for personal loan borrowers, offset by a shift to more secured lending and a stabilisation in portfolio delinquency,” the ratings agency said.