Resimac records growth in real estate loans despite “aggressive” competition
The non-bank lender handled record home loan settlements in the six months to December, but competitive pressures in the sector are expected to persist.
Resimac reported its results for the first half of fiscal 2022, revealing a 6% increase in net profit after tax (NPAT) year-over-year to $53.5 million.
The result was driven by record settlements and growth in the real estate lending and asset finance businesses.
Resimac’s home loan portfolio was $14.6 billion, up 13% year-over-year. There had been a record $3.5 billion in settlements under this segment, up 63% year-over-year.
Scott McWilliam, group chief executive of Resimac, said growth in home loans had been supported by progress in its specialist segment, despite competitive pressures and “aggressive pricing strategies” from the big four banks and regional lenders.
Specialty segment loans increased 45% to $5 billion. Claims for specialty products nearly tripled, up 190% to $2.1 billion.
At the same time, high run-off, price competition and consumer shifts to fixed rate products caused Resimac’s prime loan portfolio to fall 7% to 9.3 billions of dollars.
Mr McWilliam noted that there had been a “heavy refinancing market” over the past 12 to 18 months. The landscape has started to change, but the competition is expected to remain intense.
“Certain sectors that may have an advantage in an easing cycle or a low rate cycle, especially those that are able to offer very cheap fixed rates. I think that advantage is starting to diminish,” a- he told The Adviser.
“But you know, I don’t expect the competition in the space to go down. I think it’s different parts of the market, maybe variable rates will be seen as more attractive in the future, so that we are entering a tightening cycle.
Resimac’s CFO Jason Azzopardi echoed the CEO, commenting that as customers may exit fixed rate products, there could be an opportunity for the lender’s key variable offerings.
“We believe that with fixed rates gone, we’re going to be able to take advantage of that variable space, like we’ve done before…before this really competitive 12-month period that we just had,” Azzopardi said. at The Adviser.
Resimac’s net interest margin (NIM) was down 14 basis points (bps) from the prior half, and 20 bps year-on-year, to 191 bps.
Although financing costs fell by 9 basis points, the pricing of the group’s home loans also fell by 22 basis points.
But Mr McWilliam said Resimac has seen opportunities across all segments as prices for fixed-rate home loans rise and its market share grows in asset finance.
Resimac’s asset finance division saw its loan portfolio triple year-over-year during the six-month period, to $300 million. There were $200 million in settlements under the segment.
“Technology continues to help level the playing field, and as a deeply customer-focused organization, this is an area we are constantly investing in to improve operational efficiency and enhance the digital experience of our customers. customers and brokers,” said McWilliam.
Resimac recently confirmed that it will be rolling out a new digital lending system in Australia, having completed its launch in New Zealand.
Mr McWilliam said the group has remained focused on the broker channel with its investments in technology. Brokers now represent approximately 85% of Resimac’s overall loan portfolio.
“At the end of the day, the non-bank proposition and in particular the Resimac proposition, which we focused on, is the broker experience: turnaround times, dealing with us, unnecessarily removing any kind of friction from the process,” he told The Adviser. .
“This is where we will continue to focus as an organization and gather ideas and feedback from the broker community as we grow our broker experience.”
The company also invested in a new loan origination system for its asset finance business, which is expected to go live in the first quarter of FY23.
The New Zealand firm also increased its assets by 20%, to $800 million, with specialist and direct settlements up 117% and 68% respectively.
[Related: Broker flows to majors drop to record low]
Sarah Simpkins is the managing editor of Mortgage Business and The Adviser.
Previously, she reported on banking, financial services and wealth management for InvestorDaily and ifa.