A blowout in Australian banking
Financial systems rise and fall on the dynamism and demise of non-bank funders, and on the tenth anniversary of the great recession and the collapse of Lehman Brothers, investors in Australian bank capital must be weighing the perils in an industry dashing for deep change.Via fintech, most of them shams and showponies, non-bank financial intermediation is taking a lively turn - and combined they look an increasingly lively threat to legacy operators in banking.With digital, AI, an aggrieved mass market and a royal commission to stir things up, non-bank financiers of varying stripes are walloping the opportunity in the Australian mortgage sector."Seventy per cent of applicants choose to digitally validate," Anthony Baum, founder and CEO of TicToc Homeloans told Banking Day yesterday."People say Australia are the world leader in [mortgage] fulfilment," Baum said.A fast growing business enabled by comparison sites and search engine optimisation, Baum's enterprise relies on funding from Bendigo and Adelaide Bank. The mortgage book of the one-year old financier now exceeds A$200 million and TicToc approved more than $40 million in loans last month.TicToc jostles in a sector where Uno and Joust and HashChing make a noise with varying degrees of success. It is also a sector where lifelong stirrer Ron Brierley is hunting ASX-listed Yellow Brick Road (a bid treated cynically, with YBR shares trading above the Brierley offer).For now, a questioning target market is waking up to NBFIs new and old as a viable source of capital.The number of commitments for owner-occupied dwellings financed by non-banks increased by 1.0 per cent over July 2018, following a rise of 1.3 per cent in June 2018. The seasonally adjusted series expanded by 2.0 per cent in July, after a fall of 0.6 per cent in June 2018. Also, "the number of commitments for owner-occupied dwellings financed by permanent building societies on a trend basis rose 0.9 per cent in July 2018, following a rise of 2.5 per cent in June 2018," according to the Australian Bureau of Statistics.Mash in marketplace lending, P2P, lay-by, fintechs, short-term sharks and a pile of neo-banks and it seems Australia is solving a chunk of the credit supply challenge imposed by the Hayne royal commission in banking.RedZed Lending is a more conventional NBFI and mortgage-backed funder returning to the debt capital market for funding this week.Its advisers, including Commonwealth Bank, will sort out allocations and pricing for the RedZed 2018-1 transaction. This will refinance $375 million in home loans from RedZed, around 90 per cent advanced under an alt-doc credit process for business owners.There are Aaa and AAA ratings on the bulk of these bonds (cut into ten tranches) from Moody's and Fitch.RedZed will have placed more than $1.4 billion in mortgage securities since it first arranged a private placement seven years ago, making it bigger than many credit unions.Back at TicToc, Baum is counting on recent trends to continue. "When the royal commission started in April, volumes picked up materially," he said. "There is growth in digital as a channel and