DirectMoney Slides - May 2015
- 1. Investor presentation May 2015 An opportunity to participate in a technology company positioned for substantial growth in the Marketplace Lending sector
- 2. Investment Case Disruptive product – Innovative warehouse model enables loans to fund immediately rather than the 3-10 days for “classic P2P” lenders – Scalable technology - marginal cost of additional capacity is low Highly experienced team – Banking and funds management – Technology architecture and digital marketing Untapped growth market – Few domestic competitors – Savers and personal loan customers are underserviced by traditional providers – Banks moving out of personal funding market due to Basel III requirements High margin – Australian unsecured consumer lending is 3% of bank assets and 16% of profits Barriers to Entry – Heavy regulation & licensing requirements May 2015 2
- 3. Marketplace Lending Growth May 2015 3 US$7bn of volume on top 5 platforms in 2014; MPL / P2P volumes have grown at 131% CAGR since 2009 • 2005: Zopa launched in the UK; • Lending Club - originated $4.3bn+ in 2014 MPL / P2P Gross Annual Volume $bn Source: Lending Club, Prosper, Funding Circle, Zopa, RateSetter, Liberum Source: Lending Club, Prosper, Funding Circle, Zopa, RateSetter, Liberum CAGR: 131% - 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 2009 2010 2011 2012 2013 2014e Lending Club Prosper Ratesetter Zopa Funding Circle
- 4. A Global Market May 2015 4 P2P/MPL lending is a global phenomenon: largest markets US, China and UK * Estimate based on historic and Celent forecast $2.4bn = 2013 annual gross volume $1.4bn $1.9bn* $
- 5. Marketplace Lending Model May 2015 5 Revenue fee structure for MPL Platforms During the Loan • Platform revenue from borrower: Upfront 2-5% of principal. • Platform revenue from lenders: Annual fee of 1-2% of loan balances under management (details vary by platform) • Credit risk managed carefully by the MPL - but passed through to lender/investor • Asset maturities matched with obligations to lender/investors BorrowerLender/Investor Platforms Principal + Interest Principal + Interest Annual Fee of 1-2% At Start of Loan Lender / Investor Borrower Platform s PrincipalPrincipal Upfront fee 2-5%
- 6. Cost Advantage May 2015 MPL / P2P is the ‘Amazon’ of financial disintermediation; with costs 60% lower than banks. Cost base comparison 2015e: Banks vs. Lending Club (costs as % loans outstanding) Source: McKinsey / Lending Club • Lending Club expects to be 60% more efficient than the equivalent banking business, on costs as % of loan balances, by 2015e • MPL / P2P has no expensive branches/ legacy systems/ expensive regulatory capital to service 220 10 170 100 30 30 35 100 695 0 100 200 300 400 500 600 700 Branch FDIC CS/Collection… Origination G&A Other IT Marketing TotalOPEX OPEX/TotalBalanceOutstanding(bps) Banks Cost inefficiencies High margins Restrictive lending 39 19 20 28 29 135 270 0 100 200 300 400 500 600 700 Branch FDIC CS/Collection Billing/Fraud Origination G&A Other IT Marketing TotalOPEX OPEX/TotalBalanceOutstanding(bps) Peer 2 Peer Government endorsed Attractive Rates Convenient & flexible 425bps Lower Operating Expenses 6
- 7. Technology Opportunity May 2015 Internet sourced credit information has become a robust way to underwrite loans effectively and cheaply Web-enabled game changers in lending Big Data, social media Bank A/C Scraping Credit Scoring Can run credit check on any individual or company for $8 in seconds Use of big data to enhance credit scoring Automated analysis of borrower’s bank a/c; cash flow health 7
- 8. Australian Banking Market May 2015 8 Big 4 Australian banks are currently an oligopoly – vulnerable to disruption • Australian banks currently enjoy an oligopoly with an average RoE of 15.4% in 2012/13 (international peers well below 10%) • charging above average rates and fees • unsecured consumer lending is 3% assets and 16% of profits Average RoE between 2012-2013 Source: Liberum, Bloomberg 0% 1% 2% 3% 4% CommonWealth Bank Wespac ANZ NAB JP Morgan RBS core BoA Lloyds Average PBT as % of RWA between 2012-2013 0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20% CommonWealth Bank Wespac ANZ NAB JP Morgan RBS core BoA Lloyds Source: Liberum average average average average
- 9. Consumer Loan Asset Class Performance May 2015 Consumer Finance Loans – attractive asset class ‘through- the-cycle’ in US, Australia (and elsewhere) • In Australia since 2007: • the average net yield on Consumer loans is 10.9% • with a trough annual return of 8.0% • Consumer finance returns are less volatile than SME US Credit Card Historic Net Yields- Annual % Source: Liberum, Bloomberg, Federal Reserve Australia Consumer Loans: Historic Net Yield – Annual % Source: RBA, Australia bank company data, Liberum estimates 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0% 18.0% 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Net Yield Charge off Average Net Yield 0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0 16.0 18.0 2007 2008 2009 2010 2011 2012 2013 Net Yield Charge off Average net yield 9
- 10. DirectMoney Model Advantage DirectMoney’s model is superior to competitors – DirectMoney model is designed for higher growth and earlier profits – Pooled retail fund integrated with lending platform providing cost efficiency – Unit trust is a safer investment product and familiar to retail investors – No fractional bidding = lower software costs – Whole loan sales are now the industry direction – Loan warehouse funding = faster loan settlement and drives borrower demand DirectMoney can lead and dominate the sector’s growth – Registered the world’s first regulated Personal Loan Fund in 2008 • US Marketplace lenders followed this regulated model from 2009 – Experienced team of bankers and financial services technologists – Launched personal loans site October 2014 with a capacity of $2m per month Vision – Build multi $billion AUM – Multiple listed lending funds offering safe, liquid, high yield income products May 2015 10
- 11. DirectMoney Performance May 2015 Strong start for Direct Money relative to leading UK peers • In its first 5 months, DirectMoney has achieved 67% faster growth than UK peers Funding Circle and RateSetter- 2 of the UK P2P sector leaders. • DirectMoney’s fast growth is underpinned by its scalable warehouse + fund model allowing for immediate loan fulfillment investment efficiency and familiarity • Institutional capital is likely to further accelerate DirectMoney’s volumes relative to peers. First 5 months cumulative volume: Direct Money, Funding Circle and RateSetter $m Source: Liberum, Companies 0 1 2 3 4 5 6 RateSetter Funding Circle Direct Money Millions 1 2 3 4 5 6 First 60 months cumulative volume: Direct Money, Funding Circle and RateSetter $m 0 100 200 300 400 500 600 700 800 1 11 21 31 41 51 Millions RateSetter Funding Circle Direct Money Source: Liberum, Companies 12
- 12. BOARD Executive Chairman: Stephen Porges – 30+ years financial services; 5 years CEO Aussie Home Loans Director: Campbell McComb – Former CEO listed fund manager, stock broker, CIO of a large family office Director: Craig Swanger – 20+ years investment banking; Former CIO Macquarie Retail Bank; Head Cap Mkts FIIG EXECUTIVES Founder: David Doust – 30+ years accountant, banker, IT project manager; Silicon Valley startup CEO Chief Operating Officer: Peter Beaumont – 30+ investment banking, capital markets sales management, engineering background Credit Manager: Marianne Young – 20+ years credit experience with Westpac; branch credit compliance auditor; training officer Chief Technology Officer: David Russell – 13 yrs IT senior architect, 8 yrs at IRESS share trading systems, Comp Sc. Honors Digital Marketing Manager: Jason Theofilos – Senior software engineer at IRESS, digital marketer at $350m Catch Group Investor Distribution Manager: David Marshall – 30+ years experience in credit policy, capital markets and funds management research May 2015 12 DirectMoney Board & Team
- 13. Timetable & Capital Raising May 2015 13 Oct 2014 • Personal loan online origination platform launched May 2015 • DirectMoney Personal Loan Fund - Retail launch Jun 2015 • DirectMoney Management Company listing - $10 to15 million Q4 2015 • Personal Loan Investment Company listed on ASX Investment Offer • $10-15 million listing - June 2015 - 20-27% equity The funds will be used for: • 75% of funds raised will be used to fund loans for sale • 25% will be used for working capital – Loan marketing – IT, salaries, rent & general, legal
- 14. Investment Highlights Banking Industry Disruption Play – 18 yrs after internet disrupted media & retail; driven by crisis & tech consumers High Margin, High Growth Opportunity – 10%+ rate gap; 150% US lending growth; 15% per month growth plan Experienced Team – 100+ years funds management, banking, credit and IT experience Barriers to Entry – Heavy regulation & licensing requirements; 5 years experience in MPL Strong Early Traction – Capacity built for $3m in loans per month – expect to exceed year 1 budget Early Breakeven – Breakeven in two years – better record than other MPL players May 2015 14
- 15. Disclaimer Some of the information contained in this presentation contains “forward-looking statements” which may not directly or exclusively relate to historical facts. These forward-looking statements reflect DirectMoney’s current intentions, plans, expectations, assumptions and beliefs about future events and are subject to risks, uncertainties and other factors, many of which are outside the control of DirectMoney. The information is given in summary form and includes financial and other information and does not purport to be complete. Information in this presentation, including forecast financial information should not be considered as advice or a recommendation to investors or potential investors and does not take into account investment objectives, financial situation or needs of any particular investor. Important factors that could cause actual results to differ materially from the expectations expressed or implied in the forward-looking statements include known and unknown risks. Because actual results could differ materially from DirectMoney’s current intentions, plans, expectations, assumptions and beliefs about the future, you are urged to view all forward-looking statements contained in this presentation with caution. To the maximum extent permitted by law, neither DirectMoney nor its related bodies corporate, directors, officers, employees, agents, contractors, advisers nor any other person, accepts, and each expressly disclaims, any liability, including without limitation any liability arising from fault or negligence, for any errors or misstatements in, or omissions from, this presentation or any direct, indirect or consequential loss arising from the use of this presentation or its contents or otherwise arising in connection with it. May 2015 15