Taking a more conservative approach to provisioning than any bank or non-bank lender this profit season, mortgage funder Resimac incurred a 5 per cent fall in net profit over the year to June 2022.
The lender’s loan impairment expense increased to A$11.5 million in FY2022 from $2.7 million in 2021, driven primarily by a higher collective provision (of $9 million).
It is staff costs, though, that will draw the ire of the buy-side and sell-side analysts around the Resimac outlook.
Employee benefits expenses shot up 21 per cent to $45.3 million, a material change down to the pandemic, the fast-arriving global recession and a ‘probably-better-late-than-never’ overhaul of the core banking and related systems.
With $15.3 billion in assets under management, the expense to asset ratio – at 0.59 per cent – remains a more than tidy advantage over big banks and indeed most of Resimac’s many contortionist competitors.
“We continue to see low arrears, we are seeing a decrease in specific provisions,” Resimac CEO Scott McWilliam told Banking Day.
“Although we feel optimistic about the future, we wanted to make sure if a worst case scenario turns out, we have a sufficient provisions for those shocks, and also sufficient to cover growth in assets under management in 2023,” he said.
Turning to the mortgage book, “we saw very elevated run off over the first half,” McWilliam said.
“In the second half it reduced to more normal levels.”
Arrears in one priority market for Resimac – asset finance – will be rising and rising in no time, more than likely.
Not that Resimac told the market anything on arrears in the rather immature business line that is asset finance.
They did clarify that four weeks ago Resimac splashed all of $900,000 to take its stake in Sonder Equipment Finance to 51 per cent from 15 per cent, and McWilliam (echoing AFG) is keen on asset finance over the near term as a driver of revenue diversification, and probably risk exaggeration, to be fair.
The firm’s investor presentation over-eggs the high growth story, comparing 30 per cent growth in home loan settlements over the year to June 2022 with the more sedate (but rising) credit growth number of 8 per cent over the full year.
On an AUM basis, Resimac’s growth was 11 per cent and 1.4 times system. Annual home loan settlements, at $6.3 billion were a record.
With a history dating back to 2001, Resimac this year stood out by being called on to rescue the $83 million mortgage book of Volt Bank two months ago.
“It was a good quality book, we didn’t buy it at a discount,” McWillliam said, while conceding they did buy it in haste.
“It’s very low LVR, a prime book, a squeaky clean book,” he said.
‘We write more loans in a week originating, but we bought that book to help Volt Bank and the regulator [APRA].”
One challenge for the lender is how to stir more vim into their home brand, Homeloans.com.au.
“Direct to consumer channel sales increased 7 per cent to $2.1 billion driven by eloans.com.au and New Zealand direct growth,”