Shareholders greenlight bank-aggregator merger

The planned merger between Kalgoorlie-based bank Goldfields Money and Sydney-based mortgage aggregator Finsure has received shareholder approval and is expected to be complete by 14 September. 

Goldfields Money executive director and CEO Simon Lyons said that the combined entity will be “transformational” for both parties, claiming that the merged entity will be the a “truly scalable digital challenger bank” that will distribute loans through the broker channel.

“[It will] offer consumers a new banking experience and provide a viable alternative to the major banks,” the CEO said. 

“We will be using technology to challenge the way banking is done, adapting to our customers’ needs, reducing costs and striving to innovate. Our new digital bank will be a trailblazer in the banking industry and offer customers a personalised experience.”

Finsure managing director John Kolenda said that the merger will provide “enormous” benefits to the aggregator’s broker network, such as “boosting” the network’s service proposition by allowing them to offer “better home loan products and rates”.

“There will be greater opportunities to expand our product offerings to our brokers and provide them with greater product choice and customer solutions. They will have access to leading mobile lending solutions, great deposits and other leading products. Our brokers will also be able to acquire ownership in the new entity given we will be listed on the ASX,” Mr Kolenda said. 

“The merger with Goldfields Money is a landmark in the proud history of Finsure.”

The Kalgoorlie-based bank announced at the start of the year that it had signed an agreement to merge with Finsure by acquiring 100 per cent of the diluted shares in Finsure through the issue of 40.75 million fully paid ordinary shares to the aggregator’s shareholders.

However, one of conditions of the merger was that Goldfields Money ensure that the merged entity will have sufficient regulatory capital.

As such, the bank announced this week that it had received $20 million in commitments from a consortium of local and international investors through the issue of more than 15.3 million fully paid ordinary shares at $1.30 a share.

Goldfields Money, which started out as a small credit union about five years ago and recently received approval to label itself a bank, presented a list of reasons why the merger would be a good move, including the expectation that the acquisition will provide the bank with access to diversified revenue streams, including aggregation, wholesale product offerings and loan writer subscription fees.

The bank last month booked a loss of $406,609 in FY18, after its profit was hit by $938,862 in bills related to a takeover offer by non-bank lender Firstmac Holdings and the merger with Finsure.

Goldfields Money also expects to benefit from the aggregator’s presence in the east-coast markets of the nation, noting that its loan book predominantly comprises loans from the west coast of Australia.

Lower funding costs through Finsure’s distribution channels for deposit products was outlined as an expected benefit of the merger.

“Once added to the Finsure panel of lenders, Goldfields Money will have the opportunity to package its own transaction accounts as well as white label transaction accounts for Finsure’s Better Choice wholesale business products,” the shareholder report stated.

“Increasing the proportion of funding sourced from transaction accounts, which is currently the lowest-cost source of funding available to Goldfields Money, will reduce the cost of funding for and improve overall profitability of the merged group.”

Joining the aggregator’s lender panel would also provide Goldfields Money with access to increased loan volumes, it said, further noting that the aggregator settles approximately $1 billion (or about 2,500) in new loans per month, which is “well in excess of those written by [the bank] historically”. As of 30 June 2018, the size of the aggregator’s loan book was reportedly $33.2 billion.

However, Goldfields Money noted in its latest ASX disclosure that Finsure achieved a record month of loan settlements in July 2018, valued collectively at about $1.3 billion. This included $72 million in wholesale settlements.

Goldfields Money is also predicting that it will benefit from partly funding Finsure’s wholesale and white label products, such as MyLoan, noting that the aggregator has written $32 million in wholesale products per month in the year ending on 30 June 2018.

According to its shareholder report, Goldfield Money’s intention is to “keep the banking and non-banking activities of the merged group operationally separate”.

“Growth in lending will be carefully managed to ensure compliance with Goldfields Money’s lending policies and APRA regulatory requirements (including the separation of banking and non-banking activities,” the report stated.

[Related: Bank to raise $20m as it prepares to merge with aggregator]