Cash Converters profit rebounds despite rising rates, cost pressures

Australians are turning to payday lender Cash Converters in droves as the cost of living crisis led to a spike in applications for its credit products.

Cash-strapped Australians turned to payday lender Cash Converters in droves as the cost of living crisis saw applications for its credit products top 390,000.

Revenues grew by over a third during the six months to December 2023, driving a statutory net profit after tax to $9m, a turnaround from a $105.7m loss in the same period the previous year.

The profit came even when a 64 per cent increase in interest expenses during the period was not passed on to customers due to regulated interest rate caps, the lender said.

During that period, the Reserve Bank increased the cash rate from 0.85 per cent at the end of June 2022 to 4.35 per cent by December 2023.

“Our statutory net profit in the period demonstrates that the business is well positioned to continue growing sustainably and profitably,” managing director Sam Budiselik said.

Cash Converters chief executive Sam Budiselik.

Following regulatory changes last year that tightened rules for payday lenders, Cash Converters is diversifying its product range.

Small loans now account for 21 per cent of its book, down from 32 per cent a year ago. Vehicle loans account for 25 per cent after jumping 38 per cent from a year earlier to $74.3m. Its $16.3m pawnbroking loan book is now only about 6 per cent of its portfolio.

The company released a new line of credit loan products in the first half of the 2024 financial year. It also acquired a number of its franchise stores in Australia and in the UK, which are banking on the growing “circular economy” trend.

“The resulting revenue growth for the half … ensured the earnings impact of the SACC (small amount credit contract) loan book reductions were mitigated, in the process establishing the foundation of what will be a larger and more resilient business over time,” Mr Budiselik said.

The non-bank lender grew its loan book 15 per cent to a record $294m in “difficult conditions” Mr Budiselik. Net loss rates ticked up to 9 per cent, up from 8.6 per cent, but remain at “expected levels” the company said.

The business said demand for credit products remained “consistently strong” during the half, receiving over 390,000 applications in Australia, including redraws. The business did not show comparable statistics for previous periods. Last year it said it had received 344,000 personal loan applications in the six months to December 2022.

Originally published as Cash Converters profit rebounds despite rising rates, cost pressures