Challenger poised to expand MyLife MyFinance lending

In an analyst briefing on Thursday (17 June), Michael Vardanega, head of bank transition at Challenger, laid out the group’s plans for MyLife MyFinance.

The strategy includes ramping up the bank’s distribution and marketing to target growth, expanding its lending to more areas, and launching more term deposit products while the bank transitions to operating under the Challenger brand.

MyLife MyFinance holds around $133 million of savings and deposits and $110 million logged in its loan book, mainly in residential mortgages.

“Broadening the lending capability” will be the centre of the bank’s lending game plan, Mr Vardanega said.

“The bank will retain its existing lending capability, continuing to grow its residential mortgages, utilising their current resources,” he explained.

“The bank will diversify its forms of lending into corporate lending, commercial real estate and asset-backed securities. These are markets Challenger is very familiar with and currently operates in.

“SME and asset finance will also be an important contributor to returns. Challenger’s existing SME lending capability will be folded into the bank.”

The transfer will include accounts receivables, finance and other forms of specialised finance, he added.

MyLife My Finance, which is currently owned by Catholic Super, has previously indicated it is looking to expand into new channels as it waits for APRA to green-light the Challenger transaction.

Mr Vardanega reported that while the regulator approval process is taking longer than expected, Challenger is expecting to complete the acquisition by July.

The bank’s staff are scheduled to move into Challenger’s office early in the coming financial year.

“We’ve made good progress in building the capability of the bank, particularly in the areas of lending, risk and compliance,” Mr Vardanega said.

“To support Challenger’s ambitious growth strategy, we will have to increase the size of the team and capability across both Sydney and Melbourne.”

For Challenger, the acquisition provides an opportunity for the annuity and retirement income specialist to expand into term deposits, with MyLife MyFinance’s banking licence providing it access to a $1-trillion domestic market.

“Its customers are right in Challenger’s sweet spot, with an average age of about 60 years,” Mr Vardanega said.

The bank is expected to open up access to a wider range of customers, including those in retirement and those approaching the end of their working lives.

It will also boost the “reliance and sustainability” of Challenger’s business model, Mr Vardanega said.

“The bank will diversify Challenger’s product offering. It will reduce reliance on the financial advice channel and it will reduce the earnings and capital volatility of the group,” he said.

But the acquisition is not expected to break even for some time, with Challenger estimating MyLife MyFinance will need to generate around $600 million in sales before it becomes profitable.

MyLife MyFinance is not expected to make a material contribution to group profit in the 2022 financial year.

[Related: REA acquires interest in mortgage lodgement platform]