Rising Provisions Threaten Resimac’s FY25 Profit Consensus Despite Operating Gains
Resimac Group reports a 12% decline in normalised net profit after tax for 1H25, driven by increased provisioning in its asset finance portfolio, while operating profit rises 20%. The lender signals challenges ahead but remains confident in its core business momentum.
- 12% decrease in normalised net profit after tax to $15 million in 1H25
- 20% increase in operating profit driven by growth in assets under management
- Significant rise in collective provisioning by 18%, reaching $54.3 million
- Asset finance portfolio arrears and net write-offs more than doubled
- Management expects to miss full-year NPAT consensus but maintain operating profit targets
Resimac’s Profit Performance: A Mixed Picture
Resimac Group Limited (ASX: RMC) has released its unaudited trading update for the first half of fiscal 2025, revealing a nuanced financial performance that underscores both resilience and emerging challenges within its lending operations. The company reported a 12% decline in normalised net profit after tax (NPAT), falling from $17.1 million in the second half of 2024 to $15 million in 1H25. This drop primarily reflects a marked increase in provisioning expenses, particularly within the asset finance segment.
Despite the profit dip, Resimac’s operating profit before impairment expenses rose by 20%, reaching $35.9 million. This improvement was driven by growth in assets under management (AUM), which now exceed $14 billion, alongside disciplined cost control measures and higher net interest and fee income. The contrasting trends highlight the company’s ability to expand its core lending book while managing operational efficiencies.
Asset Finance Pressures and Provisioning Strategy
The asset finance portfolio emerged as the key area of concern, with arrears increasing and net write-offs more than doubling to $6.5 million from $2.9 million in the previous period. In response, Resimac prudently raised its collective provisioning coverage by 18%, from $46.1 million to $54.3 million. This $8.2 million increase reflects a cautious stance amid uncertain economic conditions and signals management’s commitment to maintaining balance sheet strength.
The elevated provisioning weighs heavily on reported net profit but is a strategic move to buffer against potential future credit losses. It also suggests that the asset finance business, while growing, is facing credit quality headwinds that require close monitoring.
Outlook and Market Implications
Management has indicated that, given the recent trends in arrears and provisioning, Resimac is unlikely to meet consensus NPAT forecasts for the full fiscal year 2025. However, confidence remains high that operating profit targets will be achieved, supported by ongoing AUM growth and positive settlement momentum. Interim CEO Susan Hansen emphasised the company’s proactive approach to improving collections and recoveries within the asset finance portfolio, aiming to mitigate risks going forward.
Resimac’s diversified funding platform, including access to domestic and offshore warehouse lines and a global securitisation program, continues to underpin its capacity to support lending growth. The company’s integrated model spanning prime and non-conforming residential mortgages alongside asset finance positions it well to navigate evolving market dynamics.
Investors should anticipate the detailed half-year financial results scheduled for release on 25 February 2025, which will provide greater clarity on the impact of provisioning and the trajectory of the asset finance business.
Bottom Line?
Resimac’s cautious provisioning signals credit challenges ahead, but operating momentum offers a silver lining.
Questions in the middle?
- How will Resimac’s asset finance portfolio perform in the second half amid rising arrears?
- What specific strategies will management deploy to improve collections and reduce write-offs?
- To what extent will increased provisioning affect full-year earnings and dividend policy?
