Since listing last month, the Latitude Group Holdings Ltd (ASX: LFS) share price has dropped slightly. Will today’s guidance for the half-year push the Latitude share price up?
Latitude is a leading digital payments, instalments and lending platform, with ~2.8 million customer accounts and roughly 2,000 merchant partners across Australia and New Zealand.
Similar to other banks like Commonwealth Bank of Australia (ASX: CBA) and Westpac Banking Corp (ASX: WBC), Latitude generates revenue from net interest income on its lending products.
LFS share price
HY21 guidance looks promising
Latitude provides lending products that include credit cards, personal loans and motor loans.
It expects to process a volume of around $3.7 billion for HY21, which equates to an increase of 7%. This is expected to be primarily driven by personal loans as the volume in this segment surged by 25% in Australia and 50% in New Zealand.
In terms of costs, Latitude has anticipated it will fall by 10% compared to the prior corresponding period, being HY20.
On the bottom line, it has provided guidance on cash net profit after tax in the range of $115 million to $120 million.
My take on Latitude
It seems Latitude is becoming a leader in loan originations.
Managing Director and CEO, Ahmed Fahour noted Latitude is now the number two originator of new personal loans in Australia and one of the leaders in New Zealand.
Investors should keep in mind that Latitude is currently benefiting from the low-interest rate environment, so any lift in interest rates will result in reduced margins.
Latitude’s future growth will be driven by the volume of loans, so I would closely monitor consumer attitude towards credit.
My colleague, Owen Raszkiewicz covered three other things to note.
If you are interested in another ASX growth share in a similar space, you should check out my article on Plenti Group Ltd (ASX: PLT).
