AFG's home loans division, which provides AFG branded loans funded by third parties and AFG Securities, is on track to overtake the company's traditional wholesale mortgage broking (aggregation) division as a profit generator for the group.
During the six months to December 2019, the wholesale mortgage broking division had revenue of A$283.9 million, compared with $281.7 million in the previous corresponding period. Segment profit was down from $16.5 million to $16.1 million.
AFG Home Loans had revenue of $62.3 million compared with $52.2 million previously. Segment profit was up from $8.3 million previously to $13.6 million in the latest half.
Based on these figures, AFG Home Loans is a much higher margin business than wholesale broking, which explains why other broker groups, such as Yellow Brick Road, are keen to move into funding and securitisation.
AFG Securities increased settlements by 46 per cent to $690 million. Its loan book grew 51 per cent to $2.5 billion. However, third party (white label) loan settlements were down 30 per cent.
The company said: "Our investment since 2018/19 in growing the AFG Securities book is now providing a strong platform for earnings growth.
"The shift in the mix to AFG Securities is a result of product improvements and consistent credit turnaround times."
AFG made a net profit of $18.3 million for the half - an increase of 10 per cent over the previous corresponding period. The company reported underlying net profit of $17.7 million - up 20 per cent.
The return on equity was 34 per cent.
Revenue was up 3.3 per cent to $324.9 million
The company has a combined residential and commercial loan book worth $160 billion. The residential portfolio grew 5 per cent during the half. Residential loan settlements were down 2 per cent to $16.9 billion.