SYDNEY - Australian buy-now-pay-later company Zip Co Ltd said it was weighing an impairment charge on its newly acquired U.S. and European businesses and "deprioritising" a cryptocurrency offering, a blow to the sector's once formidable growth prospects.

The company which saw its stock soar during a COVID-19 online shopping frenzy, only to slump this year, also said it was exiting Singapore and stopping business lending due to "significant and swift changes to the broader macro and capital environment".

The update reflects a deteriorating outlook for BNPL operators which have seen valuations collapse as inflation pushes up interest rates, squeezing consumption. This month, a capital raising by Sweden's Klarna valued it at $6.7 billion, from $46 billion in 2021.

For Zip, Australia's second-largest BNPL behind Block Inc's Afterpay, the pandemic boom spurred several acquisitions including New York-based Quadpay, valuing the company at $269 million.

Zip then bought Dubai-based Spotii and Czech Republic's Twisto for a total A$160 million ($110 million). It planned to buy rival Sezzle, before pulling out this month.

"Reflecting current market conditions, the company has reviewed the goodwill against the Spotii, Twisto and Quadpay assets and is assessing the need to take an impairment charge," the company said.

Zip did not give the size of the potential charge, but CEO Larry Diamond said cancelling the Sezzle buyout would see Zip, which is yet to post a profit, "reach cash EBTDA profitability earlier than anticipated".

Like many financial firms, Zip planned to tap the exploding popularity of cryptocurrency trading with younger customers by promising a digital asset trading platform by mid-2022. That was now "deprioritised", it said.

In a limited trading update, the company said net bad debt in Australia, which is payments more than 180 days overdue, grew to 3.82% of receivables at June 30, from 3.4% at March 31, a "peak in losses".

Zip shares rose 4.5%, against a flat market, but are still down 85% since January.

"Credit risks remain elevated," UBS analyst Tom Beadle said in a research note, calling Zip's market filing "another trading update heavy on top-line detail without meaningful profitability metrics we require to assess Zip's progress".

($1 = 1.4501 Australian dollars)

(Reporting by Byron Kaye; Editing by Jacqueline Wong and Stephen Coates)