For years, many companies have tried to steal market share away from the mighty Commonwealth Bank of Australia (ASX: CBA) and Westpac Banking Corp (ASX: WBC). And it's no wonder why.
Between them you'll find over $1.5 trillion worth of assets, 50% of the Australian mortgage market, nearly 40% of domestic business banking and a touch under half of all household deposits.
Their economic moats are so wide you could sink a ship and castles so large, their shadows have shadows. To think any company could seriously stand up to them, is a stretch, at best.
However, as these next small-cap companies have proven, there could be enough room beside these giants for new players to enter and play happily.
- Cash Converters International Ltd (ASX: CCV) is a big provider of payday loans and has exposure to both the Australian and UK economy through an extensive branch network. Unlike a big bank who might charge an interest rate of say 14% on a $10,000 loan, according to the Cash Converters' website a $1,000 loan over six weeks has a comparison rate of 152.03%! Although that might sound ridiculous, the business is growing and I think its stock is cheap at today's prices.
- Money3 Corporation Limited (ASX: MNY) is not dissimilar to Cash Converters. It offers small loans through its growing branch network as well as online. Directors, like Robert James Bryant, hold a significant amount of shares in the company and have been with the business for many years, steering it towards sustainable earnings growth. At current prices Money3 yields 4.2% fully franked and shares trade on a price to cash flow of just 10.
- Yellow Brick Road Holdings Ltd (ASX: YBR) is a favourite small-cap of mine. YBR is a $188 million diversified wealth management company led by distinguished Australian businessman Mark Bouris. YBR offers home loans backed by Macquarie Group Ltd (ASX: MQG) (a major shareholder) and although not yet profitable, expects to be so in the next two years, as it benefits from branch maturity and scale.
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