Lenders brace for further consolidation

by Ben Abbott28 Nov 2011

Homeloans chairman Tim Holmes told the non-bank lender's AGM in Perth on Friday that directors and management were expecting further industry consolidation to occur over the next 12 months.

In his outlook for the industry during 2012, Holmes said that further consolidation would likely occur in the second tier and non-bank sector.

"Homeloans is actively looking for acquisition opportunities," Holmes said. "With fewer brands in the marketplace, this strengthens our position as a genuine alternative to the major banks."

Holmes detailed a normalised net profit after tax (including adjustments) of $8.1m for the financial year to June 2011, a decrease from $8.4 which he attributed to "ongoing margin pressures" that have "no forseeable improvement in the near term".

The group had continued strengthening relationships with key broker partners, Homles said, pointing specificaly to the creation of an 'Elite Broker Circle' segmentation offering.

"We are committed to further building on these [relationships] and leveraging existing relationships to help drive greater levels of repeat business. Indeed this is an are of significant opportunity for us."

In conclusion, Homles detailed the challenges the business had faced through the abolition of exit fees early this year, but argued that it created opportunities.

The existence of exit fees had historically created a competitive disadvantage for some lenders, and their removal will create a more level playing field and transparency of mortgage product offerings.

"Further, continuing channel conflict is evident between the retail and third party distribution arms of the major retail banks providing greater scope for brokers and consumersto engage with our business."

Homles sais the non-bank would seek opportunities for growth in lending volumes including working closely with wholesale funders to improve and expand on its product offering.

"Product innovation is critical, particularly in the current environment, and we expect to make further progress in this area over the year ahead," he said.

During the 2011 financial year lending volumes of Homeloans' branded products increased 21%, resulting in a 10% increase in net fee and commission income to $16.1m compared to the previous financial year.

Related stories:

Homeloans' Accelerate finds new fifth