QUEENSLAND, Australia – Credit Union Australia’s value of new lending issues took a hit and dropped by around 36% for the first half of 2020.
The Credit Union Australia (CUA) Group published its figures for the first half of the FY2020. The results show that the number of new loans issued by the lender reached $1.47 billion for the last six months of 2019, ending December 31. The latest figure shows a significant drop in the total new loans issued as it went down by nearly 35.8% compared to the same period from the previous year. During the similar 6-month period for the FY2019, the recorded new loans issued reached as much as $2.29 billion.
According to Paul Lewis, the chief executive of Credit Union Australia, the decline in their lending volumes shows the conscious business decision of the CUA Group. Instead of the efforts they did for the FY2019, where they concentrated on boosting lending growth, they took maintaining a much steadier lending volume levels this year.
Mr. Lewis said that during the first half of 2019, they recorded high lending volumes and was focusing on boosting their home loan portfolio at a much higher level than the system rate.
He noted that the approach they previously took helped drive their loan book during the FY2019. However, Mr. Lewis said that the rapid growth for the CUA Group flowed through their operating costs during the period when funding is at a significantly high level. It was the primary driver why they had to expand their deposit portfolio during the same period, he added.
Mr. Lewis also said that the margin that CUA is getting is one of the tightest in the entire market. He stated that they know the challenges they might face in the external environment will continue. With that, it is critical to target growth primarily based on the ongoing system growth. He stated that this initiative would help them properly manage their interest margin throughout the FY2020 and remain to get sustainable profits.
CUA Group also said that the new loan among the FY2020 boosted the loan balance advance by around 1.3 times the average in the market.
Based on the newly released results from the lender, about 82.7% of new loan issues are for owner-occupiers, which accounted for around $1.09 billion. The total new mortgage lending issued by the CUA Group during the six months in 2019, ending December 31, reach $1.31 billion.
Meanwhile, for the period, the lender recorded a total of $227.7 million for investor lending.
According to the spokesperson of the CUA Group, the split between investor lending and owner-occupier remained mostly unchanged from the same period the previous year. In the pr time, owner-occupiers took 82.5% of the total lending volume or $1.78 billion from the group.
In an interview, the same spokesperson said that the broker channel stayed as the primary driver for their lending volumes.
However, this sector accounted for a decline in the lending volume during the latest period as well. It wasn’t immune to the overall lending volume decline that the CUA Group was experiencing, which also affected both the organic and broken home loan channels.
According to the spokesperson, brokers contributed around $0.78 billion or 56.8% of the total new mortgage lending of CUA during FY2020. The latest figure is down by about $460 million compared to the $1.24 billion during the same period in FY2019.
For the total lending of CUA Group, broker share stayed relatively unchanged, which recorded a slight decline from its 57.7% share in new loans during FY2019.
Meanwhile, CUA Group noted that it established over 250 First Home Loan Deposit Scheme applications since its appointment to the lending sector in December last year. During the same interview, the spokesperson further stated that around 70% of the total applications received were from the broker channel. This sector recorded a much more significant share compared to CUA’s average broker volume.
The spokesperson added that CUA Group saw the average FHLDS application loan amounts rose by around 16% from their average overall lending price.
The increase in the lender’s balance sheet was mostly due to the steady loan grown under its retail and management deposits. However, despite the growth, CUA reported that its net profit for banking operations, excluding taxes, is only at $23.02 million. It is down by around 23.4% from its prior net profit.
The decrease in the growth rate of the lender is mainly because of its strategic investments and the challenging external conditions.
Overall, the net profit of the CUA Group after tax went down by 7.9% from the recorded $21.25 million from the corresponding prior period. The decline is primarily due to the challenging external environment, costs due to its choice to devote to member services, and the low-interest rate conditions.
According to Mr. Lewis, margins are getting sustained pressure from the challenging external climate, which reflects in their latest flat net interest profits. However, he added that the CUA Group is staying focused on accomplishing more sustainable gains that can allow them to offer competitively priced products.
CUA Group also said that they are funneling cash worth around $40 million in 2020 on several projects that could help businesses in their scaling efforts. It will include optimizing service channels and a streamlined lending origination platform.
Mr. Lewis further stated that CUA is on track to start with phase one of its latest lending origination system in a partnership with Sandstone Technology. They aim for a more streamlined home loan experience for all its customers through the new platform, and they expect to start the rollout in a couple of months.
He also commented that they remain committed to funding technology and projects despite the challenging operating conditions right now. Mr. Lewis also said that CUA made decisions during the first half of the financial year that influenced their current position.
He stated that they are also putting customers and members are their primary focus as they look for ways to manage better the effects of the RBA cut rates. Mr. Lewis concluded that Credit Union Australia remains conscious in balancing the needs of both depositors and borrowers in all their pricing decisions.