Mortgage Choice profits slump but lending approvals on the rise

Mortgage Choice has been weighed down by a flat loan book and sliding franchise numbers amid an overall challenging period for the housing market.

Mortgage Choice chief executive Susan Mitchell.

Mortgage Choice has seen its profit slump more than one-third in the 2020 financial year as a flat loan book weighed on the business amid the impacts of bushfires and the pandemic.

But investors cheered a rise in lending approvals, which accelerated in the final quarter of the year in defiance of the broader economic downturn, pushing the group’s shares up 18 per cent to close at 85c.

Mortgage Choice on Thursday revealed a net profit attributable to shareholders of $9.4m, down 31.3 per cent from the previous year. Cash profit for the year fell to $11.7m from $14m.

But the lender settled $10bn in home loans for the 2020 financial year, up 7 per cent on the year before, while the June quarter — which coincided with COVID-19 lockdowns across the country — saw an 18 per cent jump in approvals from the prior corresponding period.

Chief executive Susan Mitchell said the company had prioritised ensuring customers would not be affected by the impacts of COVID-19 on trading.

“The investment we have made in recent years in our technology platforms ensured Mortgage Choice and FinChoice franchisees were able to confidently navigate periods of lockdown and remain open for business,” she said. “Along with productivity improvements we have introduced, we were able to deliver a resilient performance while supporting our customers when they needed us most.”

Mortgage Choice customers settled on 10,017 loans last year and the declining trailing commissions from the loan book were offset by a growth in originating commissions.

Its total loan book stood at $54bn in June, down 1 per cent on 2019 and a continuation of the slide the broker network has experienced since 2018.

The broker network shrunk by six franchises in the past year, despite 14 new franchises opening.

Ms Mitchell said the broker would continue to focus on recruiting and renewing franchisees and had introduced training and technology support ahead of the “best interests duty obligation” coming into effect on January 1 next year.

“Despite the impacts of COVID-19 on the broader economy and housing markets in the second half, we have enabled our network with powerful marketing tools to take advantage of an incredibly competitive home loan market,” she said.

The lender will pay a final dividend of 3.5c, bringing the annual total to 6.5c, fully franked. Mortgage choice has received no JobKeeper payments.