“There’s no doubt that some of those players did list too prematurely, and you’ve got to question what the next step for them looks like.”
But what dismays Blumberg is the lack of institutional support for what he sees as a vital sector of the economy.
“I’m not sure how long it takes the market to recover. I don’t think it’s a quick fix. But I don’t think structurally and strategically that’s good for the sector and for Australia. We just don’t want to go back to the concentration we’ve had previously. You want to see a successful and growing non-bank lending sector.”
‘Some pain… is a good thing’
But Blumberg is also realistic about what’s coming. Those non-bank lenders who have aggressively pursued growth in recent years at the expense of profitability will probably be squeezed as funding becomes more expensive and less plentiful.
“I do think there will be some players in the market that experience some pain in their books and in their margins. And I think that’s a good thing, too. I think it’s important that we have a shakeout.”
Blumberg wants to be on the right side of that.
Now, which specializes in fee-free personal loans to prime or near-prime borrowers, was founded in 2013 and supported by Farrel Meltzer’s Wingate Group, before being spun out to its underlying investors late last year. Blumberg says the business has been profitable since 2017 and conservative in the way it has grown; Although credit inquiries dropped across the sector last month, he says he is not seeing bad debts rise.
“We haven’t seen any issues with delinquencies in arrears. I think the fact that we have full employment is an important consideration.”
Last month, Now tapped debt markets and raised $200 million through the sale of new asset-backed securities. Although Blumberg says credit spreads have widened and liquidity softened since Now was last in the market in September last year, the company’s raising was completed very quickly.
Blumberg is now raising equity to further support Now’s expansion into the auto loans market, which is set for next month. The banks aren’t as active in this market as they were, and Blumberg believes that with pricing of auto loans more rational, there is room for Now’s fee-free product offering.
The auto loan expansion is part of Blumberg’s bigger plan to double Now’s loan book to $1 billion, which he sees as the sweet spot for a niche lender in Australia. The coming shakeout among non-bank leaders might present Now with opportunities.
“To the extent there is distress – and there will be – we are keen to take a look at that and see what opportunities there are to buy into businesses and to buy loan books.”