The merger of two non-banks will create a mortgage group with a loan book of more than $4 billion, writing in excess of $1 billion a year in new business.
Australian First Mortgage (AFM) yesterday announced it will merge with Queensland-based National Mortgage Company (NMC).
Founding directors Tanya White, David White and Iain Forbes confirmed that NMC has acquired the shares of AFM in a deal that will see the new combined entity grow its loan book to over $4 billion, write $1 billion a year in new business and generate revenue of over $30 million per annum.
"The merger compliments both of our existing operations and will provide our brokers and their customers with higher levels of service and support,” AFM managing director Tanya White said.
“It will combine NMC’s back-office capabilities with AFM’s broker distribution platform and robust branding to build scale and growth.
“In addition, coupling AFM’s national footprint and deep aggregator network with NMC’s operational infrastructure will put the merged entity amongst the largest non-bank lenders in the country, where it can access increased funding lines at very competitive pricing,” she said.
The move follows the earlier announcement of the retirement of industry legend and joint AFM founding director Iain Forbes.
With Mr Forbes' approaching retirement, AFM has been actively considering opportunities across a range of complementary financial service providers and, as such, identified growth opportunities within NMC.
AFM said the group's remaining directors – Ms White and Mr White – will remain in the business and take active, long-term roles in driving growth, synergies and opportunity in the new entity.
The AFM brand will remain intact.
The deal comes just weeks after non-bank lender Homeloans announced its acquisition of Queensland-based mortgage manager Barnes Home Loans.
Barnes Home Loans executive director Janelle Rayner urged non-bank lenders to join forces to combat the strength of the big four.
Ms Rayner told Mortgage Business she expects to see “a lot more consolidation” among non-banks in the future.
“The bigger lenders do have a lot of strength and as smaller lenders we need to get together and strengthen our position because there needs to be alternative lenders out there,” she said. “You can’t just have the big four.”
Other lenders have signalled their appetite for M&A in recent weeks.
Following the release of its half-yearly results, MyState Bank chief executive Melos Sulicich told Fairfax Media that as the cash rate has come down, smaller banks particularly are finding it increasingly difficult to compete as interest margins are squeezed.
“We're keen to explore any other M&A opportunity – we have got a strong capital adequacy position," he said. "We are actively looking around the market."
According to a new report, the Australian market is primed for a strong year of M&A activity.
The report, released by Pitcher Partners and Mergermarket and entitled Dealmakers: Middle market M&A in Australia 2015, said the “stage is being set” for another year of “record” M&A activity.
“Confident and with ample cash reserves, corporate boardrooms and financial sponsors are ready to pull the trigger on a new round of deals,” the report said.
“Bankers and investors also agree that low interest rates and government privatisations are creating excellent conditions for savvy business operators to pursue growth through M&A.”
This optimism follows a three-year trend of frenetic dealmaking, which experienced a jump from US$46 billion (AU$59 billion) in 2012 to almost US$70 billion (AU$90 billion) in 2014, according to the report.
It noted that M&A volumes have bounced back post-financial crisis to reach 498 deals.