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CREDIT INTELLIGENCE LTD - Corporate Spotlight

Credit Intelligence is a diversified debt restructuring and personal insolvency... Credit Intelligence is a diversified debt restructuring and personal insolvency management businesses within the credit funding sector. Offering the provision of bankruptcy administration services and Individual Voluntary Arrangement proposal consultancy, implementation services and credit funding for corporate and individuals.More

Corporate Spotlight

Credit Intelligence is a diversified debt restructuring and personal insolvency management businesses within the credit funding sector. Offering the provision of bankruptcy administration services and Individual Voluntary Arrangement proposal consultancy, implementation services and credit funding.
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CI1 SOARS ON BNPL OFFERING

CI1 GROWS PROFIT & REVENUE

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Credit Intelligence (ASX:CI1) grows profit and revenue in latest half-year results

Finance

ASX:CI1   
Credit Intelligence (ASX:CI1) - Chairman, Jimmie Wong - The Market Herald
Chairman, Jimmie Wong

  • Credit Intelligence (CI1) is trading red today despite bolstering both revenue and profit of the first half of the 2021 financial year
  • The debt management company increased half-yearly revenue to $7.4 million — 21 per cent higher than the same time in 2019
  • Net profit after tax grew to $1.6 million compared to the $1.25 million over the prior corresponding period
  • Credit Intelligence said its Hong Kong business performed in line with the year despite COVID-19 challenges, but Singapore results were mixed
  • Nevertheless, the company was still able to make some key Australian purchases over the half-year by buying a controlling interest in Chapter Two and YOZO
  • Credit Intelligence said that while the two purchases are not yet material, both companies have strong potential and an exciting future
  • Still, after a strong week on the ASX and a record-high close yesterday, shares in Credit Intelligence are down over 19 per cent this afternoon to 6.3 cents

Credit Intelligence (CI1) is trading red today despite bolstering both revenue and profit of the first half of the 2021 financial year. 


The debt management and payment collection specialist said revenue for the six months to the end of 2020 increased by 21 per cent to just under $7.4 million compared to the $6.07 million over the same half-yearly period in 2019. 


This underpinned a 25 per cent increase to net profit after tax for CI1, which came in at around $1.6 million compared to the $1.25 million over the prior corresponding period. 


However, given some important recent purchases for CI1, the company has not declared any dividend for the first half of the financial year. 


Credit Intelligence said its Hong Kong business performed in line with the year despite the onset of COVID-19 in 2020, with its core business of bankruptcy and individual voluntary arrangement services in Hong Kong continuing to trade well. 


The company said it expects deferrals from the coronavirus will show up in the coming year. 


However, strong government support for small businesses in Singapore meant results from CI1's subsidiary, ICS Funding, were well-below the year before. However, CI1's Singaporean Hup Hoe Credit lending businesses performed well over the half-year, meaning full Singapore results were mixed. 


Nevertheless, Credit Intelligence Managing Director Jimmie Wong said the company's half-year performance was steady despite challenges faced as a result of COVID-19 — particularly considering the key Australian purchases made over the half-year period. 

"We have significant resources and energy being applied to the development of our new exciting businesses, YOZO and Chapter Two," Jimmie said. 


The new Australian businesses 

Credit Intelligence bought a 60 per cent interest in Chapter Two Holdings in July 2020 as part of its Asia-Pacific expansion strategy. 


The in December, CI1 bought a 60 per cent interest in Australian fintech business YOZO. 


Together, the purchases are designed to help Credit Intelligence build up a full suite of debt management solutions for Australian consumers and create a one-stop-shop for small-to-medium businesses (SME) across the country. 


On top of this, the YOZO tech platform helped Credit Intelligence build a buy now, pay later (BNPL) service for SMEs, which it launched this week. 


Credit Intelligence said that while the Chapter Two and YOZO purchases are not yet material, but both companies have strong potential and an exciting future. 


Company shares soared from three cents each to over 11 cents each in just one week following the acquisitions and the launch of the SME BNPL service. 


As such, today's red day could be a mixture of investors taking profits from the company's strong recent performance and the mixed Singapore results. 


Read the full article on The Market Herald here.

CI1 SOARS ON BNPL OFFERING

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Credit Intelligence (ASX:CI1) soars on BNPL offering

Finance

ASX:CI1    
Credit Intelligence (ASX:CI1) - Chairman, Jimmie Wong - The Market Herald
Chairman, Jimmie Wong

  • Credit Intelligence (CI1) has commenced the lending of buy now, pay later company (BNPL) YOZO Pay 
  • The YOZO Pay service uses an artificial intelligence (AI) engine to help small and medium-sized enterprises overcome typical cashflow challenges
  • The YOZO Pay platform offers same-day loan approvals and automatic borrower limit changes
  • On the market this morning, Credit Intelligence is up 53.3 per cent and is trading at 11.5 cents per share

Credit Intelligence (CI1) has commenced the lending of buy now, pay later company (BNPL) YOZO Pay.


YOZO's BNPL service is for small and medium-sized enterprises (SMEs).


The YOZO Pay service uses the artificial intelligence (AI) engine, developed with UTS Sydney, to help SMEs overcome typical cashflow challenges. 


Notably, through this AI engine, the YOZO Pay platform offers same-day loan approvals and automatic borrower limit changes, which are based on repayment histories, with limited human interaction in the process. 


Minimal human interaction in the approval process means the company and customers save significant amounts of time and money. 


A key feature of YOZO Pay includes flexible repayment instalments, which allow the borrower to choose their repayment frequency. 


Executive Chairman and Managing Director Jimmie Wong is excited to commence lending via the YOZO Pay service. 


"This is a truly unique offering and is set to revolutionise lending for small and medium enterprise by providing a product which is not only aligned with the operations and cashflow of the business, but is also faster, cheaper and more transparent for the SME owner to use – allowing them more time to focus on the day-to-day running of their business," he said.


"This SME BNPL service is totally different from other personal BNPL products being offered in Australia right now," he added. 

Credit Intelligence is continuing to collaborate with UTS to further leverage its AI engine to develop new features, such as "24/7 loan approvals". 


On the market this morning, Credit Intelligence is up 53.3 per cent and is trading at 11.5 cents per share at 10:04 am AEDT.


Read the full article on The Market Herald here.

CI1 TO PROFIT FROM WAVE OF BNPL DEBT

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Credit Intelligence (ASX:CI1) is primed to profit from an imminent wave of BNPL debt

Sponsored

ASX:CI1    
Credit Intelligence (ASX:CI1) is primed to profit from an imminent wave of BNPL debt


  • The buy now, pay later (BNPL) sector has transformed the Australian consumer credit market, but with it comes a new age of debt
  • Small, low-cost debts with easy repayment terms may seem like no big deal, but new data from the Australian Securities and Investments Commission (ASIC) shows one in five consumers are missing their BNPL payments
  • Credit Intelligence (CI1) is one of only a handful of ASX-listed companies operating in the debt management space
  • What's more, the company is leveraging the expertise and technology of its recently-acquired subsidiary, ChapterTwo, to create a groundbreaking debt management platform
  • This platform will be designed to target BNPL debts through a ChapterTwo mobile app and customer portal
  • The app will let consumers see all of their debts in one place and make gradual payments towards these debts without ever entering into any formal insolvency
  • To keep the process simple, ChapterTwo will collect customer payments each month and disburse those payments to the appropriate creditors 
  • As a profitable company, the fundamentals of CI1's business model are already in place
  • Now, Credit Intelligence is waiting on the other side of the buy now, pay later mountain to help those who have bitten off a bit more than they can chew

The buy now, pay later (BNPL) sector has transformed the Australian consumer credit market with its promise of low-cost credit and easy repayments.


Companies like Afterpay (APT), with a market cap now over $40 billion, have helped an army of millennials enter into small, seemingly harmless debts. Debts that slowly build up. And debts that these BNPL users have no idea how to manage.


New players in the BNPL space are constantly popping up across the ASX as companies try their best to capitalise on what's quickly become an oversaturated market.


But only a handful of ASX-listed companies operate in the debt management space — a space that will be in high demand when the oncoming wave of BNPL debt finally crashes.


Credit Intelligence (CI1) has noticed this upcoming gap in the market and is working hard to create an ethical and efficient debt management service specifically tailored for BNPL struggles.


Making molehills of mountains

While the idea of small, low-cost debts with easy repayment terms might seem like no big deal, consumers are clearly unwittingly taking on more than they can bear.


Recent research from the Australian Securities and Investments Commission (ASIC) suggests that one in five consumers are missing their BNPL payments.


In fact, in the 2018-2019 financial year, missed payments made up a whopping $43 million in revenue for the six BNPL providers reviewed by ASIC.


And this trend is even more worrying given the renewed explosion of BNPL over the COVID-19 pandemic.


"Buy now pay later arrangements are clearly popular as a payment method. While working for the majority of users, some consumers are suffering harm," ASIC said in November 2020.


"There are regulatory changes coming that will impact the industry, with the design and distribution obligations coming into effect in October 2021," the watchdog warned. And as regulatory changes are introduced to protect consumers from the current BNPL model, Credit Intelligence will be ready to help those already hurt.


The ChapterTwo app

Credit Intelligence will leverage the services of its recently-acquired subsidiary, ChapterTwo, to create the groundbreaking debt management platform.


The unique solution will transform the traditional debt management sector, which is rife with uncaring and unethical practices as debt collectors hound people for repayments.


Credit Intelligence's service would operate differently: rather than take debtors through a court process and enforce recovery, the CI1 approach will be to freeze the debt and halt interest from growing. Credit Intelligence can then manage a performing balance sheet loan.


This will all be made possible through a ChapterTwo mobile app and customer portal.


ChapterTwo has already engaged a leading salesforce partner to build the platform, with plans for the app to be an industry first for debt restructuring.


The app will let Australian consumers see all of their debts in one place and make gradual payments without ever entering into any formal insolvency. The debts can be paid back over a five to seven-year term.


To make it as simple as possible for the consumer, ChapterTwo will collect the customer payment each month and then disburse those payments to the appropriate creditors — meaning the system is efficient and effective for those in financial strife.


"Credit Intelligence is a proven leader in managing debt in a different way, and we have decades of experience across Asia in making debt management a better process," Credit Intelligence Managing Director Jimmie Wong said.


"We are growing, we are profitable, and we will leverage the unique insights we have gained into technology-enabled debt management to transform the experience of millions of Australian BNPL customers," he said.


Importantly, Credit Intelligence said the arrangements between banks and ChapterTwo will generally be interest-free, meaning customers will be able to see their debt balances reduce over time as they make use of the CI1 and ChapterTwo services.


The fact that customers deal directly with ChapterTwo also means they avoid dealing with unforgiving banks and harsh debt collectors so they can maintain their dignity as they pay down their arrears.


A proven business

Credit Intelligence has already proven its prowess in offering consumers ethical debt management and payment collection services.


In fact, CI1 helped pioneer Hong Kong's individual voluntary arrangement (IVA) procedure, which is an alternative to filing for bankruptcy.


IVA arrangements allow debtors to keep their jobs, act as a director of a company, and avoid the stigma associated with bankruptcy as they work to pay back their creditors.


And Credit Intelligence is making a profit while helping others.


The company made over $3.5 million in profit over the 2020 financial year, of which more than a quarter was returned to shareholders through two dividend payouts.


The fundamentals of CI1's business model are already in place. Now, the company is waiting on the other side of the buy now, pay later mountain to help those who have bitten off a bit more than they can chew.


Read the full article on The Market Herald here.

CI1 DEBT MANAGEMENT SOLUTION WITH YOZO

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Credit Intelligence (ASX:CI1): creating a one-stop-shop for SMEs with Yozo

Credit Intelligence (ASX:CI1) - Chairman, Jimmie Wong - The Market Herald

Chairman, Jimmie Wong

  • The explosion of buy now, pay later (BNPL) services is bringing with it an avalanche of debt that people have no idea how to manage
  • However, lending and debt collection are two sides of the same coin — meaning as debt rises, so does the need for effective debt management
  • The current debt collection space is plagued with a reputation of uncaring and aggressive business practices, but ASX-listed Credit Intelligence (CI1) is changing that
  • Through its recent purchase of Australian fintech group Yozo, Credit Intelligence is collaborating with the University of Technology, Sydney (UTS) to revolutionise the financial management industry for small and medium enterprises (SMEs)
  • The enhanced Yozo platform will provide business health checks, analytics, and effective expense management for SMEs
  • On top of this, Yozo will provide ethical BNPL services to SMEs with personalised repayment schedules
  • Importantly, all of these services will be powered by artificial intelligence
  • At 3.3 cents per share with a $47.31 million market cap, Credit Intelligence is highly undervalued — presenting a unique opportunity for shrewd investors to buy in before the business takes off



The explosion of buy now, pay later (BNPL) services in recent years has opened up a wave of opportunities for investors and consumers alike as the availability of low-cost credit soars.


The issue is that as millennials are taking on these small liabilities in droves, they seem oblivious to the mountain of debt growing in front of them. 


This means on the other side of the buy now, pay later boom is an avalanche of debt that people have no idea how to manage — and the services that are causing this upcoming crisis appear to have no intention of stopping any time soon. 


The Australian Securities and Investments Commission (ASIC) has already raised concerns about how recklessly BNPL services like Afterpay (APT) are being used — especially in light of the COVID-19 pandemic — and has flagged potential upcoming regulation to the sector. But it might be too little, too late. 


This means the biggest beneficiaries of the BNPL crisis will be debt managers who can help people manage their finances and hold on to their dignity. 


ASX-listed Credit Intelligence (CI1) has already positioned itself nicely to tackle this oncoming age of new debt. But there's one key factor that differentiates CI1 from its peers in the debt management space: ethics. 


A new age of ethical debt management

There are hundreds of ASX-listed companies in the business of lending, with new competitors in the BNPL space constantly popping up. Yet, lending and debt collection are two sides of the same coin, and there are only a handful of stocks operating in the debt collection space. 


What's more, this space is plagued with a reputation for being aggressive and uncaring to the point where customers are alienated from financial institutions chasing down arrears. 


Credit Intelligence identified this issue and is now breaking the mold with its ethical and moral approach to the debt management space, which is all made possible through the use of artificial intelligence. 


In fact, with the recent purchase of Australian fintech specialist Yozo, Credit Intelligence is gearing up to disrupt the financial management space as we know it. 


High-profile collaboration

Yozo's tech was developed in collaboration with Professor Guandong Xu, a Professor in Data Science and leader of the Artificial Intelligence (AI) Institute at the University of Technology, Sydney (UTS).


With a focus on small and medium enterprises (SMEs), the tech uses AI and machine learning to personalise and streamline loans while also making sure the business knows exactly what it's getting itself into when it takes on new debt. 


Now, Credit Intelligence is enhancing this tech to create a one-stop-shop for all finance needs for SMEs. 


Importantly, CI1 and Yozo are once more teaming up with UTS to develop the new tech features. 


The fact that an organisation of UTS' reputation and calibre is joining forces with a small-cap listed business like Credit Intelligence is a strong validation of the existing technology and the vision behind the Yozo platform. 




A snapshot of the proposed Yozo dashboard.
Source: Credit Intelligence



UTS clearly believes there is something unique about the AI-driven Yozo service. 


Yozo Co-Founder Sunny Zhu said the tech was born out of a desire to help small businesses.


"Not every SME needs funding, but they do need support in other ways," Sunny said.


Essentially, the AI-based platform can connect to a business' electronic banking services and accounting software to analyse all facets of an SME, automatically learning payment schedules and spending trends.


The platform then provides in-depth financial analytics and business health checks to help small businesses minimise their expenses and maximise their repayment potential.


What does Yozo offer?

Yozo is already an established leader in SME lending and financing. But the enhanced features of the AI-based technology will make the business so much more than this.





Yozo provides easy-to-understand health checks for SMEs.

Source: Credit Intelligence

The automatic Yozo health checks will allow SMEs to easily track important financial information through a user-friendly centralised dashboard.


Yozo will also use the learnt payment schedules and spending trends of the business to provide alerts and advice to SME customers, all through AI. 


Yet, the tech goes beyond simple financial management; Yozo's platform works 24/7 in the background of a smartphone or tablet to find the best deals on frustrating but necessary business expenses.


From insurance deals to supply costs to electricity and gas bills, the enhanced Yozo tech will able to automatically find businesses the best available deals and notify them when new and better deals become available


What's more, the deals are fully personalised for each individual business — meaning the tech does more than just scan the web for good prices. 


Instead, the Yozo platform can do all the work necessary to find best-fit deals for SMEs. Take electricity, for example: instead of a busy business owner needing to call different providers, explain their position, hand over their info, and then wait for a response, Yozo does handles the whole process automatically and notifies the SME when a better deal becomes accessible. 




A Yozo membership gives SMEs access to better deals on important expenses.
Source: Credit Intelligence

On top of this, Yozo plans to work with other industry partners, meaning users have the chance to secure even better prices through specific Yozo partner deals.


Yet, while Yozo will continue to provide the intelligent loan services that attracted CI1 to the business in the first place, the company is set to provide a new service for SMEs with the help of UTS: buy now, pay later. 


BNPL without the guilt

By taking advantage of Yozo's AI-driven technology, small businesses can enjoy personalised repayment schedules on their loans and BNPL transactions to ensure they are not biting off more than they can chew. 


"We understand one size does not fit all and every business/industry is different," Sunny said.


"The AI system will analyse and recommend the tailor-made solution for the SME to choose from," he said.


He explained that the Yozo platform will automatically assess not only how much money is coming into a business, but when the business banks its receipts. 


A restaurant, for example, might have new money flowing into the business every day as customers pay for immediate service. An SME offering design services, on the other hand, might only receive full payment once a product has been delivered — meaning it could see weeks between major receipts.


 



Yozo automatically assesses spending limits to design a personalised repayment schedule.
Source: Credit Intelligence

A loan for each of these businesses will need to look very different. Through the Yozo platform, a personalised repayment system will be offered to each business based on their specific business analytics. 


This means SMEs can have all the benefit of low-cost credit without unwittingly taking on more debt than they can bear. 


It also means ethical investors have access to a BNPL service that doesn't survive on the financial struggle of others. 


In contrast to the typical SME lending industry, the Yozo system actually helps SMEs, rather than leaving them high-and-dry in return for a decent commission.


Helping SMEs while turning a profit

Credit Intelligence has already proven itself to be a profitable business with a keen eye for spotting gaps in the market. 


With the company well-placed to benefit off the carnage being created by the buy now, pay later sector, Credit Intelligence's Yozo developments mark the next step to finding ways to help embattled businesses and turn a profit while doing so. 


At the same time, the importance of AI in the debt management market is starting to come to light. 


With AI in the picture, customers can have immediate peace-of-mind that their repayment plans are best-suited to their specific situation, while debt collectors are free to focus on ensuring the debtor holds on to their control and their dignity. 


A 2018 report from multi-billion-dollar consultancy firm Tata Consultancy Services found AI has the potential to revolutionise the debt management market as we know it. 


"[Artificial intelligence] could well prove to be a godsend for banks looking for non-intrusive methods of communication with delinquent customers and bring them back into the mainstream," the report said. 


"AI-powered solutions can potentially transform the way collections are handled and ultimately help banks to improve customer experience and create exponential value"


So, at 3 cents per share with a $39.22 million market cap, Credit Intelligence is highly undervalued — presenting a unique opportunity for shrewd investors to buy in before the business takes off.


Read the full article on The Market Herald here.

CI1 FOCUS ON ACQUISITION GROWTH

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Credit Intelligence (ASX:CI1) enters facility to fund acquisition growth

Finance

ASX:CI1   

Credit Intelligence (ASX:CI1) enters facility to fund acquisition growth



  • Debt restructuring business Credit Intelligence (CI1) has signed and executed a funding facility agreement with Clee Capital
  • By issuing convertible notes to professional and sophisticated investors, Clee Capital has raised $1.35 million in gross proceeds
  • The proceeds raised will help fund the growth of Credit Intelligence's acquisitions, including ICS Funding and Hup Hoe Credit
  • The company has also entered into a further agreement with Clee Capital, for the provision of corporate advisory services



Debt restructuring business Credit Intelligence (CI1) has signed and executed a funding facility agreement with Clee Capital.

Clee Capital has already issued 1.35 million convertible notes to professional and sophisticated investors, at a price of $1 per note. Through this issuance, Clee Capital has raised $1.35 million, before costs.


The issued notes are convertible into ordinary shares at three cents per share, within six months of the issue date. The shares which are issued on conversion will be equal to the value of the note being converted, divided by $0.03.


The notes which have been issued are unsecured and will have an interest rate of 6 per cent. 


Clee Capital will be entitled to a management fee of two per cent, as well as a four per cent capital raising fee on the $1.35 million raised in funds. 


The proceeds raised will primarily be used to fund the growth of businesses which Credit Intelligence has acquired interest in. These include companies such as ICS Funding and Hup Hoe Credit, which have both exceeded their profit guarantees since being acquired.


In addition to the funding facility agreement, Clee Capital has entered a further agreement with Credit Intelligence in order to provide corporate advisory services. 


Credit Intelligence’s Managing Director, Jimmie Wong, commented on the company’s working relationship with Clee Capital.

“We look forward to working with Clee Capital as we continue to grow and develop the CI1 business in Asia Pacific and globally,” he said.


Read the full article on The Market Herald here.

CI1 HHC SEES REVENUE SURGE

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Credit Intelligence’s (ASX:CI1) HHC sees revenue surge

Finance

ASX:CI1    

Credit Intelligence (ASX:CI1) - Managing Director & Executive Chairman, Jimmie Wong - The Market Herald

Managing Director & Executive Chairman, Jimmie Wong
Source: Pitt Street Research

  • Credit Intelligence's (CI1) subsidiary, Hup Hoe Credit (HHC), has experienced a surge in revenue to $4.4 million in the year to September 30, 2020
  • This, along with a $1.9 million profit after tax, was achieved despite a 2-month hiatus due to COVID-19
  • CI1 acquired HHC last year which aligned with its plans of expanding into the Asian credit funding market
  • As part of the agreement, Ci1 is required to issue vendors shares if HHC achieves a profit of more than $700,000 in the 12 months to September 30
  • The company expects it will need to issue up to a further 200 million new shares to the vendor
  • Additionally, Credit Intelligence has appointed Russell Goodman as a Director to strengthen the board presence in Australia
  • Company shares are up 3.85 per cent and trading for 2.7 cents



Credit Intelligence's (CI1) subsidiary, Hup Hoe Credit (HHC), saw a surge in revenue to $4.4 million in the year to September 30 2020.


HHC achieved this revenue and a profit after tax of $1.9 million despite a brief hiatus in March and April due to COVID-19.


Last year, Credit Intelligence acquired a 60 per cent interest in HHC for over $1.2 million. HHC is a Singapore-based registered moneylender which provides short-term loans to individuals. 


The company bought a majority interest in HHC as part of its plan to expand into the Asian credit funding market. 


As part of the sale and purchase agreement that was outlined in October 2019, CI1 are requiried to issue the vendors additional company shares if the profit for the 12 months ending on September 30 2020 exceed $700,000.


HHC's results for the year to September 30 will need to be review and audited, however the company expects it will be required to issue up to a further 200 million new shares to the vendor.


CI1 will seek shareholder approval regarding this at the upcoming Annual General Meeting. The issue may then be adjusted when the determination has been finalised and the audit has been completed.


Director appointment

Additionally, Credit Intelligence has appointed Russell Goodman as a Director, effective immediately.


Russell has over 30 years' experience in stock broking and equity investments - including more than 10 years as the Head of Institutional Australian Equities Dealing Desk for Credit Suisse First Boston.


He was also a fund manager at ANZ Funds Management and K2 Investment Management. Mr Goodman has also held the role of Director and Chairman at Vmoto (VMT).


"We are delighted to welcome Mr Russell Goodman to the Board of Credit Intelligence. This appointment strengthens our Board presence in Australia, as we continue to grow the business in Australasia and globally," Chairman Jimmie Wong said.


Company shares are up 3.85 per cent and trading for 2.7 cents at 11:50 am AEDT.


Read the full article on The Market Herald.

ABOUT CREDIT INTELLIGENCE

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ABOUT CREDIT INTELLIGENCE

Visit Credit Intelligence Website Here


Credit Intelligence is one of the leading diversified debt restructuring and personal insolvency management businesses within the credit funding sector operating in Hong Kong. Credit Intelligence’s main business model includes the provision of bankruptcy administration services and Individual Voluntary Arrangement proposal consultancy, implementation services and credit funding for corporate and individuals.


The company employs over 30 staff, including accountants and legal practitioners, who work with financial institutions to provide creditors and debtors with customised cost-effective debt solutions.


Credit Intelligence has worked with over 30 banks in Hong Kong including HSBC, Standard Chartered Bank, Bank of China and Citibank, and has played a central role in shaping the IVA process in Hong Kong.


Credit Intelligence, through its owned subsidiaries, ICS Funding Pte Ltd (ICS) and Hup Hoe Credit Pte Ltd (HHC) provide credit funding in Singapore.


On 1 July 2020, Credit Intelligence completed acquisition of Chapter Two Holdings Pty Ltd (CTH), a Sydney based debt negotiation business. CTH provides debt solutions and mortgage broking services to individuals who are experiencing financial hardship.

 


LINKS


Visit Credit Intelligence Website Here

BORROWING IS SET TO BOOM

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Borrowing is set to boom, but what happens when the bubble bursts?

Economy

Borrowing is set to boom, but what happens when the bubble bursts?


  • Changes to lending laws, brought in to free up credit and stimulate the Australian economy, are set to trigger a lending boom
  • Essentially, the changes simplify the loan application process, meaning there's less information credit hopefuls are required to hand over when they tap the banks for fresh funds
  • Borrowing was on the rise down under even before the lending criteria was relaxed — In July, the Australian Bureau of Statistics (ABS) reported the sharpest-ever monthly spike in home loan lending
  • But amid a wave of new applications, deferrals are also on the rise, leading some to question whether the boom is sustainable.
  • So, what's in store if the lending bubble bursts, and how will it impact the ASX-listed credit managers?

Changes to lending laws, brought in to free up credit and stimulate the Australian economy, are set to trigger a lending boom.


The modifications, announced by Federal Treasurer Josh Frydenburg last Friday, will make it easier for Australians to apply for a home or personal loan.


It comes as statistical bodies reported a sharp rise in loan applications over the winter months as COVID-19 restrictions began to ease. But amid a wave of new applications, deferrals are also on the rise, leading some to question whether the boom is sustainable.


So, what's in store if the lending bubble bursts, and how will it impact the ASX-listed credit managers?

Change is in the air


Last week saw a bevy of changes introduced to the loan application process by the Federal Government in a bid to free up borrowings.


"Credit is the lifeblood of the Australian economy, with billions of dollars in new credit extended to households and businesses in Australia each month," Treasurer Josh Frydenburg said of the transition.


"Now more than ever, it is critical that unnecessary barriers to accessing credit are removed so that consumers can continue to spend and businesses can invest and create jobs," he continued.


Essentially, the changes simplify the loan application process, meaning there's less information credit hopefuls are required to hand over when they tap the banks for fresh funds.


The modifications were largely welcomed by Australia's big four banks, which argued the system over-complicated the application process.


However, the relaxing of borrowing conditions is poised to further fuel a lending boom, which Financial Counselling Australia CEO Fiona Guthrie told the ABC wasn't without its caveats.


"As we learnt to our cost during the GFC, weaker lending standards mean people will be loaded up with as much debt as possible. There is significant profit to be made in pushing borrowers to the edge," she said.


"Removing responsible lending obligations will free banks up to aggressively push credit onto their customers," the CEO continued.


Borrowing booms

Already, it seems borrowing in Australia is on the rise.


In July, the Australian Bureau of Statistics (ABS) reported the sharpest-ever monthly rise in home loan lending. Over the winter month, the value of new home loan commitments skyrocketed 8.9 per cent.


Additionally, the ABS tabled a rise in personal lending over July. New personal fixed-term loan commitments shot up 6.9 per cent over the month.


Meanwhile, between mid-May and mid-June, the Australian Banking Association (ABA) revealed that business lending was also on the rise, at an increasingly higher rate when compared to business loan deferrals.


Source: ABA


It's not just business loans which are bing put on hold. Significantly, at the end of May, the Australian Prudential Regulation Authority (APRA) reported 10 per cent of all housing and small business loans — valued at a whopping $266 billion —had been deferred.


While the latest quarter of banking figures are pending, the spike in loans and deferrals points to an avalanche of defaults in the near-term. And while a credit bubble is set to stimulate the economy, it's also set to leave Australians dealing with the aftermath for years to come.


Bubble bursts

Of course, an increase across home, personal and business lending, encouraged by the relaxation of lending laws, will also lead to a rise in defaults. Coupled with low interest rates and the current recession, it'll lead to a major Australian credit bust.


Once the lending bubble does burst, the spotlight will be on credit managers. The fallout from the relaxation of lending laws and a wave of debt will challenge managers to work with those in debt and pick up the pieces. So how are ASX-listed credit managers positioned to respond to the impending burst?


Credit Intelligence (ASX:CI1)

Significantly, Hong-Kong based Credit Intelligence (ASX:CI1), while listed on an Australian exchange, has minimal exposure to the Australian lending market — in fact, it made its first Australian acquisition in July.


In its FY20 report, released today, Credit Intelligence tabled $13.6 million in revenue, up 125 per cent on last financial year's figures.


Even more significantly, CI1 increased its profits nearly fivefold over the period. The debt collector went from just over half a million in profit over FY19 to land $2.54 million in the black at the end of FY20.


Credit Intelligence's Australian buy, a 60 per cent stake in Sydney-based debt solutions business Chapter Two Holdings, is yet to have a financial impact on the company.


However, as lending booms and the bubble bursts down under, the acquisition positions CI1 to make moves in the Australian market.

Today, Credit shares are trading grey for 2.8 cents.


Credit Corp (ASX:CCP)

ASX-200 lister Credit Corp (ASX:CCP) is another publicly-listed credit manager which recently released its financials.

The billion-dollar stock also held onto a profit over FY20, albeit a much smaller one than recorded in the previous year.


At the end of June, Credit Corp recorded $15.5 million in net profit after tax, down from FY19's $70.3 million.


Speaking to the results, CCP's Remuneration and HR Committee Chairman Eric Dodd said the group had focussed on cash generation as COVID impacted its business, setting it up for the future.


"These operational achievements have put the group into a strong position. With $400 million in cash and undrawn credit lines the group can continue to invest and look for opportunity during a period of uncertainty," Eric stated.


"Pricing and risk settings have been adjusted and the group remains a trusted partner of its banking client base during a period of renewed interest in debt sale and an outlook which suggests rising sale volumes," he continued.


As lending laws relax, debt booms and deferrals spike, investors will be watching ASX-listed credit managers to see how they perform in the wake of the credit bust.


Read the full article on The Market Herald here: https://themarketherald.com.au/borrowing-is-set-to-boom-but-what-happens-when-the-bubble-bursts-2020-09-28/

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