Margins a mess for largest non-banks

Australia's largest non-bank lenders struggled with lower margins (and in one case, losses) over the 2014 financial year. FirstMac, Resimac and Liberty Financial all produced patchy returns last year.

FirstMac, the home loan market leader on pricing through its loans.com.au brand, reported a fall in net profit over the year to June 2014 to A$3.4 million down from $8.4 million in 2013.

The success of loans.com.au is the chief reason for the fall, with its very low rates (and thus low margins) only one factor.

James Austin, chief financial officer of FirstMac, said that origination costs were expensed directly for this brand (as opposed to broker-originated loans where commission costs are amortised).

Austin also said loan growth continued at $100 million a month, lifting the June 2014 asset level of $5.6 billion in recent days to in excess of $6 billion.

The second-largest non-bank lender, Resimac, posted a pre-tax loss of $3.6 million for the 12 months to June 2014, compared with a loss of $5.6 million for 2013.

Warren McLeland, Resimac CEO, wrote in the annual report that the loss "reflects a challenging year as margins, particularly in the prime business space, have been squeezed and it also reflects further business investments and a number of items that are 'one-off' in nature."

Resimac absorbed the residual business of RHG (formerly Rams) during the year, lifting its assets to $5.0 billion from $3.2 billion.

With $1.7 billion in RHG loans transferred, organic loan growth for Resimac seems to have been slight.

Resimac also picked up assets in the UK in September 2014.

The group also divulged that it "acquired shares in Firstfolio, an ASX listed entity, during the year to meet medium term value and strategic objectives."

Liberty Financial achieved a better balance between asset growth and yield.

Net profit for the year for Liberty increased by $7 million to $47 million in 2014 from $40 million in 2013.

Asset growth was only $200 million to $2.8 billion for a business that's widened from non-conforming home loans to prime loans, business and equipment finance.