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The strength of the broker-client relationship has helped deliver a record settlement and financial result for the aggregator, according to its CEO.
On Friday (27 August), aggregation group Australian Finance Group (AFG) released its full-year results for the financial year ending 30 June 2021.
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The results show that residential settlements were up 28 per cent to $43.6 billion in the 12-month period, bringing the total residential loan book to $167 billion.
AFG Home Loans settlements also increased, with the white label loan settlements up 18 per cent to $2.1 billion and AFG Securities holding strong at $1.3 billion. The securities loan book particularly increased in the second half of the year, up 35 per cent when compared with H2 FY20.
Combined, the residential and commercial loan book is now at $176 billion, up 8 per cent over FY2020.
‘Record demand for broker services’
Speaking to The Adviser about the results, the CEO of AFG, David Bailey, noted that the number of AFG Brokers under the group had risen to over 3,050 in the year, outlining that one in 11 Australian residential mortgages was therefore arranged by an AFG broker.
He said that while record demand for mortgages had fuelled the growth, he added that the strong settlements were also due to brokers’ strong service proposition.
“The relationships these brokers have had with customers over a number of years has contributed [to the strong settlements]. We’ve got brokers who’ve been in the industry for a long period of time who have a high level of refinances and a high level of repeat business coming through.
“We always talk about brokers having longer-term relationships with customers, and that can be seen in strong refinances, but also in customer retention rates... That is probably testament to the closeness of our brokers to their customers, particularly during the pandemic, when they were needed more than ever.
“Our brokers have experienced record demand for their services to Australian borrowers,” he stated.
Mr Bailey added that growth in the AFG Home Loans space had also been proof of the service offering that brokers could provide customers, suggesting that growth in the period came down to “a good proposition for the customer and a good credit experience for the broker (regarding turnaround times and consistency of credit)”.
“When 70 per cent (or more) of a broker’s business comes from referrals, you need to make sure that the broker has the best opportunity of getting [their client] a fast decision yes, and also a good customer outcome. That is where that side of the business has thrived, particularly in the latter half of the year.”
The CEO acknowledged that commercial lending had not grown as quickly as residential mortgages (increasing just 1 per cent to $2.3 billion); however, he added that this was in line with businesses having been the hardest hit by COVID restrictions.
Despite this, Mr Bailey suggested that activity was increasing, with commercial settlements up 23 per cent in the second half of the year compared with the prior period. The aggregator’s investment in Thinktank (its white label provider for AFG Commercial) also contributed to the group’s profit.
Overall, the aggregator reached record profit of $51.3 million (net profit after tax [NPAT]) and underlying NPAT of $49.6 million.
Looking forward, Mr Bailey told The Adviser that the group was ramping up the roll out of its new CRM platform over the next 12 months, with a staged migration underway and was looking forward to launching its new white label loan, in partnership with Volt Bank, following its move to acquire 8 per cent in the neobank.
According to Mr Bailey, the “innovative technology” will provide AFG Brokers with a competitive product to offer clients, with rapid approvals and streamlined digital solutions (Volt-owned technology will also be utilised to streamline credit decisioning for the AFG Securities business)
He said: “We had a strategy meeting a few days ago, and we’re in the process of making sure that our systems are working and talking to each other, developing the product names, and process flows etc, so we’re still on target to start the pilot in the second quarter of this financial year.
“We will be an exclusive white label partner – offering an AFG Home Loans mortgage, powered by Volt Bank as they... step out into the marketplace, raising deposits, obtaining funding etc.
“We think we’ll be able to give them a significant level of volume and business to keep them focused, active and busy in that space, while they’re in that initial growth phase.”
Noting that the proposed Connective merger was no longer possible (with the “drop dead” date of 31 August rapidly approaching and no court decision yet having been made), he concluded: “We’re always looking for opportunities to grow our business, be it organically or inorganically.
“Whether it’s aggregation or some of the manufacturing areas, it’s something that we’re constantly looking at.
“We’ve got a strong balance sheet, strong cash flow and capability of making acquisitions. So when we identify the right ones, we can participate,” he told The Adviser.
[Related: AFG brokers lodged $81bn in FY21]
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