AFG reports settlements, profit spike

The aggregator – which also revealed a redesign of its brand logo – has reported an underlying (cash) profit increase of 41 per cent to $24.88 million.

Residential settlements for the HY21 had jumped 24 per cent to $20.92 billion, which the aggregator has attributed to government stimulus supporting increases in first home buyers, as well as upgraders and refinance activity.

Speaking to The Adviser about the increase, AFG CEO David Bailey said: “Customers sought out brokers to help facilitate refinances and new transactions. I think brokers adapted quickly to the new way of working compared to a branch structure and enabled transactions to be fulfilled quickly.

“Our results are a testament to the hard work all brokers are doing for their customers during a period of crisis and uncertainty. What we’ve found is that broker market share has increased over this time.”

However, Mr Bailey said AFG had seen demand for refinance subsiding, and being replaced by demand from first home buyers and home owners who wished to upgrade their current homes.

“An example might be a customer who has been in lockdown for two or three months and working from home with his or her partner and children. They may decide that they need a bigger house or want to move to a different location because it’s just not working for them,” he told The Adviser.

The aggregator has also reported year-on-year growth in residential settlements in each month of HY21. The residential trail book had increased by 5 per cent to $160 billion.

On the other hand, AFG Securities settlement volumes had decreased by 35 per cent to $446 million for the half, driven by reduced credit appetite during uncertain market conditions, although AFG said that volumes have since returned, reflecting a stronger credit appetite.

Commenting on the results of AFG Securities, Mr Bailey said: “As mentioned in our FY 2020 results, as the pandemic hit we adopted a cautious approach to lending within AFG Securities, which drove a greater focus onto white label arrangements.

“This ultimately impacted the AFG securities lodgement pipeline as we entered the new financial year.

“From my perspective, the pleasing aspect is that as the lending environment stabilised over the half, we expected the flows of business to return to AFG Securities products, and this is now occurring.”

AFG Securities’ loan book has increased by 18 per cent to $2.96 billion, and it settled over $100 million in December, Mr Bailey added.

“Looking to current trading conditions, AFG Securities recorded higher lodgement volumes in December 2020 and January 2021 compared to the prior year,” he said.

“January 2021 has closed at levels 3 per cent above January last year. Importantly, AFG Securities’ arrears remain well below industry averages, while COVID-19 hardship numbers continue to improve.”

AFG Home Loans’ trail book had increased 9 per cent in 1H21 to $10.68 billion, while settlements volumes had decreased by 6 per cent to $1.47 billion. The lender reported a changing mix towards white label funders as AFG Securities had reduced its credit appetite during the initial stages of COVID-19.

However, the aggregator said that since July 2020, volumes had increased steadily as the funding market had stabilised, and there had been a measured increase in credit appetite and mix back towards AFG Securities during H121.

Only two customers are still accessing assistance through the COVID-19 loan repayment deferral scheme, while 37 customers, or 0.57 per cent, are making payments under a COVID-19 interest only arrangement.

The contribution to profit from AFG’s 33 per cent equity investment in Thinktank increased by 102 per cent to $2.31 million in H121, the aggregator reported.

Commenting on the overall results, Mr Bailey said: “The resilience displayed by the company’s staff and our brokers in their unwavering support of their customers, through what has been one of the most challenging periods our community has ever faced, has been remarkable.

“The first half performance demonstrates the company is delivering strong returns through a commitment to a shared value business model, diversified income streams and a resilient core that delivers choice, competition and value to Australian borrowers.”

Looking ahead, Mr Bailey said: “We head into the second half of the 2021 financial year, with a strong balance sheet, no debt, a solid pipeline of lodgements and a good cash flow. We are well equipped to continue to deliver value to our brokers, choice to customers, competition to the lending market, and returns for shareholders.”

[Related: AFG creates ‘BID coach’ role]