Homeloans reports stronger lending but weaker bottom line

Mortgage lender Homeloans Ltd is caught between the strong growth of its branded loan book and accelerating run-off of its securitised portfolio. The result was a fall in net profit and earnings per share for the year to June.

Homeloans yesterday announced that its net profit fell 12.1 per cent from A$14.1 million in 2009/10 to $12.4 million in the last financial year. Earnings per share fell from 12.2 cents to 8.9 cents.

Homeloans' executive chairman, Tim Holmes, said loans supported by wholesale funding lines increased by 21 per cent to $3.5 billion.

The securitised loan portfolio fell from $489.7 million to $370.5 million. Homeloans has not been involved in the Australian Office of Financial Management's investment program to support issuers of residential mortgage-backed securities and has not undertaken an RMBS transaction since 2008.

Holmes said another factor in the result was that the company made a $32 million return of capital last year. This had the effect of reducing interest income by around $2 million.

Net interest income fell from $15.6 million to $11.9 million. Fees and commissions were up, however, from $29.7 million to $32.9 million, reflecting the growth in the branded loan book.

The company reversed an impairment charge from the previous year and reported an impairment gain of $533,000.

Holmes said the increase in the branded loan book was due to more aggressive marketing and an expansion of its retail presence. The company has opened two sales offices in Victoria and four in Queensland. It has plans to open more offices this year.