AFG broker settlements surge

The company cited its ongoing diversification and strategy across its business lines for the result, with higher settlements across all divisions.

Settlements under the group’s residential segment were up by 47 per cent to $30.8 billion, as the Australian mortgage broker market share crept up to 67 per cent. The residential trail book was up by 9 per cent to $173.8 billion.

Meanwhile AFG Home Loans’ settlements had close to doubled, surging by 90 per cent to $2.8 billion. The division’s trail book had risen by 14 per cent to $12.1 billion.

The growth had continued into January, with AFG Home Loans seeing 33 per cent more lodgements compared to a year prior.

According to the group, one in 10 Australian residential mortgages are now arranged by an AFG broker.

“Customers value the competition, choice and convenience a broker providers. AFG is well placed to continue to capitalise on this trend,” a slide in the group’s investor presentation stated.

In-house lending division AFG Securities managed to grow its loan book by 36 per cent, to $4 billion, while its settlements almost tripled, rising by 192 per cent to $1.3 billion.

At the same time, the loan book for white label products under the AFG Home Loans business had grown by 6 per cent, to $8.1 billion.

Like many other lenders, AFG had faced profitability challenges but AFG chief executive David Bailey commented the company had taken the difficulties head-on by focusing on higher margin products Link, Retro, Lite and SMSF.

“We set the goal at the commencement of the financial year to continue to build the AFG Securities loan book and also introduce some higher margin products,” Mr Bailey explained.

“Both of these actions will ultimately assist in offsetting margin pressures within this part of our business and this is one of the most pleasing aspects of this half’s result.”

He also added the removal of the term funding facility for the major banks had “lifted the competitive advantage of the non-major lenders”, with AFG Home Loans expected to benefit from the return to a more level playing field.

Meanwhile, commercial settlements had jumped by 83 per cent to $1.8 billion, while the trail book for the segment had climbed by 14 per cent to $9.9 billion.

AFG’s 32.2 per cent stake in Thinktank had contributed $2.6 million to earnings, on the back of high settlements across its own distribution channels.

The loan book for AFG’s commercial lending segment had also crept up by 14 per cent, to $9.9 billion.

“Asset finance/commercial distribution and lending are ‘under-served’ markets and we have taken our first steps to capitalise on this opportunity,” a slide in the group’s investor presentation stated.

Investing in tech

During the half, AFG had acquired a 75 per cent stake in asset finance aggregator National Finance Alliance, which trades as Fintelligence, and it had also bought a 70 per cent stake in mortgage broker software provider, BrokerEngine.

The purchase of Fintelligence has added 350 brokers to AFG’s broader network, which now has a combined tally of 3,525.

Mr Bailey expects the purchases will build on the company’s scale and support broker opportunities.

“Investment in our own technology and recent fintech acquisitions position us to maximise growth opportunities and continue to improve the broker and customer experience across multiple asset classes,” Mr Bailey said.

“In addition, Fintelligence provides an in-house referral service for our residential brokers and a direct-to-consumer web presence. The work to unlock the potential for future growth with the development of new products to distribute and securities in this asset class is underway, which will help broaden the earnings base of AFG into the future.”

Meanwhile, BrokerEngine will integrate with AFG’s technology platform, although it will retain its brand and product offering to the broader Australian broker market.

Looking ahead, Mr Bailey has an optimistic outlook. The group expects to harness open banking to position it ahead of its competitors, while both political parties have expressed support for the retention of the existing broker remuneration model.

“While we remain mindful of the changing economic environment, unemployment remains low,” he said.

“We are positive about the outlook of the mortgage market and the opportunity for AFG to accelerate our growth in other asset classes.”

[Related: AFG broker lodgements hit new record]