Joining forces

Resimac’s GM of third party distribution, Daniel Carde, explains how Homeloans and Resimac have combined the best of both brands

The last two years have seen record merger and acquisition activity across all sectors globally. In 2016, Deloitte reported the “busiest year ever” as the value of global deals exceeded $4.7trn, with the banking and securities sector the second busiest.

In 2017, the value of M&A deals reached a six-year high in Australia, and in 2018 KPMG predicts activity will increase by a further 10% by year end, following a “ground shift” in the financial services sector that has resulted in a “very buoyant M&A environment”. What’s more, KPMG expects that, within financial services, the trend will continue well into 2019.

One of many deals contributing to the statistics was the merger of Homeloans and Resimac Limited. Finalised in 2016, the merger formed one of Australia’s largest non-bank lenders, with a combined loan portfolio of more than $12bn.

However, until this month the two brands continued to exist side by side – in the marketplace and on aggregator panels. Behind the scenes, policies, procedures and processes have been aligned since 2016, while the market- and brokerfacing side of the business continued to operate under two separate names.

Now Homeloans and Resimac are to be unified under a refreshed Resimac brand for all Australia and New Zealand operations, with effect from 3 December.

In part, the Resimac name was chosen to continue market association with the lender’s specialist products, an area of the business that has been active since 2007 and that will remain a key focus area moving forward. Coupled with Homeloans’ wide-reaching distribution, it’s tipped to be a recipe for success.

Calling the rebrand a “natural evolution” of the merger, joint CEO Scott McWilliam says, “We have turned our attention to developing a simpler, single-brand platform from which to serve our customers and distributors and continue our strong growth.”

While there is no material change for customers, one of the benefits of operating under a single brand is that it will make things easier for brokers through streamlined and targeted marketing and simpler customer interaction.

GM of third party distribution Daniel Carde says, “As part of the process we did consider new brands, old brands. We engaged with an external brand consultancy group and, after considering all our options, the decision was made to run with the Resimac brand.

“The consolidation of the brands provides an opportunity in how we market to brokers, and it provides an opportunity for brokers – and the wider market – to better understand the complete product range that we offer, and remove any confusion about who we are and what we do.”

A highlight of that range is the non-bank’s ongoing commitment to specialist lending, an area that has seen a resurgence over recent months thanks to tightening lending criteria among the major banks.

In August, ABC published data confirming a 40% spike in failed refinance applications and further increases in the number of first home buyer, investor and owner-occupier loan rejections. In November, new lending declined to the lowest level since August 2014, driven by major banks rejecting applications from borrowers who only a year ago were considered prime.

Specifically, year-on-year figures for September 2018 showed total finance was down 7.7% on average, with owner-occupier loans down 18.1% and investor finance down 11.5%. However, the trend is good news for the non-bank lenders, particularly those in the specialist space.

Data calculated by ANZ shows non-bank housing credit is up 13% year-on-year, with further data from AFG showing a 30% increase in total market share for the non-banks in the last two years.

“The biggest opportunity for us is that Resimac has been known as a specialist lender in the past so we are looking to capitalise on that and reach a broader market through what was traditionally our Homeloans distribution,” says Carde.

“It’s about putting the best of both together – the Homeloans distribution with the Resimac funding, supported by our other long-term funding partners.”

The right questions

In part, Carde attributes Resimac’s market strength to an extensive credit policy, which has contributed to the lender’s reputation for catering to “the broadest possible market”. For example, impaired and alt-doc borrowers can borrow up to 90% of the value of the property, and an unlimited number of defaults and arrears can be considered.

“There has been quite a bit of uncertainty about the residential market, and investors seem to be looking for alternative options,” he says. “I certainly believe this has contributed to the growth in business lending. Also, with cash rates at historical lows, investors are looking for better returns. Finally, brokers seem to be picking up a larger slice of the commercial pie. I think the last point is the main reason.”

In November, Resimac introduced an 85% LVR residential mortgage product with no LMI requirement or risk fee and a maximum loan amount of $1.1m.

“We fund right the way from the prime 80% owner-occupier loans, all the way to the credit-impaired, alt-doc loans. We fund all those ourselves through our own platform, as well as our other funding partners, and, importantly, we have been funding loans for over 30 years,” he says.

At times, products have even been introduced and amended to meet market needs. For example, a rise in interest from self-employed borrowers is met through a range of alt-doc solutions, including higher-LVR options.

This has also allowed Resimac to cater to a broader section of the self-employed market. Likewise, when it comes to credit-impaired borrowers, similar demands can also be met – providing brokers are asking the right questions during client meetings.

“The biggest opportunity for us is that Resimac has been known as a specialist lender in the past so we are looking to capitalise on that”

“It all comes down to the story, and that is where brokers come into play,” Carde says. “When they talk to the borrowers they need to get as much information as possible and put it forward to us so we can make an informed decision.”

For Carde, there is only one rule for these conversations: nothing is off-limits.

“The simple rule is that if something doesn’t stand out or you’re not clear on something, just ask further questions and make sure you convey that to the lender. Anything that is relevant should always be put forward to the lender,” he says.

Growth strategy

With brokers driving more than 85% of Resimac’s mortgage originations, the lender’s third party strategy will remain unchanged for the time being, retaining a focus on exclusive broker distribution of Resimac-branded mortgages.

The focus for Carde is the current market conditions and the “great opportunity” they provide for brokers to diversify into specialist lending. He believes these opportunities will multiply as comprehensive credit reporting is rolled out.

“CCR will certainly change the way in which lenders accept applications because there will be a lot more data available when making a credit decision. What is a prime loan today may not be a prime loan tomorrow,” Carde says.

“As more and more data becomes available, brokers will need to consider diversification outside of that prime category and look to lenders such as Resimac which offer both near prime and specialist lending solutions to borrowers who potentially fall outside of the traditional lending guidelines.”

With access to more than 85% of the broker market through its aggregator partnerships, Resimac enjoyed a strong FY18. Total settlements reached $4.3bn, up 19.4% on the previous year, and assets under management reached values of $12.1bn, up 18.6% on the previous year. Further, the principally funded loan book reached values of $8.6bn, an increase of 30.3% year-on-year, and the future looks equally bright.

Carde says, “It’s now time to focus on exactly what we are good at.”