Non-bank lender rebounding following cyber breach
Flattering year-on-year comparatives were on full display in Latitude Financial’s full-year 2024 results last Friday.
The non-bank lender saw a 30% uptick in new-loan origination volume across its personal loan and auto loan products (cumulatively bundled under the “Money” segment), hitting just shy of $1.5 billion.
While a healthy pace of growth at face value, the 2024 results followed a particularly tough 2023 for the company, as a brutal cyberattack in March resulted in hundreds of customers having their credit cards, loan applications, passports and more compromised.
This was obviously a PR nightmare that resulted in a substantial decline in first-half volumes, a suspended dividend and net losses on the bottom line.
The cyberattack resulted in business operations being disrupted for up to six weeks, during which Latitude was unable to originate new customer accounts, while delinquencies also started to ramp up due to collections systems being offline.
So while Latitude Financial saw decent lending growth in the year just gone, it’s worth keeping these baseline effects in mind.
Brokers driving growth
Nonetheless, Latitude Financial has managed to get its personal lending offering back on track, with brokers playing a critical role in volume growth.
Personal lending is a relatively niche part of the broking industry, although major brokerages like Mortgage Choice work with the likes of Latitude Financial, MoneyPlace and Plenti to provide them as part of a full-service offering.
They typically come with higher interest rates than mortgages, though this depends on the borrower’s risk profile.
According to a Latitude Financial spokesperson, around 42% of Latitude personal loans were written via brokers in 2024, “increasing to well over 50% when you add motor loans”.
Auto new-origination volume increased 49% year on year to $330 million, per the annual results, driven by “price optimisation, system integration (and) brokers embracing the enhanced new platform and the 2023 cyber incident”.
The spokesperson said that “further expanding broker distribution and deepening relationships is a key focus of our Money division (which comprises personal loans and car finance)”.
Broker-originated personal loans outpaced direct loans in 2024, the spokesperson said, adding: “We expect this trend to continue this year.”
Asked if this trend is a positive development for Latitude Financial, the spokesperson said: “We see brokers as an important source of distribution for our Money division, complementing our traditional direct channels, as well as providing consumers with important choice and information that they may not have otherwise considered when searching for a loan.”
Improving margins
The inherently higher interest rates of personal loans mean that Latitude Financial’s Money division works on eye-catchingly high net interest margins (NIM).
In the second half of 2024, Money’s NIMs were 10.2%, compared to 9.2% in the second half of 2023. New business NIMs were even higher at 11.7% in the second half of 2024 compared to 10.2% in the second half of 2023.
For comparison, the average NIM of a banking major is around 2% or lower – they have gotten progressively smaller over the years thanks to mortgage brokers ramping up competition in the home loan market.
Latitude Financial’s widening NIMs in 2024 came “following the extensive pricing action taken by Latitude to offset higher-for-longer interest rates”, said the spokesperson.
Speaking of which, “an easing rate cycle will undoubtedly be beneficial for net interest margins as funding costs reduce and the full-year benefit of last year’s pricing actions flow through in 2025”, the spokesperson said.
“Despite cost of living pressures, strong labour markets and further rate relief are likely to support increased consumption and lending demand as the year progresses,” the group said in its earnings statement.
