Good results from SA's first listed mortgage originator Finbond Property Finance
Despite the uncertain credit climate, South Africa's fourth largest and only listed mortgage origination company and non bank lender, Finbond Property Finance, turned in a solid set of maiden interim results today.
Turnover for the first six months ended in August was R64,0 m, 974% higher than the comparable period last year. After tax profit came in at R31.1m, 1 612% up on the same period in 2006.
Headline earnings were 13,7 cents a share 1 629% up on the 0,8 cents a share recorded first six months of last year and outstripping the prospectus forecasts.
Finbond CEO, Dr. Willie van Aardt, says he is extremely pleased as these results had been achieved at a time of challenging marketing conditions characterised by the rise in interest rates and the introduction of the National Credit Act.
However, he says Finbond was not adversely affected by the rise in interest rates or changing regulatory environment due to the timeous positioning of the Group, its significant national distribution channels, product design, matching funding, cost containment and strong organic growth.
According to statistics released by ABSAs senior economist Jaques du Toit this month, growth in total mortgage advances are only modestly diminished from their high of 30,9% year-on-year in October last year to around 26,4% year-on-year in August 2007 and this despite a series of hikes in the banks prime interest rate to 13,5%.
However, ABSA's Jaques du Toit says the lag effect of higher interest rates since mid 2006 should start to see the growth in mortgage advances declining gradually towards the end of the year. Growth in houses prices, he says, which averaged at 15,4% for the first seven months of this year, should also slow further to an average of around 14% for the full year.
Van Aardt says the introduction of the National Credit Act, while having a dampening affect on domestic credit extension, including mortgage advances, also created additional opportunities for Finbond. The tighter regulatory environment and the further regulation of operators, as well as the fragmentation of the industry, he says, should lead to consolidation opportunities in the mass term lending market as smaller less sophisticated players are forced out of the business.
Findbond is already acting as an industry consolidator. At the time of its listing in June this year it brought together four mortgage originators and term lenders in the form of Independent Bond Originators; Dimension Financial Services; Bondmaster and Blue Dot Finance. Since then it has acquired 100% of the Excel Group and 50% of Blue Chip Finance (national) and 100% of Blue Chip Finance (Western Cape).
Van Aardt remains positive about the group's prospects. However, he notes that the volatile market conditions and rising interest rates, in particular, could impact on the group's ability to repeat the performance of the first six months in the second half of the year.
That aside, Finbond has set itself ambitious growth targets for the medium term especially via further expansion into the mass term lending market. It is currently originating more that R1,6bn a month in mortgage advances through the four major banks and is responsible for origination around R19bn in mortgage advances a year.
It has also substantially increased its national footprint since the takeover of Blue Chip Finance and now has 80 branches, 183 agencies and associates, 875 brokers and 75 independent business units servicing its growing customer base countrywide.
Says van Aardt:
"Through organic growth and further strategic acquisitions we hope to achieve our vision of becoming the countrys number one, non-bank, lender and mortgage originator of choice."
