MoneyMe's share price could rise on Generation Now popularity

ASX-listed fintech lender MoneyMe (ASX: MME) has just posted an impressive performance for the first half of FY24, despite the challenging business environment created by heavy inflation and rising interest rates.

The company has touted its ability to cater to the financial needs of Australia's 'Generation Now,' by using fintech innovations to provide credit approvals and settlement to online consumers within minutes.

MoneyMe's profits rebound in H1 FY24

MME's profits saw an impressive gain in H1 FY24 compared to the preceding period, despite the Reserve Bank of Australia's (RBA) further hiking of interest rates.

Statutory net profits after tax (NPAT) came in at $6 million, bouncing back by 100% from $3 million in H2 FY23, after sinking from $9 milllion in H1 FY23.

The sharp rise in NPAT arrived despite a decline in gross revenue to around $105 million. According to MME this decline was in line with expectations, reflecting the platform's 'moderated growth strategy and move towards higher credit quality and secured assets to reduce credit risk and losses.'

MME's gross customer receivables held steady at $1.2 billion, as compared to $1.1 billion for the previous half and $1.2 billion in H1 FY24.

Originations rose considerably, however, to $277 million in H1 FY24, as compared to $224 million the previous half and $242 for H1 FY23.

Credit quality improves despite rate hikes

As a 100% digital lender, MME has touted its ability to provide consumers with more rapid access to funds and financial services by means of its one-stop app.

The app's fintech innovations enable it to provide loan approvals within minutes, as well as provide consumers with personalised rates even prior to application.

According to MME, these innovations enable it to better cater to the financial needs of younger, more tech-savvy consumers, whom it refers to as 'Generation Now,'

In addition to facilitating access and convenience for younger consumers, fintech innovations may have also played a key role in recent improvements to MME's profitability, by helping it to achieve more effective credit management.

MME imputed its strong profitability in H1 FY24 to adept management of its loan book that led to improved credit quality, despite the potentially adverse impacts of ongoing inflation and the RBA's hawkish monetary policy.

This enabled MME to reduce its net loss rate for the half to 4.6%, for a sustained reduction from 5.7% in H2 FY23 and 6% in H1FY23.

The average Equifax score of MME's loan book lifted to 741, from 727 for the preceding half and 714 for the previous comparable period.

86% of MME's loan book has an Equifax score of more than 600, a marked increase from 81% in HY FY23 and 83% in H2FY23.

MME chief executive Clayton Howes points out that the improvements to its loan book arrived amidst an increase in originations.

'We increased originations in the half, maintaining our book balance relatively stable, while continuing the shift to high credit quality assets, ' Howes said.

'The strength of our loan book portfolio has been recognised by two recent Moody's credit rating upgrades of our term securitisation.'

Howes also highlighted the adaptability of MME's fintech-driven business model, enabling it to effecively negotiate the challenges created by the RBA's sustained, hawkish response to inflation.

'Our current strategy and agility to navigatae the macroeconomic environment position us well to deliver increased scale and returns as conditions evolve,' he said.

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