Liberty Financial share price slips despite $219 million profit

The lending company has reported record earnings and approved loans for FY22.

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Key points

  • The Liberty Financial Group share price slipped lower this morning amid the company releasing its financial results for FY22
  • The company reported record earnings,  loan originations, and portfolio growth
  • However, Liberty Financial Group notes a mixed outlook for FY23 and beyond, driven primarily by slower expected credit growth.

The Liberty Financial Group (ASX: LFG) share price is down marginally this morning amid the company releasing its full-year results for FY22.

Shares of the lending company are currently trading for $4.45 each, a drop of 0.67% on Friday's closing price.

Let's go over the highlights of the company's report.

What did Liberty Financial Group Report?

  • Statutory net profit after tax (NPAT) up 18% year over year (yoy) to $219.3 million
  • Underlying net profit after tax and amortisation (NPATA) up 2% yoy to $231.1 million
  • Average financial assets up 6% yoy to $12.9 billion
  • Return on financial assets stable at 1.7% yoy
  • Final unfranked dividend of 28.2 cents per share

Liberty Financial posted record earnings, originations (approved loans), and growth across its portfolio.

Eating into the company's profits was its increased cost-to-income figure. It increased to 23.4% in 2H22 from 21.9% in 2H21. The company cited one reason for the increase was the hiring of additional staff, with employee numbers growing to 524 from 500 during the period.

The unfranked dividend of 28.2 cents per share had a record date of 30 June and will be paid 31 August.

What else happened in FY22?

Liberty Financial added $50 million in cash to its balance sheet in FY22. This helped boost its net assets to $1.11 billion, up 8.34% during the reporting period. The company describes its balance sheet as "stable" and notes that its debt is investment grade BBB- rated.

When breaking down the firm's operating segments, its residential and secured loans broke origination records, with their totals growing 28% and 66% respectively. These figures led the company to post record high originations as a group, with 36% total growth yoy.

On the risk front, the company states that COVID-19 is no longer impacting customers, with the projected risk from the virus falling to 0.3% in FY22 from 9.7% in FY20.

What did management say?

Liberty Financial Group chief financial officer Peter Ridel said:

LFG's capital and liquidity position remain in a strong position to continue supporting our customers and business partners. LFG established seven new funding vehicles in FY22 raising $5 billion in new liquidity.

Liberty Financial Group chief executive officer James Boyle also commented:

We continued progress on our mission of providing solutions for free thinkers in need of finance. Generating asset growth while also maintaining ROA and ROE is further evidence of LFG's increasing and durable business value.

What's next?

Liberty Financial Group reported a mixed outlook for the future. On the negative side, it stated economic indicators suggest slower credit growth. It also expects a contraction in its net interest margin (NIM) and will need to outlay greater customer support expenses as higher interest rates bite.

For the positives, its top line will be supported by ongoing refinancing activity as its fixed-rate loans expire. The company will also fast-track growth for its automotive finance products and continue to invest in improving customer service.

Liberty Financial Group share price snapshot

The Liberty Financial Group share price is currently down 20% year to date. By comparison, the S&P/ASX 200 Index (ASX: XJO) is down 7% over the same period.

The company's market capitalisation is around $1.35 billion, including today's price action.

Motley Fool contributor Matthew Farley 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 Scott Phillips.

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