Resimac (ASX:RMC) share price lifts on $104 million profit

The market's responding well to Resimac's financial year 2021 earnings

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The Resimac Group Ltd (ASX: RMC) share price is in the green today following the release of the company's earnings for financial year 2021 (FY21).

Right now, the Resimac share price is $2.49, 3.75% higher than its previous close.

Resimac share price jumps on 87% boost to profit

Here's how the non-bank lender performed in FY21:

  • Normalised profit after tax of $104 million, 87% higher than that of FY20;
  • $485.5 million of revenue – 3% more than last year;
  • $13.8 billion of home loan assets under management, up 11%;
  • 4 cent fully franked final dividend, bringing full-year dividends to 6.4 cents per share.

Some $456.6 million of revenue came from the company's Australian lending segment, while $28.8 million came from its New Zealand arm.

The company saw $4.8 billion of home loan settlements in FY21. It received $242.7 million of income from interest, 29% more than it did in FY20.

Resimac's loan impairment expense also dropped 88% to $2.7 million.

The company ended the period with $619.8 million of cash.

What happened in FY21 for Resimac?

Here's what drove Resimac, and its share price, in FY21:

The lender issued a number of new residential mortgage-backed securities (RMBS) in FY21.

First off, its subsidiary RESIMAC Limited settled a $1 billion funding transaction, RESIMAC Bastille Series 2020-1NC, in August.

Then, the company settled a $289 million (converted from New Zealand dollars) RMBS transaction in September. Another 2 $1 billion transactions were settled in October and December.

Finally, the company's $1.5 billion RESIMAC Premier Series 2021-1 transaction was settled in March before its $1 billion RESIMAC Bastille Series 2021-1NC transaction was settled in May.

Additionally, a small portion of Resimac's customers is still impacted by COVID-19. Resimac is continuing to provide them assistance.  

What did management say?

CEO Scott McWilliam commented on the results driving the Resimac share price today. He said:

These results reflect the momentum of our business, driven by growth across our prime and specialist portfolios in Australia and New Zealand, development of our broker and direct-to-consumer brands, strong investor demand for our bonds, and ongoing investments into our digital transformation…

Furthermore, we have achieved a record profit of $104 million by consistently delivering above system AUM growth – a clear indication that the Resimac brand continues to resonate well with both brokers and consumers alike. Our cost-to-income ratio has also decreased significantly to 32.1% as our continued focus on process and technology drives scale in the business.

What's next for Resimac?

Here's what market watchers interested in the Resimac share price might want to keep an eye out for in FY22:

According to McWilliam, the vaccination rollout will see the economy recovering quickly despite current economic uncertainty. The housing market is expected to improve alongside the economy.

He believes the first half of FY22 will likely be rockier than the second, bringing more macroeconomic challenges.

Additionally, the company is working on a digital transformation. It expects it will be finished in early FY22.

According to McWilliam, Resimac will soon launch "alternative loan products focused on sustainability".

Finally, the company noted its Resimac Home Loans business and its business are targeting $8 billion in annual settlements by FY24. Additionally, its Resimac Asset Financial business is targeting $1 billion in annual settlements by FY24.

Resimac share price snapshot

The Resimac share price has gained 14% year to date. It is also 85% higher than it was this time last year.

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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