Wonga defends reputation as profits rocket

 
Tim Wallace
Follow Tim
ONLINE lender Wonga yesterday claimed it is a “good corporate citizen” and that it believes the political campaign against its short-term loans is beginning to die down.

The company recorded post-tax profits of £62.5m for 2012, a rise of 36 per cent on the year, on revenues of £309.3m, up 67 per cent.

Loan volumes increased 68 per cent to £1.2bn, while the default rate on those loans edged up to 7.4 per cent.

Wonga has been criticised for charging high rates of interest – it advertises a representative APR of 5,853 per cent.

However, the firm argues its loans are too short term to run up interest rates anywhere close to that level, that it stops charging interest on late payers beyond the 60-day mark, and that it takes care only to lend to those who can afford it.

“We turn down two-thirds of those who apply for loans. We are disincentivised from taking decisions to lend to those in financial trouble,” said chief executive Errol Damelin.

“We are the biggest brand so it is easy shorthand to associate us with bad practice in the industry.”

Wonga expanded into Canada and South Africa in 2012, and revealed it has now hired staff in Poland and Spain to launch in those countries.

As part of that growth its headcount is up from 450 last year to an expected 650 at the end of 2013.

It is not paying a dividend to shareholders as it wants to retain the money to invest.

The group is also rolling out PayLater, a consumer finance service for online retailers, as well as Wonga for Business to tap the small companies market.

“If a firm has a short-term cash flow problem or a bit of machinery has broken down, they can go online that day and be funded. It is massively valuable and reduces the perceived risk of doing business,” said Damelin, arguing SMEs want the same rapid service as consumers.

“Our target is the digital generation, the kind of people who wouldn’t contemplate ordering a book and waiting three weeks for it to be delivered, people who are prepared to pay a premium for a prime service.”

Despite the growth the executive insisted there are no plans yet for floating on the stock market, arguing Wonga does not yet need extra funds for investment.