Resimac Group Limited (RMC) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the Resimac HY '26 Investor Call. [Operator Instructions] I would now like to hand the conference over to Mr. Pete Lirantzis. Please go ahead.

Thank you. Good morning, everyone, and thank you for joining us. Today, James and I will take you through the presentation labeled the First Half '26 Results Presentation, and we'll be flipping through the slides, and we'll do some speaker notes. I'm pleased to present Resimac's first half '26 results covering the first 6 months to December 2025. My name is Pete Lirantzis, CEO of Resimac, and joining me today is our Chief Financial Officer, James Spurway; and our Chief Treasury Officer, Andrew Marsden. This has been a strong half for the group. We delivered solid earnings growth, continued to build momentum in our core lending portfolio and maintain a disciplined approach to capital, risk and cost management. Today, I'll walk you through our performance highlights, portfolio growth and the key drivers underpinning these results. I will then hand over to James, who will take you through our financial performance in more detail. I'll then wrap up with an overview of our priorities and strategy before opening up to questions. I'm now moving to Slide 3. Before I get into the numbers, I want to briefly explain who we are and what we stand for. For 4 decades, Resimac has helped people buy homes, grow businesses and take on new opportunities. As a diversified nonbank lender, we operate across home loans and asset finance with a strong presence in both prime and nonconforming. We take the time to understand each customer's unique position and circumstance. We help customers underserved by traditional lenders. Our vision and mission are clear: to be the home of intelligent lending, shaping the future of nonbank lending through intelligent innovation, efficiency and genuine commitment to our people, customers and channel. Our intelligent lending operating model will redefine the way we approach every aspect of our business, establishing a new way of operating in a market where the most efficient and the innovative players will win. Redefining what we stand for represents a new and exciting phase in our company's 40-year history. Our ambition is underpinned by our values, people first, own the outcome and make it happen. At our core is a culture where human judgment is amplified by intelligent lending operations and technology to make things happen. Turning now to page -- to Slide 4. Our first half results for '26 show that the momentum built in the second half of financial year '25 has continued and strengthened with strong performance across our business drivers reflecting our disciplined approach to delivering sustainable growth. Normalized operating profit was at $51.7 million, up 44% from $39.9 million (sic) [ $35.9 million] in the first half of '25. Normalized NPAT almost doubled to $29.6 million and stat NPAT more than doubled to $28.5 million. This growth in profitability has been driven by improvements in operational efficiencies with our normalized cost-to-income ratio reducing from 53.1% to 50%. Asset quality collections and recoveries resulting in impairment expenses reducing by 1/3 to $9.7 million and a subsequent decrease in our collection provision balance. Growth in AUM driven by both Home Loans AUM increasing by $600 million to $13.6 billion and Asset Finance origination originated AUM increasing to $300 million to $1.5 billion. Disciplined approach to pricing with portfolio NIM widening by 15 bps. Consistent with our disciplined capital management approach, we have declared a fully franked interim dividend of $0.04 per share and a fully franked special dividend at $0.09 per share. Overall, this was a strong result that demonstrates that the business has continued to build momentum over the last 12 months and that we have effectively balanced growth, efficiency, risk management and providing returns to our shareholders. This result has only been possible because of our employees, our distribution partners and our customers, and we greatly appreciate their ongoing support. Moving on to Slide 5. We continue to see reasonable growth opportunities in Home Loans, and I'm pleased to report we experienced growth in overall settlements. Our Home Loan settlements increased by 12% to $2.7 billion for the half, and we simultaneously increased NIM by 5 bps. This outcome was delivered by focusing on improving service levels to brokers versus reliance on an ad hoc campaign. Our strategy is translating into higher rate of repeat business from our brokers. Mortgage applications in the first half were broadly consistent with the first half of '25, positive outcome given that last year's volume was driven by a one-off campaign. This result and positive growth outlook are largely the result of enhancements we have made through uplifting and streamlining our credit processes, strengthening our broker and customer experience through improving technology, processes to deliver greater speed and consistency and the renewal of our sales and marketing function resulting in Resimac improving ranking in broker surveys and the increase in the depth of engagement with our brokers. These results build on a steady growth in settlements delivered over the last 12 months. I'm proud of what our people have achieved over this period. In our Asset Finance portfolio, volumes were relatively flat over the period. As I previously mentioned, we are taking a cautious approach to some industries that have underperformed. Moving now to Slide 6. Overall, Resimac originated AUM increased to $15.1 billion across Home Loans and Asset Finance and has increased consistently for the last 2 years, reflecting the strong momentum the business has built. Total AUM in the last -- in the half to $15.7 billion was a result of the expected runoff of the Westpac portfolio acquired in February 2025. Our Home Loans portfolio continues to build momentum with AUM increasing by 4% to $13.6 billion over previous corresponding periods. Our disciplined approach has delivered consistent growth over the last 2 years, together with a 5 bps increase in NIM since the first half of '25. In Asset Finance, Resimac originated AUM increased 25% to $1.5 billion. Let us now look at a snapshot of our Home Loans portfolio on Slide 7. Our Home Loans portfolio continues to demonstrate resilience and improved quality, reflecting our disciplined approach to delivering sustainable growth and our methodical risk settings. The portfolio is balanced across the 3 portfolio compositions, owner-occupied and investment lending, prime and nonconforming and P&I and interest-only lending. These percentages remain consistent over time. Specifically, the mix of prime and nonconforming has remained broadly consistent over the last 2 years as a proportion of the settlements and AUM, reflecting the stability of the portfolio. The portfolio dynamic LVR are currently at 61.9%, broadly stable compared to the June half and reflecting the high quality of our portfolio. The distribution of the dynamic LVR across bands remains well controlled with 90% of accounts still at or below 80%. Overall, the fundamentals of our Home Loan portfolio remain very strong. Turning now to our Asset Finance portfolio on Slide 8. In the Asset Finance space, we continue to take a disciplined approach to portfolio quality, prioritizing the right business at the right risk-adjusted return. We've redefined -- we're refining our credit appetite to ensure new business aligns with current market conditions and our return thresholds. While application volume has softened, settlements remain broadly in line with first half of '25, reflecting our deliberate focus on quality -- higher-quality deals. We're also taking a more conservative stance in higher-risk sectors, particularly transport and logistics to protect portfolio performance. As mentioned earlier, the runoff of the Westpac portfolio impacts reported AUM and AUM of the Resimac originator book has shown continued growth over the last 3 years. Credit performance remains well managed for the originated portfolio with loan ratios improving over the past year and arrears remaining contained. We strengthened our internal collections and recoveries capabilities and expanded our use of specialist collections partners and third-party recovery teams. As a result, our collection strategies are now more effective and focused to support improved arrears and recoveries outcomes. I will now ask James to provide an overview of our financial results.

Thank you, Pete, and good morning, everyone. I'm pleased to present Resimac Group's financial results for the half year ended 31st of December 2025. The group has delivered a strong performance, reflecting sustained momentum across origination, servicing and funding, together with disciplined execution on our strategic priorities. Our capital-light warehouse to securitization model continues to operate as designed, generating resilient earnings, efficiently recycling capital and delivering attractive sustainable returns to shareholders. Turning first to the headline numbers on Slide 10. As Peter has already highlighted, normalized net profit after tax, excluding fair value derivative movements, was $29.6 million in first half '26, almost double the $15 million reported in first half '25. Compared with second half '25 normalized NPAT was up 20% from $24.7 million, reinforcing the momentum we're building in our earnings trajectory. Pleasingly, normalized operating profit before impairments and tax, representing the underlying earnings engine of the business rose to $51.7 million, up 44% on first half '25 of $35.9 million. This was also 21% higher than second half '25, demonstrating the continued build in earnings momentum. Importantly, the improvement in performance has been underpinned by a balanced mix of higher lending volumes, disciplined margin and expense management and improved credit outcomes relative to the prior corresponding period. Let me now turn to the detailed financial performance of first half '26 compared to the prior corresponding period on Slide 11. Total normalized operating income increased by $26.9 million or 35% to $103.5 million compared to first half '25, supported by strong AUM growth, including the acquisition of the Westpac Auto portfolio, together with higher fee income and a 15 basis point expansion in group NIM. Net interest income increased by $18.7 million or 24%, reflecting growth in the average loan book and higher NIM. The average AUM for the Home Loans portfolio was $600 million higher than PCP, while Asset Finance average AUM was $900 million, inclusive of the Westpac Auto portfolio. The group's net interest margin increased by 15 basis points to 163 basis points in first half '26 compared to first half '25 and remained broadly stable relative to second half '25. Noninterest income, comprising fee and commission income also delivered a positive contribution, doubling to $12 million compared to first half '25. This uplift reflects a strong loan settlement fee revenue and growth across other fee-based income streams, including servicing and discharge fees derived from the Westpac Auto portfolio. Normalized operating expenses were $51.8 million in first half '26 compared to $40.7 million in first half '25, representing an increase of $11.1 million or 27% increase on prior comparative period. As anticipated, the expense base for the first half of 2026 includes an entire period servicing and collections costs related to the Westpac Auto portfolio, which were not part of the expense base in the PCP. During the period, our employment expenses were up 7%, reflecting higher FTE to support the Westpac Auto portfolio, strengthen our credit underwriting and support origination volumes, together with underlying salary and wage inflation. Importantly, revenue growth exceeded expense growth during the period, delivering positive jaws of 8%. As a consequence, our normalized cost-to-income ratio improved by 310 basis points to 50%, demonstrating both disciplined cost control and the scalability of our business model. A key driver of the improved earnings outcome in first half '26 has been the reduction in impairment expense. Credit impairment charges were $9.7 million, materially lower than the $14.8 million recorded in first half '25. By comparison, the prior corresponding period reflected more challenging economic conditions, particularly within Asset Finance, where elevated arrears led to higher provisioning. In first half '26, credit performance strengthened across the portfolios. Within Home Loans, we recorded a net release of provisions supported by improved arrears metrics and approximately $100 million of late-stage arrears during the period, greatly assisted by the RBA's rate reductions throughout 2025. While the Asset Finance segment experienced some additional write-offs associated with the Westpac Autos portfolio, which was acquired in February '25, these were partially offset by the acquisition discount recognized upon purchase. Overall, the improvement in arrears performance and portfolio resilience has translated into a significantly lower impairment charge for the half, contributing meaningful to earnings growth. Bringing these elements together, normalized NPAT for the half was $29.6 million, nearly double PCP. This change in profitability is reflected in our key return metrics with ROE increasing to 15.5% and earnings per share rising to $0.0719. These outcomes were aided by the group's capital management initiatives undertaken in FY '25, including the meaningful return of capital by way of special dividend and a share buyback scheme. Looking ahead, we expect normalized operating profit in second half '26 to be approximately $6 million lower than in first half '26. This anticipated reduction is primarily attributed to the ongoing runoff of the Westpac Autos portfolio with AUM anticipated to be approximately $300 million to $400 million by June '26 accompanied with the potential headwinds that may arise due to fluctuations in the spread between BBSW and the RBA base rate. Now turning to net interest margin on Slide 12. Group NIM expanded from 148 basis points in first half '25 to 163 basis points in first half '26 and is 3 basis points higher than second half '25. The primary driver of this uplift has been portfolio mix, particularly the increased contribution from Asset Finance following the acquisition of the Westpac Autos portfolio. As Asset Finance has become a larger portion of the overall book, its structurally higher margin profile has flowed through to a stronger blended group NIM outcome. Within Home Loans, NIM improved by 5 basis points to 133 basis points relative to first half '25, reflecting the normalization following the targeted campaign we ran in first half '25 to stimulate broker engagement and application volumes. That initiative was effective, contributing to $4.3 billion of applications in first half '25 and $2.4 billion of settlements. However, as expected, it came at a cost to margin. What is particularly pleasing in first half '26 is that we have again generated $4.3 billion of applications and improved settlements to $2.7 billion without the pricing concession. Same volume, stronger economics, and that's the essence of our back-to-core strategy delivering tangible results. The group was able to maintain similar margins in second half '25 whilst also increasing volume. This highlights that our competitive edge is shifting towards service quality, product design and quick decision-making rather than just pricing. Brokers are choosing Resimac because we're becoming more reliable, responsive and easy to work with, which provides a much stronger market proposition. Within Asset Finance, NIM was 309 basis points, down 15 basis points on first half '25 due to the dilution impact of the Westpac Autos portfolio acquisition. As anticipated, NIM increased by 22 basis points for second half '25, reflecting the runoff of the acquired portfolio and change in portfolio mix. Consistent with our strategy, we have maintained a disciplined and targeted approach to originations, focusing on business that meets our return hurdles and credit standards. This has meant being comfortable at times with lower application and settlement volumes where pricing or credit parameters did not meet our requirements. We're focusing on writing the right business and not simply growing volumes. Overall, our measured approach ensures Asset Finance growth remains aligned with sustainable risk-adjusted returns rather than short-term volume targets. Now moving to Slide 13. The first half of FY '26 saw a meaningful improvement in credit performance across both lending portfolios. A year ago, Home Loan arrears were elevated, driven by cost of living pressures and lagging impact of rapid rate increases. That picture has changed materially. The pass-through of RBA rate reductions during 2025 provided genuine repayment relief to our customers, and we are seeing that flow through directly into improved repayment behavior. Alongside that macro tailwind, we have made deliberate investments in our collections capability with additional personnel, enhanced processes and more proactive customer engagement, and these investments are delivering. Our prime Home Loan arrears greater than 90 days declined to 36 basis points at December '25, down from 81 basis points a year earlier, outperforming our ADI peer group. Our nonconforming loan arrears also improved materially, falling 61 basis points over the same period to 1.71%. These strong outcomes and they reflect the quality of our underwriting and the resilience of the customers we originate. We have also seen a normalization in Asset Finance arrears relative to first half '25, notwithstanding elevated insolvency levels across the SME sector. Following the higher impairment expense last year, we deliberately tightened credit policy and invested further in collections and recoveries capability, including focused management on the Westpac Autos portfolio. Overall, the benefits of these disciplined credit settings and operational enhancements are now flowing through the book, contributing to improved arrears outcomes and stronger portfolio resilience. And this improvement in credit performance is reflected in the financial results with lower overall impairment expense recognized in first half '26 versus PCP. Now moving to Slide 14. Our total credit loss provisions have decreased by $1.9 million from second half '25 to $62.6 million, with the overall coverage ratio slightly reducing by 1 basis point to 40 basis points. The mix of our provisioning shifted during the half with an $8.1 million reduction in collective provisions, partially offset by a $6.2 million increase in specific provisions. For the Home Loans portfolio, our collective provisioning decreased by $3.6 million from June '25 to $28.6 million at 31st of December. And this reduction primarily reflects $100 million of accounts that were in late-stage arrears maturing during the period. Importantly, the Home Loan book continues to be supported by strong collateral fundamentals. The portfolio's average dynamic loan-to-value ratio remains consistent at 61.9%, providing the group with a significant equity buffer. This combined with a buoyant housing market, lower interest rate environment and improved arrears performance reinforces our confidence in the resilience of the Home Loans portfolio. Within the Asset Finance portfolio, the overall coverage ratio has increased by 22 basis points to 140 basis points from second half '25, reflecting prudent coverage. Our collective provision balance reduced from $28.7 million at second half '25 to $24.2 million at first half '26, largely reflecting the runoff of the Westpac Autos portfolio. As the acquired portfolio continues to season, we observed some migrations into later-stage arrears and active recovery. And in line with this profile, specific provisions have increased from $0.5 million to $5.3 million during the half. These exposures are being actively managed. And with our strengthened recoveries capability, performance remains consistent with industry benchmarks. Now turning to Slide 15. Resimac's funding position remains strong, underpinned by a diversified and scalable securitization platform. During first half '26, we issued $2 billion of RMBS and $0.5 billion of ABS across 3 transactions spanning prime, nonconforming and auto and equipment assets. Since inception, we have issued more than $54 billion of securitization, demonstrating a well-established capital markets track record. Investor demand remains robust with our recent transactions oversubscribed and senior tranches on both the prime RMBS and auto and equipment ABS deals pricing at 95 basis points. Our warehouse facilities continue to serve as a fundamental element of our funding strategy. We benefit from consistent and diverse support from a broad range of domestic and offshore banks ensuring ample capacity to achieve our AUM growth objectives. During first half '26, the group benefited from a negative basis spread between the 1-month swap rate trading consistently below the RBA cash rate, providing a tailwind for our funding costs. The RBA's cash rate increase in February has brought to fruition the market anticipation of monetary tightening with further tightening price into the swap curve in 2026. This may introduce volatility in the spread between BBSW and the cash rate, potentially creating some headwinds as previously flagged. Now turning to capital management on Slide 16. And our approach remains clear and disciplined, returning surplus capital to shareholders while ensuring we are well positioned to fund growth. For first half '26, the Board has declared a fully franked interim dividend of $0.04 per share, a 14% increase on first half '25. In addition, the Board has declared a fully franked special dividend of $0.09 per share, returning a further $35.6 million of excess capital to shareholders. This reflects the strength of our capital position, the benefits of our capital recycling model and our active balance sheet management. Over the past 12 months and including the declared dividends, the group will have returned $161 million of value to shareholders, comprising $112.7 million in dividends and $48.3 million in franking credits. This highlights our continued focus on unlocking value and efficiently utilizing retained earnings and available franking credits. During the half, we also took the opportunity to further optimize our capital structure. Strong cash generation enabled us to fully repay the remaining corporate debt on our balance sheet, reducing our future interest expense and further simplifying our capital structure. The result is a more efficient balance sheet, which together with earnings growth have lifted normalized return on equity to 15.5%, up from 7.2% in first half '25. In closing, Resimac's first half '26 results demonstrate a strong momentum across our business. We have delivered higher profits, better efficiency and improved credit outcomes, all against the backdrop of changing interest rate environment and robust competition. Our balance sheet is strong, our funding sources are deep, and we are returning capital to our shareholders even as we invest in the business. Thank you. And I'll now hand you back to Pete to cover off our strategy and priorities.

Thank you, James. And for everybody on the call, we'll be on Slide 18, labeled Priorities and Strategy. Just to wrap up, our strategy is anchored in a disciplined 5-point plan designed to transform Resimac into an intelligent lender, drive operational excellence and deliver sustainable long-term growth. This strategy is deliberately focused. It builds our strengths, sharpens how we execute and ensures we continue sustainable growth. First, strengthen the Home Loans portfolio remains our highest priority. Residential mortgages are our core business and our primary earnings engine. We're investing to strengthen our value propositions, deepen our broker engagements, enabling strong long-term AUM growth while maintaining a disciplined credit and pricing standard. Second, we are unlocking the power of AI to deliver our new intelligent lending operating model. We're deploying AI and agentic technologies to support smarter, efficient decision-making and to improve the broker experience through faster turnaround times. Third, we are focused on deepening channel relationships and customer experience. Growth in this market is driven by trust and consistency. By streamlining broker and customer journeys together with personalized service offerings, we aim to strengthen relationships and make Resimac easier to do business with at every touch point. Fourth, for our Asset Finance business, our focus is simple. We are refining products to improve risk-adjusted return. This will deliver disciplined growth aligned to our risk and return appetite. Finally, building a high-performance culture is imperative to driving performance and building growth. Attracting, developing, retaining talent is a key goal. Our intelligent lending model will drive our product and service offerings to channel partners and customers and represent an exciting new phase in our company's 40-year history. It positions Resimac to grow sustainably, execute with greater efficiency and deliver long-term value for shareholders. Thank you for your time today. I will now pass back to the operator to take any questions on the first half results of 2026 for Resimac.

[Operator Instructions] There are no questions at this time, sir. And that does conclude our conference for today. Thank you for participating. You may now disconnect.