Plenti soars after striking deal with NAB for EV, solar loans

Plenti listed on the ASX three years ago at $1.66, but its share price has sagged since the initial public offering on concerns that rising interest rates and funding costs would push up bad debts and squeeze margins, despite higher loan origination volumes. It closed at 34¢ on Monday. By mid-afternoon on Tuesday, it was trading up 38 per cent at 47¢.

For NAB, the partnership will allow it to refer customers to Plenti’s slick digital on-boarding and fulfilment platform to assess car and renewable energy borrowers, without having to invest in the digital infrastructure itself.

The car and EV loans will be funded by NAB, held on its balance sheet, with credit risk borne by the bank. The product – branded “NAB powered by Plenti” – is the first secured consumer car loan offer for the bank, and is slated to launch between April and June next year.

The deal provides capital-light funding diversification for Plenti, and a new origination channel for the big four bank. NAB will be responsible for marketing, while Plenti will provide the application technology, credit assessment, loan settlement and ongoing customer management.

Plenti’s chief financial officer, Miles Drury, said the deal provided a “significant financial opportunity” for the company, which would receive upfront payments from NAB.

Plenti said with originations of $500 million and an average loan book of $1 billion, it would be receiving about $20 million in annual revenue. The fintech said it was complementary to its existing products which are mostly sold by brokers, who are excluded from the new arrangements as NAB seeks to build out its direct-to-customer offering.

The renewable energy finance product will be launched to NAB customers in the first half of calendar 2024. These will be funded by Plenti, which will pay NAB a referral fee under a deal with an initial term of five years, extendable for a further five.

“The NAB deal is a great validation of the work Plenti has been putting into creating a technology platform that can originate, assess and manage loans efficiently at scale,” said Alex Shevelev, portfolio manager at Forager Funds Management, which holds Plenti in the Forager Australian Shares Fund.

“And the equity participation by NAB at share prices over double the price before the deal was announced is a further validation that a highly sophisticated player sees plenty of value in Plenti’s business.”

Unified Capital Partners senior analyst James Bisinella said the agreement “adds a material growth arm to Plenti, alongside the core group performing strongly” and could result in its cash profit growing by more than three times.

Plenti is just profitable, eking out a $1.5 million interim cash profit in results released on Tuesday, having written $624 million in new loans in the first half, up 12 per cent, for a $2 billion lending book.

Its 90-day arrears rate is just 45 basis points, reflecting its prime borrower book that spans car loans, other personal loans and specialist renewable energy products.

The deal also provides NAB with rights to acquire up to 5 per cent of the business via on-market purchases and a further 10 per cent via two additional placements. The first placement includes a 75¢ floor price while the second placement has been set with a floor of $1.20, driving the stock higher on Tuesday morning.

Plenti said while it was facing funding cost pressures, it had been able to hold its lending margin by pushing through higher prices to customers and expected to grow revenue in 2024 to over $200 million.