CBA push for mortgage firms Aussie, Lendi merger

CBA wants merger of mortgage broking group Aussie Home Loans and online firm Lendi agreed before Christmas.

CBA is keen to get an Aussie Home Loans merger signed this side of Christmas.

Commonwealth Bank wants to have a merger between mortgage broking group Aussie Home Loans and online firm Lendi agreed before Christmas, and is putting the final touches on a deal, according to sources.

The Australian understands the transaction will include CBA continuing to fund loans under the Aussie brand, while the combined group will be led by Lendi boss David Hyman. Aussie — which shook up the mortgage market in the 1990s — will continue to be run as a separate brand under the transaction’s template.

Lendi is said to be taking deal advice from former UBS stalwart Guy Fowler, who is part of new Magellan Financial-backed investment banking shop Barrenjoey. In the CBA camp, mergers and acquisitions boss Paul Fowler and deputy chief executive David Cohen are heavily involved.

Sources suggested Aussie founder John Symond had discussed the prospect of buying back his firm from CBA at various times over recent months, although the talks were not fruitful.

Mr Symond — who set up Aussie in 1992 — with the catch cry “we’ll save you” from the banks, early this month announced his retirement as chairman of the group. Aussie is run by his nephew James Symond.

Alongside Wizard founder Mark Bouris, John Symond was among an early group of mortgage market disrupters that sought to loosen the banks’ stranglehold in the home loan market.

CBA is keen to exit its exposure to mortgage broking including wholly-owned Aussie. But sources said the deal structure being proposed handed smaller but digital-focused Lendi 55 per cent of the merged group, with the bank retaining 45 per cent.

Lendi was launched in 2013 and its website says it has facilitated direct home loan settlements of more than $12bn. The online firm had been touted as an ASX listing candidate prior to the outbreak of COVID-19.

Lendi is 40 per cent owned by founders and employees, and its minority shareholders include ANZ, Macquarie Group, Bailador and sophisticated investors. Macquarie’s stake is held by its banking and financial services division.

The mooted deal follows CBA seeking to exit the mortgage broking sector, which includes Aussie and a stake in ASX-listed Mortgage Choice. That is part of a broader divestment spree which has seen the bank retreat from non-core businesses including life insurance, financial advice and wealth management.

The structure being proposed for the Lendi-Aussie tie-up is not dissimilar to CBA’s agreed sale of a 55 per cent stake in Colonial First State to KKR & Co, announced in May. Both entities may separately be ASX listing candidates over the medium term, allowing CBA to orchestrate a bigger selldown.

Interestingly, under the proposed deal terms Lendi’s valuation is said to be higher at $500m than that ascribed to Aussie, even though the former is yet to turn a profit and Aussie’s loan book is in the order of $70bn.

Aussie has outlined a growth plan — including adding broker and store numbers — over the next two years, although Lendi leverages the digitisation theme taking place across the economy.

My Hyman is among mortgage brokers that have talked up the prospects of the home lending and refinancing market this year, despite some fallout from COVID-19. Last week, James Symond and rival group AFG spoke of a surge in loan applications due to the recent round of interest rate cuts, pent-up demand and growing consumer confidence.

The divestment of Aussie by CBA, if announced in coming weeks, would end more than a decade of affiliation. The bank bought Aussie in a series of tranches culminating in the final 20 per cent stake being sold to CBA in 2017. The last selldown delivered Aussie an $820m valuation.

CBA’s latest annual report put a value of $16m on the Aussie brand name which the bank said had an “indefinite useful life”.

In August last year, when asked about CBA’s plans to pull back from mortgage broking, John Symond said he was open to participating in a sale to ensure Aussie ended up in the “right home”.

“When the time comes, do I take a chunk of it? All of those are options,” he said at the time.

Consolidation has gathered pace in the broking market in the past 12 months. AFG wants to seal its transaction to buy Connective, and National Australia Bank is pushing ahead with the sale of FAST, Choice and PLAN.