Property boom buoys Mortgage Choice

A bullish property market has helped the mortgage broker lift earnings, as its loan book tops $50bn for the first time.

Mortgage Choice chief executive John Flavell.

Mortgage broker Mortgage Choice has reported a 10 per cent lift in cash profit despite pointing to softness in the investor lending space due to a “blunt” approach from the corporate regulator.

For the 12 months to June 30, the ASX-listed group (MOC) said its cash net profit rose 10.7 per cent to $20.5 million on the back of a record settlement result of $12.2 billion as the property sector remained in a bull market.

The company’s broader net profit edged up 3.6 per cent to $19.5m, while revenue climbed 6.8 per cent to $197.4m.

Its loan book topped the $50bn mark for the first time, rising 4.4 per cent to $51.7bn.

“Throughout FY16 the group performed very well, achieving (or exceeding) all of the business objectives we set for ourselves,” chief executive John Flavell said.

“Better yet, our impressive business results were recorded against a backdrop of considerable economic and market volatility.

“Complexity in the market has provided a real opportunity for our business to deliver increased value to our customers through the provision of help, guidance and advice.”

The group noted robust demand for home loans, with ABS numbers showing approvals of $32bn a month through fiscal 2016.

“This took place on the back of interest rates falling to historically low levels which maintained momentum in the lending market, helping to offset the negative impact that the prudential regulator’s blunt approach had on investment lending,” Mr Flavell said.

The “blunt approach” has seen APRA introduce a cap on investor lending growth to slow down the influence of property investors on prices, which are seen keeping young buyers out of the market.

The company expressed confidence in growth for FY2017 despite operating in an increasingly “complex” marketplace, although it stopped short of providing specific guidance.

“We are very growth biased and we will continue to invest in the business’ capability. This will enable strong revenue growth which — coupled with diligent expense management — will deliver continued increases in profitability,” Mr Flavell said.

The company has recently expanded into financial planning, with that unit delivering profitability several months ahead of schedule in February this year.

In its assessment of market activity, Mortgage Choice noted an extension of a trend toward shorter loan lives, which were seen at their lowest level in at least seven years.

“Loan life shortened in FY16 — driven by low rates and refinancers in a buoyant mortgage market,” the company said.

“This trend is expected to continue as interest rates are expected to stay lower for the foreseeable future.”

The group declared a final dividend of 8.5c, up half a cent.

At 1.20pm (AEST), Mortgage Choice shares tacked on 1.7 per cent to $2.38.