Q: What will the effect of an interest rate lowering cycle be on Propel Holding’s earnings?
5i Research Answer:
With lower interest rates, traditional finance firms will likely see loose underwriting conditions, leading to potentially more clients being accepted by traditional banks. This could lower the level of interest for PRL's products, however, PRL is also likely to continue benefiting from trends in consumers seeking digital lending, and from its geographic expansion into new markets. Using GSY as a proxy, even though rates rose significantly in 2022 through to today, it has nearly fully reversed its 60% drawdown and is now nearing all-time highs.
Lower rates might temporarily affect its earnings, but we feel its long-term tailwinds are too strong to be materially impacted by lower rates.