Thanks, Alaric. Good morning and welcome to Latitude Results Briefing for the half-year ending 30 June 2025. I'm Mitchell Hawley, Head of IR , and I'm joined here today by our MD and CEO, Bob Belan, and CFO, Guillaume Leger. In the spirit of reconciliation, Latitude acknowledges the traditional custodians of country throughout Australia and their connections to land, sea, and community. We pay our respects to the Elders past and present and extend that respect to all Aboriginal and Torres Strait Islander people today. I'll now hand over to Bob to begin the presentation.
Thanks, Mitch. Good morning, everyone. Welcome and thanks for joining us today. The past six months have been another period of focused execution for us here at Latitude, and I'm pleased to be sharing that this has translated into a solid set of results, which you'll see in today's numbers. We've maintained growth momentum in the business, built further on the foundations that were laid last year, and continued to execute against our corporate strategy with discipline and pace. Our approach has been consistent: simplify the business, do the core fundamentals well, and deliver strong and profitable growth in our core segments and markets. If you turn to slide six of the presentation, you'll see that in the first half, we added 146,000 new customers to the franchise. That's up 15% year on year.
In our pay division, we processed 28 million credit card transactions through 30 June, which generated $3.5 billion in purchase volume. Both of these metrics are up 13% year on year. This outcome was supported by stronger consumer confidence as interest rates began to ease and by the continued expansion of our market-leading retail partner network, including the recent additions of E&F Trading, Adairs Retail Group, and WebJet, which we expect to contribute to our future growth. In our money division, we originated $783 million in new personal and auto loans for Australian and New Zealand customers, a new record high for the company. Money division receivables grew by 12% year on year to $3.2 billion, also a record high for us, and cementing our market share position as the number two personal loans brand in Australia, behind just Commonwealth Bank.
This growth across our two divisions has lifted Latitude's total interest-bearing receivables to $5.2 billion, up 11% on the same period last year, and it brings our gross receivables to $7 billion, the highest level in five years. There's clearly strong market demand for Latitude's payment and lending products, an opportunity we have and will continue to capitalize on in the months ahead. Shifting to page seven, you'll see the compounding effect of these drivers in our P&L metrics. Very importantly, the volume growth that I've spoken about continues to be delivered at higher yields. Interest income was up 16% year on year, coming in at $588 million, at a yield of 17.3%, which is up 107 basis points versus the first half of 2024. Net interest income rose to $396 million, up 23%, at a NIM yield of 11.7%, which is up 142 basis points year on year.
This was achieved through targeted pricing initiatives and improved funding costs from declining interest rates, along with work done by our Treasury team to further optimize our funding structures and our overall balance sheet. While inflationary pressures have been felt by Australian and New Zealand customers, delinquencies and credit losses remained in line with Latitude's long-run historical averages. Margin and credit management discipline has lifted our risk-adjusted income to $278 million for the half. That's up 20% year on year, with RAI yield now at 8.2%, which is up 77 basis points versus the first half of 2024. Operating expense control remains a key feature of this business, something we believe is vital to ensuring our company's capital is effectively deployed to support sustained growth and strong return for shareholders.
Our cash operating expenses for the half rose marginally by 3%, broadly in line with inflation, but importantly, this includes significant incremental investments put into our new products and capabilities to ensure that we can aggressively compete for and win share sustainably into the future. Pleasingly, our cost-to-income ratio has improved by 700 basis points year on year, dropping to 45.2%. While there's more work to be done to further increase the company's operating leverage, clear progress has been made on this front. Finally, cash profit before tax rose 40% to $93.5 million, and cash impact grew 69% to $46.2 million.
This, combined with a strong balance sheet and a tangible equity ratio of 7%, which is at the top end of our 6%- 7% target range, has allowed Latitude's board to declare an unfranked dividend of $0.04 per share for the first half, up from $0.03 per share for the full year 2024. I want to thank our executives and the broader Latitude team for their commitment and hard work in delivering what I characterize as another strong set of results. We've made significant progress and are very well positioned to capture the opportunities that lie ahead. With that, I'll now turn it over to our Chief Financial Officer, Guillaume Leger, to take you through our first half results in more technical detail. Guillaume, over to you.
Thanks, Bob, and good morning, everyone. It's a privilege to have joined the team and be here for my first results as CFO of Latitude. I'll now take you through the financials from slide 13. In the first half, we delivered strong financial momentum with higher margins, profit growth, and the ability to sustain a return of capital to shareholders. Operating income margin expanded to just over 12%. Cash impact increased 69% year on year to $46 million. As a result, the board has declared an unfranked dividend of $0.04 per share, up from $0.03 at the end of last fiscal year. That dividend is supported by a strong balance sheet with a tangible equity ratio of 7% at the top of our target range.
On slide 14, we note that underlying this result, volumes were up 12% year on year to $4.2 billion, and gross receivables increased 9% to $7 billion, the highest in five years. The combination of favorable pricing and lower cost of funds outpaced higher credit costs by a noticeable margin. Risk-adjusted income yields, an important measure of our return levels, lifted 77 basis points year on year to north of 8%. We held cash operating expenses to $184 million, up just 3% year on year on a normalized basis, even as we invested more than $10 million in new products, marketing, and technologies. That discipline drove a 700 basis points year on year improvement in our cost-to-income ratio, which stood at 45.2% for the period. On slide 15, you can see that both divisions contributed to this growth.
In Money, we originated a record $783 million in new personal and auto loans, up 8% from the prior year, which lifted Money receivables to $3.2 billion, also a new high for the division. In Pay, purchase volumes grew 13% to $3.5 billion, with receivables up 7% to $3.8 billion, boosted by higher average spend per account. Altogether, gross receivables ended the half at $7 billion. Now turning to income and margins on slide 16. Operating income was up 19% year on year, driven by both higher receivables and stronger yields, which increased by 109 basis points year on year to reach 12%. On a half-on-half basis, we saw a further 28 basis points expansion in our operating income yield. That was supported by a relatively stable revenue yield of 17.7% and improvement in funding costs.
Interest expense as a percentage of receivables was down 34 basis points year on year, supported by lower cash rates in both Australia and New Zealand. The successful issuance of new ABS term deal and the refinancing of warehouse facilities at tighter spreads also contributed to reduce our cost of funds. With all these improvements, our group operating income margin landed at 12% for the half. Now moving to slide 17, you will notice that our credit performance remains well controlled. Origination quality is strong and delinquency levels have performed in line with the historical norms.
After adjusting for Money's modification of charge-off methodology last year from 120 to 180 days, which extended the time during which balances are held on book, both the 30+ and the 90+ delinquencies are broadly in line with historical levels, consistent with what we anticipated, given the impact of higher cost of living for households and the normalization back to pre-COVID levels. The delinquency levels have resulted in an increase in net charge-off on slide 18, which have averaged 3.5% over the last 12 months, in line with historical ranges. Overall, credit outcomes are within expectations and the portfolio is well provisioned at 4.35%. Over to slide 19, you can see the effectiveness of the risk return optimization that we've been able to deliver in addition to returning receivables to their highest level in five years. Risk-adjusted income expanded 77 basis points year on year to 8.2%.
That reflects higher revenue yields and lower funding costs, partly offset by normalizing credit costs. Looking ahead, further benefits should come through as the full effect of recent cash rate reductions and spread tightenings flow into our funding arrangements. As shown on the slide, every 25 basis point reduction in cash rates equates to around $10 million in lower interest expense on a full 12-month basis. Finally, operating expenses and operating leverage are presented on slide 20. Cash OpEx was $184 million, down 5% versus the second half of 2024 and up just 3% year on year on a normalized basis. That drove a widening in our jaws to 16%, up from 9% in the second half of 2024, with income growing at 19% against only 3% expense growth in the first half of 2025.
Our cost-to-income ratio improved sharply, down 700 basis points year on year to 45.2%, even as we continue to invest in technology platforms, data, AI, cybersecurity, and marketing. This shows that our cost re-engineering program is contributing handsomely to profits and unlocking capacity to support growth. In summary, Latitude has delivered strong volume growth, expanding margins, disciplined credit management, and improved efficiency, all translating to higher earnings and returns to shareholders. With that, I'll hand it back to Bob to take you through the outlook.
Thanks, Guillaume. Nice summary. Just a couple of statements on the outlook. Looking ahead, I remain quite positive in the outlook for the remainder of 2025. We see the macro environment as being broadly supportive of our business and our business model. On this basis, I'd expect a few things. One, continued asset growth in the back half of this year, supported by strong distribution channels and Latitude's product leadership in both our pay and money divisions. Solid NIMs and RAIs on the back of some of the commentary that Guillaume shared. We expect that to carry through the back half of 2025. Shareholders should expect ongoing strategic investment in our growth, in growth in marketing, growth in technology, growth in our core capabilities, all really essential to driving sustained performance over the long term. With that, I'll turn it over to Mitch.
Yeah, thanks, Bob. Now we'll open up Q&A. I'll just hand back to Alaric for that.
Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star and two. If you are on a speakerphone, please pick up the handset to ask your question. Our first question comes from Sally Hong with Morgan Stanley. Please go ahead.
Good morning, everyone. Can you hear me okay?
We can, yeah.
Great. Thanks for that presentation. That was great. Can you talk to us about the current competitive dynamics in your unsecured consumer lending division, given that rates have come down? It would be great to just understand how that competition intensity has evolved.
Yeah, thanks for your question, Sally. What I would say is we have broadly two sets of key competitors. On one side of the ledger, we're competing for market share against the large banks. On the other side, a number of what I would call sort of fintech competitors who are really keen to grow their businesses. Our role is to make sure that we're paying attention and responding to both. What I'd say is that there has been an uplift in competitive activity in the first half. I think there's certainly been a desire to drive more volume growth, which is what we're seeing in the competitive landscape. In some cases, that's translated into using the pricing lever to do that. What I will say is that we will prioritize risk-adjusted returns and NIM over volume growth. Very pleasingly, in the first half, we've been able to achieve both.
That's great. Do you expect those record origination volumes in the Money division to sort of maintain at this current run rate, or what are really the key drivers of growth here?
Yeah, look, from an outlook perspective, what I would say is we see some nice momentum in the business, and we would expect that volume growth remains strong through the back half of this year. As the environment changes, as the competitive landscape changes, it'll be difficult to predict beyond that, Sally. What I would say is, you know, growth is a key part of what makes this business operate and operate well. We continue to stay focused on it, but with one very sharp eye to managing net interest margins as well.
Right. Just a question on credit quality. The RAIs are rising. Do you anticipate any changes to that provisioning coverage level that you set at 4.35%?
Dave, Sally, I think there's a pretty sufficient and significant buffer between sort of where we're operating at and where the coverage rate is, which is noted on one of the slides in the presentation. You know, the credit performance continues to operate within that target range. Unless we see something materially different than what we're seeing, we'd expect that coverage ratio to be maintained.
Great. Just a question on the interchange fee proposal set up by the RBA last month. Can you comment on any potential impact that could have on Latitude 's fee income going forward?
Yeah, of course. We obviously have a business in New Zealand as well as here in Australia. The New Zealand regulators have also come out with interchange reform that'll go into effect in December of this year. The interchange reforms here in Australia haven't yet been finalized. The RBA has issued a consultation paper. We've analyzed that consultation paper, we understand what the range of options are, and are planning accordingly. What I would say is we don't expect, in our case, for the impacts of the RBA regulation to be hugely significant for us. What I would say is we have a number of unilateral actions that are available to us to respond accordingly. More of a watching brief for what's happening in Australia and prepared to take some level of action in New Zealand to offset the impact.
Great. Thank you. Just one final question. Can you clarify some of the drivers behind the 50% decline in the non-interest income? Like, you know, how much of that was due to the loyalty program costs that's come through in the new David Jones cards and in the 28 Degrees card? Is that going, is that like a one-off decline, or is it like a recurring issue?
Hi, Sally. It's Guillaume here. Yes, you're right. It's mostly related to the loyalty points that we started on David Jones. We have another program also that has points that go into that line that effectively reduce that income. As the book grows, you can expect that we will give kind of similar levels of rewards, potentially to be adjusted with the interchange change in the regime that Bob was talking about.
Great. Thank you. That's all.
Thank you. Your next question comes from Jason Dukes with Dukes Investment. Please go ahead.
Hi, guys. Thanks for the presentation. Just a question on the capital notes. The buyback programs seem to stop in about May. I think it was about $3 million out of the $10 million was executed. Was there a reason for that, and do you anticipate picking that back up again? Thank you.
Thank you, Jason, for the question. We continue to evaluate on a daily, weekly basis when to go on the market and buy these notes. We try to be opportunistic, and we have a whole program. Of course, whenever we're in blackout, we can't go out and do anything in the market. When those blackout periods end, we can go back as well. We want to be opportunistic. We don't want to pay any price for those notes. We have, as I said earlier, a strong balance sheet and cash levels to continue that program.
Thank you.
Thank you. Once again, if you wish to ask a question, please press star one on your telephone and wait for your name to be announced. There are no further questions at this time. I'll now hand it back to Mr. Bob Belan, Managing Director and CEO, for the closing remarks.
Just a quick note to say thank you to everyone who joined today's call. Looking forward to, I know we've got a number of sessions scheduled for next week. For those of you who we have schedules with, looking forward to catching up. Enjoy the rest of the day, and thanks for your time.
That does conclude our conference for today. Thank you for participating. You may now disconnect.