AFG enjoys 20% earnings growth

Australian Finance Group is crediting its diversification strategy for a strong financial full-year result, which includes a 20% rise in normalised earnings and a 30% boost in the final dividend.

One of the country’s largest broker aggregators, with member numbers increasing to more than 3,700 brokers including Fintelligence and non-residential brokers, AFG on Friday released its results for the financial year ended June 30, 2022.

Among the highlights were normalised net profit after tax of $61.3M, up 20% on FY21,  normalised NPAT of $55.8m, up 12%, and statutory NPAT of $38.8m after technology and investment-related impairments of $21.3m.

Read more: AFG reports solid third-quarter growth

AFG also reported strong growth across all business lines with direct lending for loans such as AFG Retro and AFG Link, funded by subsidiary AFG Securities, driving earnings and diversification growth.

This growth included:

  • Direct lending settlements up 102% to $2.7bn and loan book up 41% to $4.8bn (net interest margin 163 basis points)
  • White label settlements up 36% to $2.9bn and loan book up 8% to $8.5bn
  • Aggregation settlements up 36% to $59.4bn and loan book up 9% to a record $182.2bn
  • Commercial settlements up 67% to $3.9bn and loan book up 19% to $10.9bn

AFG CEO David Bailey (pictured above) said the company’s strategy to diversify for earnings quality and growth through a broader product set was a key driver in delivering 20% growth in normalised earnings and increasing the final dividend by 30% in FY2022.

“AFG Securities settlements more than doubled in the year, significantly outperforming the strong 36% growth in both white label (distributed on behalf of ADIs) and aggregation settlements,” Bailey said.

“This outperformance was maintained throughout the year with settlements in the second half exceeding the first half period.”

Bailey said broker aggregation remains AFG’s largest business and it continued to grow strongly throughout the year with $59.4bn of settlements, increasing the loan book by 9% to a record $182.2bn.

“Homebuyers continue to embrace the competition and choice provided by mortgage brokers and this has been evidenced by an increase in broker market share to 69.5% in the March 2022 quarter,” he said.

“Approximately 1 in 10 Australian residential mortgages are now arranged by an AFG broker. We remain confident that the role and value of brokers to Australian borrowers will become more important as their customers seek advice and adjust their finances as their economic position changes.”

Read more: AFG partners with Tic:Toc

Bailey said FY22 has been AFG’s best year for recruitment in more than a decade with more than 200 groups joining AFG.

The FY22 performance allowed the AFG board to increase the final dividend by 30% to 9.6c per share, bringing the total dividend to 16.6c per share, representing a payout ratio of 80% and dividend yield of around 9% fully franked.

“AFG is well positioned to continue executing its diversification strategy to drive continued earnings growth across the interest rate cycle,” said Bailey.

Key strategic investments in Thinktank, Fintelligence and BrokerEngine were also providing earnings growth for AFG, as well as opportunities for further expansion.

“Thinktank’s earnings contribution is up 16% to $6.1 million for the year and Thinktank white label settlement volumes have increased by 84% to $239 million in FY2022,” Bailey said.

Further highlights from  AFG’s full-year results include:

  • A strong balance sheet with net cash, investments, and other financial assets of $217m
  • Trail book net asset growth of $5.5m (after tax), up from $1.7m last year driven by record settlements
  • Low capital requirements support strong returns with ROE of 30%