Australian Finance Group cashed in on a booming housing market in 2020/21, with 28 per cent growth in residential settlements driving growth in revenue and profit.
The company said it has money in the bank to pursue its ongoing diversification strategy.
AFG reported net profit of A$51.3 million for the year to June – an increase of 34.7 per cent over the previous year. Revenue rose 10.7 per cent to $747 million.
Residential settlements rose to $43.6 billion and the trail book rose 8 per cent to $166.6 billion.
The commercial side of the business was more subdued. Commercial loan settlements rose 1 per cent to $2.3 billion, AFG Business settlements fell 42 per cent to $199 million and Thinktank settlements fell 19 per cent to $130 million.
AFG said the commercial business picked up in the second half.
The net interest margin rose 13 basis points to 1.78 per cent and the return on equity was steady at 27 per cent.
The company made a highlight of the fact that strong growth in cash flow gave the company unrestricted cash of $106 million, providing scope for the company to continue with its earnings diversification strategy.
In June it announced that it would pay $15 million for a 7.6 per cent stake on neobank Volt. The deal will see the mortgage aggregator offer a Volt-funded digital mortgage product under a white label arrangement.
In addition to the white label mortgage, AFG will have access to Volt’s digital banking services and technology platform, which will be used for AFG credit decisioning.
AFG will use Volt’s personal financial manager to develop an AFG branded PFM for AFG home loan customers and other AFG broker customers.
AFG suffered a blow to its ambitions in July, when it notified that ASX that its merger with rival mortgage aggregator Connective Group was not likely to proceed because of a lengthy and unresolved court approval process that held up completion of the deal.
AFG and Connective announced their merger agreement in August 2019. In June 2020 the ACCC said it would not oppose the deal.
The Victorian Supreme Court held a hearing in March 2020 to review the transaction. Its decision has not been delivered.
The end date to satisfy the conditions under the AFG and Connective implementation deed is 31 August 2021. AFG chief executive David Bailey said: “Given the ability of a party to the court proceedings to appeal the decision when it is delivered, AFG has concluded that it is not likely that the merger will be able to complete prior to the expiry of the implementation deed.”
AFG said it was pleased with its 30 per cent holding in commercial mortgage lender Thinktank, whose contribution to AFG earnings rose from $2.3 million in 2019/20 to $5.3 million in 2020/21.