Lender sees billion-dollar settlement spike ahead of merger

A listed lender has seen significant growth in its branded loan settlements over the year to 30 June as it prepares to merge with a non-bank.

In a trading update this week, Homeloans Limited announced total branded loan settlements of $1.2 billion over the 2016 financial year, an increase of 17.7 per cent.

The non-bank said it has continued to grow its presence on the east coast of Australia, with buoyant property markets in the eastern states contributing to the strong growth in settlements.

“By offering brokers and customers competitive products and quality of service Homeloans continued to consolidate its position as a viable alternative to the major banks during FY2016,” it said.

The group also noted that the last 12 months have been characterised by competitive responses to changes to investment loan and interest-only products, historically low interest rates, and strong refinancing activity across all major states.

“Homeloans’ unique funding position, diversity of products and investment in broker relationships has ensured consistent growth throughout the year,” it said.

Homeloans’ net interest income was down 7.7 per cent, with the group citing a reduction in the RMT loan portfolio as well as the impact of increased funding costs.

“We are pleased with settlements growth of 17.7 per cent achieved in the year and see the positive trends in submission and settlement activity continuing into FY2017,” Homeloans CEO Scott McWilliam said.

“This is due to our success in building our east coast presence as demand softens in some key markets such as WA. In addition, recent cash rate movements and ongoing historical low levels of interest rates will support further positive momentum in settlements in the year ahead,” he said.

On 20 July 2016, Homeloans entered into a Scheme Implementation Agreement with RESIMAC Limited, under which Homeloans will merge with RESIMAC subject to approval by the shareholders of both companies.

Mr McWilliam, said the proposed merger represents “an ideal opportunity for shareholders to benefit from an enlarged and more diversified combined business.”

“With an established pattern of delivering settlements growth through the current distribution structure, Homeloans is well-placed to further leverage, and build on, its relationships with brokers and retail networks,” he said.

“In a changing regulatory landscape, which has impacted investor and interest-only loans, non-bank lenders continue to establish their position as a viable alternative to the major banks.”

With its diversified funding base, Mr McWilliam believes Homeloans is well-placed to continue capitalising on these changes. He added that the proposed merger with RESIMAC, a leading non-bank lender with established product manufacturing and funding capabilities, will further accelerate the company’s ability to increase settlements and pursue other growth opportunities.

[Related: Major mortgage deal puts non-ADIs on par with banks]

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