Support for non-banks ‘disproportionate’, ‘unfair’: Resimac

Resimac chairman Warren McLeland has used his chairman’s address at the lender’s annual general meeting (AGM) to criticise the support provided by the Australian government to the non-bank industry during the coronavirus pandemic.

While remarking that Resimac would benefit from these policies, Mr McLeland said “a distinct uneven playing field has emerged between the pricing of financial support received by the major banks over the non-banks”.

Mr McLeland first acknowledged what he called the “extensive” support provided by the Australian government to the non-bank sector during the economic crisis spurred by the pandemic.

He noted that financial support has been provided by the government through the direct financial assistance of the Australian Office of Financial Management (AOFM), along with an “accommodative” interest rate policy implemented by the Reserve Bank of Australia (RBA) through a series of official cash rate reductions.

He also noted the RBA’s announcement of an extension of its government bond purchasing plans, including the purchase of $100 billion of government bonds of maturities of around five to 10 years over the next six months, and said that this is likely to be extended to a large quantitative easing program.

However, Mr McLeland pointed to what he believes is financial support that is “disproportionate” for the non-bank sector.

“Given the scale of the non-bank sector’s contribution to the Australian residential home lending market, we consider this as grossly unfair and disproportionate,” he said.

Despite the criticism, Mr McLeland said the assistance by the Australian government for the non-bank sector has been substantial when compared with the global financial crisis (GFC) period.

“This is in stark contrast to the GFC in the years 2007 to 2010, when the focus from the government was on the banking sector, with the non-banks being left to survive as best they could,” he said.

“By the end of the GFC, the non-banks’ share of the residential housing market had dropped by 85 per cent. However, in 2020, which was arguably more significant in economic decline, our segment experienced double-digit growth.”

However, Mr McLeland said the growth rate in the non-bank lending segment had slipped back to a single digit in the second half of 2020, which he attributed to increasing competition from the major banks.

Launch of direct-to-customer brand

Resimac CEO Scott McWilliam also addressed the AGM and spoke about homeloans.com.au, its direct-to-customer brand, which was launched in August.

Mr McWilliam said the brand would enable the lender to access a larger group of potential customers, and added that the reception to the brand has been positive.

“With over 40 per cent of home loan borrowers preferring to deal with lenders directly, this digitally native brand gives us access to a bigger pool of potential customers and supports our strategic objective of diversification of originations,” he said.

“Customers have been thrilled by the exceptional customer service, fast turnaround times and competitive interest rates. These attributes, combined with what’s possibly the industry’s most powerful domain name, provide a strong platform for further growth.”

Financial results

Mr McWilliam addressed Resimac’s full-year results for FY20, where Resimac’s normalised net profit increased by 79 per cent on the previous full-year result to $55.7 million for the year ended 30 June.

He said the profit increase was driven by a 60 per cent spike in net interest income, which he attributed to strong settlements and assets under management growth “at a multiple to system”.

“The growth in our portfolio is a testament to our focus on consistent and timely credit decisioning, and our overall service offering resonating well with brokers and consumers alike,” he said.

Cost-to-income ratio reduced from 56.6 per cent in the previous year to 37.9 per cent.

Resimac also extended and increased its warehouse funding and capital lines by more than $2 billion, with Mr McWilliam adding that the lender was able to do this despite disruption to global funding and credit markets as a result of the COVID-19 crisis.

[Related: Resimac reports drop in payment deferrals]