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The new best interests duty would provide lenders with a greater deal of “comfort” when dealing with the third-party channel and would serve as an “opportunity” for brokers to market their customer service proposition, according to a lender CEO.
Speaking to The Adviser following the release of Resimac’s half-year results for the 2020 financial year (HY20), CEO Scott McWilliam said the incoming best interests duty would not affect the lender’s broker strategy.
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According to Mr McWilliam, the new obligations would enhance the broker position from both a lender and consumer perspective.
“If anything, [the best interests duty] provides a lot of comfort for lenders down that particular channel,” he said.
“I think it’s a great opportunity for the broker channel to separate itself from other channels where they need to make additional steps.
“I think it helps them from a marketing strategy, in terms of marketing the credibility of that particular channel, where they know need to perform these best interests duties.”
When asked if he was concerned that heightened compliance obligations would slow turnaround times for Resimac loans, Mr McWilliam said the lender would work with the third-party channel to sure-up its practices.
Resimac’s chief financial officer, Jason Azzopardi, added that the non-bank had invested in its processing capabilities over the past two years, which he said has contributed to a sharp increase in home loan settlements.
“We’ve done a lot of work over the last 12-24 months to digitise processes throughout the loan application and underwriting process, and that’s been one of the key attributes behind our ability to grow settlements above system,” he told The Adviser.
“We are continually focused on our speed of processing and our speed of service to brokers, and that’s why we fully support the broker channel.
“We think if we can keep up that consistent speed of service to brokers, [it] will be a key part of the ability to grow and to be able to absorb that extra compliance cost if there is any.”
HY20 results
Resimac has posted a statutory net profit after tax (NPAT) of $27.2 million for HY20, up 44 per cent from $18.9 million in the previous corresponding period.
The growth was largely driven by strong above-system home loan settlement growth, with volumes rising 22 per cent, from $1.9 billion in HY19 to $2.4 billion.
As a result, Resimac’s net interest income rose by 53 per cent to $84.3 million.
The growth in settlements was reported across both Resimac’s prime and specialist segments, of which uptake increased by 17 per cent to $1.7 billion and 39 per cent to $700 million, respectively.
This was slightly offset by a decline in white label home loan approvals, from approximately $300 million in HY19 to $100 million.
Overall, Resimac’s mortgage book grew 20 per cent, from $9.4 billion to $11.3 billion, with prime home loan products making up just under 70 per cent of its total portfolio.
As at 31 December 2019, owner-occupiers made up 59 per cent of Resimac’s mortgage book, while the share of borrowers with principal and interest (P&I) terms totalled 63 per cent.
Mr McWilliam attributed the lender’s strong home-lending performance to the bank’s service proposition to brokers and the growing shift in demand from borrowers away from established lenders.
“I think it’s [because] of our strategy in the broker channel over the last 12-18 months, and that is very much an over-service strategy,” he said.
“We spend a lot of time with the broker network from an education perspective in terms of the benefits of our product.”
“We’re also benefiting from a flow away from some of the more established brands. As you’ll see, strong growth is coming from a number of non-ADIs.”
The Resimac CEO added that he expects strong home-lending growth to continue throughout the second half.
Mr McWilliam said Resimac would continue to develop its wholesale network, noting that the lender would consider establishing new partnerships “where it makes sense”.
Other headline results
The lender’s underlying earnings were also helped by a sharp improvement in its cost to income ratio, down 15.7 percentage points to 42.1 per cent.
The non-bank’s return on equity also improved, up 8.4 percentage points to 26 per cent.
When including non-mortgage assets, Resimac’s total loan book grew 11 per cent to $14.2 billion.
[Related: Heritage profits down, despite loan, deposit growth]
