The Resimac Group Ltd (ASX: RMC) share price closed 7.43% higher today following a positive market reaction to the release of the company's 1H20 results.
Resimac shares climbed as much as 14.86% today to an intra-day high of $1.70 before closing at $1.59 per share.
Resimac is a residential mortgage lender specialising in prime and specialist lending. The company operates in targeted market segments and asset classes in Australia and New Zealand.
Very strong reported revenue and earnings growth
For the six months to 31 December 2019, Resimac reported net interest income of $84.3 million. This represents a significant 53% increase on the $55.1 million reported in the prior corresponding period (pcp) of 1H19.
Statutory net profit after tax (NPAT) also grew strongly by 44% to $27.2 million, up from $18.9 million in the pcp. Meanwhile, normalised NPAT increased by an even stronger 85% to reach $26.9 million in the half.
The company commented that this impressive overall profit growth was driven by strong home loan portfolio growth of 20% to $11.3 billion. Additionally, Resimac's cost to income ratio decreased significantly from 57.8% to 42.1%. This was achieved despite the fact that the company had commenced investment in its digital and technology transformation project during the period.
Resimac highlighted it was starting to benefit from investments that it previously had made in process improvement and digital automation. Along with this, the company has been able to continue to strengthen its funding capabilities through the successful diversification of its banking and warehouse facilities.
Resimac declared a fully franked interim dividend of 1.2 cents per share, up 20% on the pcp.
Expansion in the US market
Resimac's US investor base was reported to have been significantly expanded during the period. With this, the company noted that a number of key new accounts participated in 1H20 transactions. Resimac issued three public residential mortgage-backed securities (RMBS) deals totalling $2.5 billion in 1H20.
At the start of this year, Resimac acquired a 60% stake in asset finance company IA Group and has the option to purchase the remaining 40% of the group within two years. Resimac sees this acquisition as providing it with diversification and tremendous opportunities for expansion.
Outlook for remainder of FY20
Commenting on outlook, Resimac Chief Executive Officer Scott McWilliam, said:
"The Australian housing market remains resilient with a strong rebound over the last six months. Whilst Resimac recorded its highest settlements in 1H20, we represent less than two per cent of the home loan market. A huge opportunity exists to grow market share via our third party and digital direct channels."
The company expects to continue to benefit from the trend of consumers originating home loans away from the big 4 banks via the broker channel. With this, Resimac highlighted that it had originated a record $2.4 billion of home loans in 1H20.
