Will cyber-attack undermine Latitude's share price?

ASX-listed consumer credit company Latitude Financial (ASX: LFS) is at the centre of a cyber attack scandal that could undermine its share price.

The hack is believed to be the largest cyber attack on an Australian financial institution and could affect millions of individual customers.

Latitude's share price has held up well since reports of the attack emerged, however, with its CEO committing to minimisation of client impacts.

Cyber attack could affect millions of Australians

The hacking breach that has hit Latitude Financial could potentially affect millions of Australian customers, particularly given the size of some of the company's leading retail partners.

Latitude announced on 16 March that a cyber attack on the company had compromised more than 330,000 personal records. Shortly afterwards the company revised these numbers upwards, announcing on 27 March that hackers had accessed 6.1 million customer records, with some dating back to 2005.

Latitude further estimates that hackers obtained nearly eight million driver's license numbers and around 53,000 passport numbers.

The incident is reportedly the largest cyber-attack ever launched by hackers against an Australian financial institution.

The theft of personal information leaves affected customers vulnerable to digital fraud, while also necessitating the trouble and expense of replacing their compromised identification materials.

Latitude Financial CEO Ahmed Fahour warned customers to be on the watch for any suspicious behaviour in relation to their accounts. He said the company would mitigate the impact of the breach by helping out any affected customers.

"We are committed to working closely with impacted customers and applicants to minimise the risk and disruption to them, including reimbursing the cost if they choose to replace their ID document."

Latitude's Australian BNPL foray shelved

The announcement of the cyber attack arrived just after Latitude shelved its foray into Australia's burgeoning buy-now-pay-later (BNPL) market on the grounds of regulatory uncertainty.

In February, Latitude's BNPL vehicle LatitudePay announced it would no longer be available in Australia from 11 April.

"We have decided to stop offering LatitudePay services in Australia as a consequence of the uncertainty surrounding the future regulatory environment for the BNPL sector," the company said.

LatitudePay, which reportedly has over 500,000 customers, was originally available as a payment option with major retailers including JB Hi-Fi, Kogan and The Good Guys.

Latitude's share price yet to be affected

Latitude's share price has held up surprisingly well in the wake of the cyber-attack, despite its unprecedented scale for the Australian financial sector.

At the time of writing Latitude's share price was up 6.09% over the past month, albeit nearly 7% down year-to-date (YTD).

Headquartered in Melbourne, Latitude is one of the largest non-bank providers of consumer credit in Australia, with a focus on unsecured personal loans, vehicle loans and credit card payments. The company also has operations in New Zealand and is making forays into the markets of Singapore and Malaysia.

Flagship products include the Latitude GO Mastercard and Gema Visa credit cards, which Latitude says offer consumers longer-term interest-free monthly instalment plans of up to $30,000 for as long as 60 months.

The company counts some of Australia's leading retail brands as its merchant partners, including Harvey Norman, JB Hi-Fi and The Good Guys. It has also entered partnerships with international tech giants Apple and Samsung.

According to its FY2022 annual report, Latitude remained profitable in 2022 despite the lingering impacts of the Covid pandemic. Its net profits after tax in 2022 were $153.5 million for a return on equity of 10.1%, including dividends of 11.85 cents per share fully franked.

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