NAB shuts down mortgage arms as revenue soars on white label loans
While National Australia Bank's controversial dealings with introducers have plunged the bank into another governance scandal, the group's wholesale mortgage business has emerged as one of the fastest-growing profit-spinners in the group.Advantedge Financial Services Holdings contributed A$311.6 million to NAB's group bottom line in 2017, according to disclosures made in special purpose financial accounts lodged with the Australian Securities and Investments Commission.The earnings performance of the subsidiary was up more than 63 per cent on 2016 net earnings of $191 million, underlining how NAB is increasingly reliant on this business model.The Advantedge holding company's main asset is an operating entity known as Advantedge Financial Services Pty Limited, which originates loans through big mortgage aggregation platforms such as AFG, Connective, Astute and LJ Hooker.Advantedge is now the country's largest white label funder in the residential mortgage market, reaching around 85 per cent of licensed brokers via the aggregators.Under Australian company laws, NAB is required to prepare special purpose accounts for the Advantedge group of companies even though they are not considered "reporting entities".One of the aims of special purpose reporting is to ensure that consolidated tax entities such as the NAB group estimate the income and tax liabilities of their large subsidiaries as if they were discrete entities.Apart from highlighting Advantedge's importance to NAB as one of its fastest-growing businesses, the latest special purpose accounts also reveal details of an internal reorganisation occurring across the bank's third party mortgage operations.Under a program that began in October last year, NAB has been migrating the activities of a raft of business entities and operations to the Advantedge holding company.The changes mean that nine subsidiaries that previously operated in the bank's third party mortgage area have been placed in liquidation.Here's a list of the NAB-owned entities that are no longer operating:• Fintrack Members Pty Ltd• Independent Mortgage Affiliates Pty Limited• Mortgage Support Services Pty Ltd• Finance & Systems Technology Holdings Pty Limited• Fastlend Pty Ltd• Choice Lend Pty Ltd• Plan Lending Pty Ltd• MSS MF Pty Ltd• MSS MFA Pty LtdThe first company on this list was part of NAB's controversial mortgage introducer operation, which has been spotlighted in hearings of the Hayne Royal Commission for alleged bribery and fraud in relation to mortgage applications.NAB confirmed to the Royal Commission last month that the bank had been investigating misconduct in its home loan introducer program in Western Sydney since 2015.The bank also identified misconduct by staff in Victoria and the ACT after the internal investigation was later widened.NAB announced in November last year - the same month it placed Fintrack Members and Independent Mortgage Affiliates in liquidation - that it had sacked 20 staff and disciplined another 32 employees for "unacceptable" conduct in relation to NAB's introducer program.A NAB spokesperson last night said the reorganisation was purely administrative."In order to simplify our internal processes and better align our legal structure with our management structure, we have recently made some changes to the structure of that group of legal entities," the spokesperson said."This includes reducing the total number of