The decline in mortgage market activity in the 2022/23 financial year, combined with the deterioration in the competitive positive of non-bank lenders, made it a tough year for mortgage aggregator and lender Australian Financial Group.

Both sides of its business suffered. Broker settlements fell 9.7 per cent to A$53.6 billion. At the same time, the payout ratio to brokers increased from 95 per cent to 95.6 per cent of the upfront commission.

Another hit to the bottom line was a $17.7 million trail book adjustment, which reflected the impact of lower volumes and higher run-off rates. 

The AFG Securitisation division’s loan book ran off by 6.5 per cent to $4.5 billion at the end of June and net interest income was down 1.2 per cent. Settlements fell 42 per cent to $1.6 billion.

The net interest margin on the securitised loan book fell from 163 basis points to 136 bps.

Settlements in the white label business, AFG Home Loans, fell 29 per cent to $2 billion.

The combined loan book grew by 7 per cent to $206.5 billion, including a commercial loan book of $12 billion.

AFG reported net profit of $37.3 million for the year to June – 3.8 per cent down on the previous year. 

The company hopes to take advantage of the growing share of mortgages written by brokers, which is up around 70 per cent. It is investing in digital capabilities for its brokers. It also made a strategic investment in BrokerEngine, a mortgage broking software business.

AFG claims a 10 per cent share of the broker market. Its broker numbers grew from 3711 to 3802 year-on-year.

On the lending side, the company is confident the funding advantage that banks enjoyed over the last year will weaken in the current financial year, allowing the AFG home loans business to be more competitive.