REA Group has reported positive results for its financial services division in the December half-year, following the acquisition of broker franchise group Mortgage Choice and the merger with its Smartline business last year.
The A$244 million acquisition of Mortgage Choice was completed in June last year and REA reported the December half results for its financial services division on a pro forma basis, assuming that it owned Mortgage Choice in the previous corresponding period.
On that basis, revenue rose 24 per cent to $41.3 million.
Financial services EBITDA was $17.1 million, adjusted to $13.6 million after accounting for a $3.5 million trail commission integration adjustment. The division contributed 3.7 per cent of total group EBITDA.
Settlements increased by 39 per cent, driven by growth in the broker network and the buoyant mortgage market. The latest Australian Bureau of Statistics data show new mortgage lending growing at 26 per cent in 2021.
On a pro forma basis, broker recruitment rose 7 per cent year-on-year. The group had 978 brokers in the market at December 31.
These are strong results, given that Mortgage Choice had struggled in recent years to keep pace with the market in settlement volumes and grow its franchise network.
On the downside, the loan book grew by only 3 per cent to $86.1 billion, compared with the previous corresponding period. This is less than half the rate of system growth reported by the RBA for 2021.
REA said the weak loan book growth was affected high run-off rates, with savings levels remaining elevated.
REA said integration of Mortgage Choice and Smartline is underway and will be completed in the third quarter for the 2022/23 financial year. The business will be branded Mortgage Choice.
Plans for the financial services division include an open banking offering. It is working on a proof of concept with Frollo.
It also moved to upgrade its broker systems with an investment in Simpology, which it described as “a leading provider of mortgage application and e-lodgement solutions for the broking and lending industries”.