This article is from the Australian Property Journal archive
SHARES in AFG tumbled yesterday after the mortgage broking aggregator announced a 34% fall in first-half profit, but it said its brokers have seen positive momentum in home loan lodgements in January and February.
Net profit after tax (NPAT) came in at $14.5 million, while distribution earnings lifted 7% to $26.8 million on the prior corresponding period, as residential settlements increased 13% for the half compared to the prior six months.
“Broker remains the dominant channel in the Australian residential lending market and AFG’s broker proposition has meant we have grown broker market share, with our broker numbers increasing and our market share of active brokers increasing to 21%,” said AFG chief executive, David Bailey.
He said, “In what has continued to be a volatile market, AFG has faced increasing funding costs and intense competition across the half”. This crimped net interest margins (NIM) across the industry and AFG reported a NIM reduction of nearly a third to $24.4 million, down by $11.6 million, which contributed to underlying adjusted NPAT dropping $7.7 million to $17.9 million.
AFG shares had fallen by more than 11% during trading yesterday, ending the day nearly 10% lower, at $1.50.
Australian Bureau of Statistics data showed home lending fell by 4.1% in December, although finished higher over the course of 2023.
Bailey said conditions in the funding markets are improving and the market is returning to a “more even footing”.
Within its residential manufacturing business, AFG Securities, the loan book stabilised at $4.1 billion. Bailey said conditions in the December quarter “allowed us to refocus from margin protection to loan book retention and growth as changes to product and funding costs were delivered”. The loan book returned to growth in December.
Momentum early in the second half appears to have shifted to the positive for AFG.
“Although cost-of-living pressures continue to be felt by many Australian households our brokers are reporting an increased level of inquiry, which points to a better residential market as we head into the second half of FY24 and into FY25.”
“In the second half, all eyes will be on the Reserve Bank’s interest rate decisions however the strength of the channel in helping to guide their customers through an increasingly complex market means homebuyers will continue to turn to brokers for help,”
AFG’s investment in technology advancements was fruitful in the first half. Fintelligence again performed strongly, supporting both a growth in broker numbers and a 27% increase in settlements. That investment, together with BrokerEngine, contributed $10.7 million to AFG’s $52.9 million gross profit for the half, a 20% increase.
