Non-bank reaping the rewards of less red tape

In its full-year 2018 (FY18) results, Liberty Financial has reported a net profit after tax (NPAT) of $64 million, up by 10 per cent from FY17.

The non-bank’s profit growth was spurred by a 15 per cent rise in new loan originations, increasing the value of its total assets under management 35 per cent to $10.2 billion.

Speaking to Mortgage Business, Liberty Financial CEO James Boyle said that the bank has benefitted from escaping prudential regulations.

“[We] are able to exercise a different appetite, so our credit is not constrained by prudential regulation in the same way that banks are,” Mr Boyle said.

“What we’ve seen over recent periods is that banks have an appetite that has been curtailed [by] prudential requirements that we’re not subject to.”

Mr Boyle also noted that Liberty offers loans to borrowers which banks no longer provide, making reference to decisions by some banks to withdraw from self-managed super fund (SMSF) lending.  

“[What’s] different about us is we’re able to help customers that banks no longer choose to,” Mr Boyle continued.

“An example of that is self-managed super fund lending. We have continued to provide users of SMSFs with credit, while we’ve seen in the last few months [that] all of the major banks and some of the smaller banks pull out. 

“It’s our commitment to providing ongoing broad solutions that has allowed us to grow faster than we’ve seen in other parts of the market.”

Further, when asked about the Reserve Bank of Australia’s recent suggestion that the rise in non-bank market share could “increase stability risks”, Mr Boyle said: “We are all bound by the same responsible lending standards; banks and non-banks alike are required to conduct themselves in a way to demonstrate that they have understood the customer’s financial objectives and that they’re mindful of that in providing them with a contract.

“In terms of the systemic risk, although we have enjoyed growth over the last couple of years, and our cohorts have as well, in the bigger picture, we’re still a small part of the overall market — less than 10 per cent.

“I think it’s a very good thing that non-banks are able to provide alternatives to consumers who are not finding those solutions from banks at the moment.”

[Related: Non-bank rise could ‘increase stability risks’: RBA]