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Opinion: Big M&A deals in the pipeline for mortgages

The Australian mortgage industry is on track for a significant shake-up as vertical integration unravels and fresh acquisition targets begin to appear. But the buyers won’t be banks this time around.

The Commonwealth Bank of Australia will soon say goodbye to Aussie Home Loans, ending a decade-long relationship that has been the most commonly cited example of vertical integration in the mortgage space since banks began buying brokerages during the GFC.

Conflicts of interest are being hunted down like dogs and chased out of existence by pressures that have been building since the Murray Inquiry four years ago. The Hayne royal commission is yet to make any recommendations, but the writing may well be on the wall for bank ownership of mortgage distribution.

Aussie is the first to go, but it may not be the last. All eyes will now be locked onto NAB’s ownership of FAST, Choice and PLAN. It’s already being discussed by mortgage professionals.

When our sister publication The Adviser broke the news of CBA’s decision to break ties with Aussie, those commenting on the story asked the question on everyone’s mind: “I wonder if NAB will do the same with PLAN, Choice and FAST?”

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“NAB would now have to be looking at it,” another reader replied.

The tables have almost certainly turned for banks and their appetite for snapping up distribution. It’s worth remembering that NAB was in the running to acquire Wizard Home Loans from GE back in 2009, before it was snapped up by Aussie (and CBA) for a song. Would a major bank be looking to make a similar buy in this day and age? Doubtful.

Given the heavy beating the banks have copped since the royal commission kicked off in March, it’s little wonder why they are now looking to get rid of any potential conflicts within their ranks.

Decoupling seems like a smart decision. But grouping Aussie with Colonial First State, Colonial First State Global Asset Management, Count Financial and Financial Wisdom is a strange move. Aussie appears to be the anomaly here; if you took it out, the CFS Group would make more sense. And that’s a serious possibility.

A number of industry insiders are already betting that Aussie will be sold or spun off from the CFS Group, which could make things very interesting for mortgage broking over the next 12 months.

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If vertical integration really is on its way out, either as a pre-emptive decision or in response to a possible directive from the royal commission, then there will be some big corporate dealmaking to be had in mortgage land.

Whether or not the bad taste of bank ownership extends to non-bank institutions remains to be seen.

Finsure’s coupling with Goldfields Money is worth watching. On 30 May, the Kalgoorlie-based ADI notified shareholders that, following recent reforms to section 66 of the Banking Act 1959, it is now officially able to refer to itself as an Australian bank.

[Related: Bouris says legacy wealth business ‘did not fit’ YBR model]

Opinion: Big M&A deals in the pipeline for mortgages
mortgages, Australian mortgage industry
mortgagebusiness

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