Resimac targets bigger share of ‘healthy’ home loan market

Resimac doesn’t see Covid-19 lockdowns derailing growth in the home loan market.

Resimac CEO Scott McWilliam and CFO Jason Azzopardi are upbeat on the lender’s growth prospects. Source: supplied

Resimac Group doesn’t see Covid-19 lockdowns derailing healthy growth in the home loan sector, allowing the non-bank lender to target an almost doubling of its share in the $400bn annual mortgage market.

Resimac chief Scott McWilliam is adamant property market strength will “carry forward” in this fiscal year, although cautioned if growth became unsustainable regulators would likely intervene.

“There‘s more demand for domestic property the longer we go through international borders being closed, states being closed,” he said.

“The counter to that is … affordability will continue to be an issue if property prices grow at unsustainable rates going forward.

“If it continues to grow at unsustainable levels, I believe (macroprudential loan limits) that is a realistic outcome. I suppose our view is they’re more likely to pull the lever on macroprudential limits than they are to changing monetary policy around interest rates.”

His comments came as Resimac reported an almost doubling in full-year profit, and flagged it expected to be settling $8bn annually in home loans by fiscal 2024 and $1bn in asset finance over the same period.

Statutory net profit soared 92 per cent to $107.6m in the 12 months ended June 30. Normalised profit - which removes one-off items including the revaluation boost from an uplift in Resimac’s stake in digital lender Athena - climbed 87 per cent to $104m, as home loan settlements edged up 3 per cent.

Resimac’s home loan assets under management rose 11 per cent to $13.8bn last fiscal year, and home loan settlements hit record levels in the latter six months. Home loan settlements in the year ended June 30 amounted to $4.8bn.

On the lender’s ambitious targets, Mr McWilliam said: “We are confident those are the types of numbers we believe that we should be writing, and it still only represents less than 2 per cent of the market.

“It seems aggressive. From our perspective, we believe it’s very realistic.”

Mr McWilliam said while uncertainty linked to Covid-19 lockdowns would continue in the six months ended December 31, he was optimistic the economy would recover “relatively quickly” when vaccinations reached government targets.

“Stable funding markets and lower cost of funds provide us with a runway to aggressively target further growth in FY22 and beyond, as we double-down on the development of our broker and direct-to-consumer brands,” he added.

Resimac’s home loans on repayment pauses dropped dramatically to 311 during the period. That was down from 3195 at June 30, 2020.

Collective provisions stood at $32.1m at the end of 2020-21, compared to $33.5m as at December 31.

Separately, comments from ANZ’s Australian retail and commercial executive Mark Hand showed the bank’s loan repayment pause levels during the latest lockdowns were just 2 per cent of those witnessed in 2020.

He highlighted strong house price growth across the nation this year, with ANZ’s economists last week raising their numbers for calendar 2021 to just over a 20 per cent price rise, which is tipped to slow next year.

ANZ has lagged market growth rates in home lending, due to processing and other issues, which Mr Hand said the bank was addressing.

“We will have levers we can pull but don’t expect us to chase unprofitable growth,” he added.

Resimac’s finance boss Jason Azzopardi said given the competitive market dynamics and customers repaying loans faster, the group was focusing more on retention and monitoring trends “very closely”.

“Consumers are definitely spoiled for choice at the moment and there is a really competitive environment for home loan pricing,” he added.

Wilsons analyst John Hynd noted the Resimac result was largely in line with his estimates, albeit with a slightly better outcome for the net interest margin.

“No quantitative (profit) guidance provided. However, Resimac advised funding markets remain stable and lower cost of funds provide a runway to ‘aggressively’ target further growth in fiscal 2022 and beyond,” he said.

The net interest margin - what the lender earns on loans minus funding and other costs - climbed 17 basis points to 2.07 per cent over the year, but was down from 2.11 per cent in Resimac’s first half.

Expenses increased 14 per cent in 2020-21, as the group pursued a digital transformation plan and an upgrade of its core systems.

Resimac’s shares closed almost 1.3 per cent higher at $2.43 on Tuesday.

The company declared a final dividend of 4 cents per share, taking the full-year payment to 6.4 cents per share.

Prior guidance had Resimac signalling a fiscal 2021 underlying profit of $100m-105m.