Minnow mortgage manager wants to be big fish
To grab a larger slice of the mortgage manager pie, Firstfolio Limited continues the growth by acquisition strategy, taking on six businesses during financial year 2008.
Firstfolio grew its lending book by a third, to $8 billion for the period, with just over half organic and the remainder purchased, with revenue up 14 per cent.
"Mortgage management revenue is growing quicker than aggregation," said Firstfolio chief executive officer Mark Forsyth.
The $41 million in revenue for FY08 was split between aggregation with $27 million and mortgage management with $14 million.
"I want mortgage management revenue to grow to be a bigger percentage of the total business revenue."
Essentially, the current Firstfolio business model is to buy small mortgage manager businesses for the shopfront distribution channel.
"We actually started off with the idea that we wanted to be a financial services firm, but if you don't have a large enough distribution footprint, you can't sell.
"So we acquired the Lawfund business to give us the distribution footprint, with the clear view we would start selling mortgage-managed products down the channel, and other products in the future."
Lawfund was an aggregator established in the mid 1990s by solicitors to assist other solicitors and their clients with finance, and currently has over 1000 members and a loan portfolio above $6 billion.
"Sixty-five per cent of our mortgage-managed product is by new brokers, so we have converted them away from just selling bank products to selling our new loan branded mortgage-managed product. If we did not have the Lawfund distribution channel, then we wouldn't have this option."
Forsyth envisages consolidation will escalate within the mortgage manager and broker space.
"There will be continued rapid consolidation. We were one of the first at the smaller end of town - at the bigger end of town Challenger jumped in and massively propelled the consolidation even faster.
"And now you have the major banks actively participating in a space that they said they weren't going to participate in, with CBA buying a third of Aussie and Westpac buying Rams.
"If the bottom guys don't merge with some of their partners above them, they are going to be in great trouble as they won't have any scale - so they either have to merge into a block of say five at the lower end, or the second tier or the first tier is going to aggregate down and consolidate."