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AFG share price flat despite revealing 30% increase in lodgements

The Australian Finance Group Ltd (ASX: AFG) share price has remained relatively flat despite the mortgage aggregator releasing its latest quarterly update yesterday. 

The update showed AFG recorded its largest quarterly lodgement result of almost $17 billion in the quarter ended June 2020, which is a 30% increase on the same time last year. Total lodgements were $5.2 billion in April, $6.1 billion in May, and $5.5 billion in June.

The group reports that banks closing branches and redirecting resources to deal with hardship cases has meant increased demand for brokers from customers looking to make changes to their financial arrangements.

Refinancing activity was strong early in the June quarter and there has been a flurry of activity from first home buyers aided by government incentives. Refinance applications accounted for 28% and 36% of lodgements in April and May, before falling to 23% in June. First home buyers accounted for 12% and 14% of lodgements in April and May, increasing to 21% in June.

Major banks winning business

AFG has witnessed a significant shift in business towards the major lenders over the past few months. After peaking at around 70% in the quarter, the highest level since 2017, flows of business to major lenders settled back down to 60% in the month of June.

Australia and New Zealand Banking GrpLtd (ASX: ANZ) was the big winner among the majors, with 9.92% market share last quarter. ANZ’s market share rose as high as 36.87% in May thanks to cash back offers and low fixed rate products. Commonwealth Bank of Australia (ASX: CBA) benefitted from consistency of service and back office efficiency which saw its market share rise to 23.66% at the end of June, up from 14.7% last quarter.

Westpac Banking Corp (ASX: WBC) saw market share drop to 12.38% at the end of June from 20.14% at the close of the third quarter due to a blow-out in turnaround times. Processing bottlenecks began to impact turnaround times for the major by the close of the quarter leading the non-majors to take back some ground.

About the AFG share price

AFG is gaining market share with lodgement volumes increasing as Australians increasingly turn to mortgage brokers to help manage their financial needs.

AFG’s proposed merger with Connective looks set to proceed following merger clearance from the ACCC. The merger will result in the largest mortgage aggregator in Australia, accounting for almost 40% of mortgage brokers operating in the country.

The AFG share price plummeted from a high of $2.96 in February to a low of 92 cents in March, but has since gained 80% to trade at $1.66.

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Motley Fool contributor Kate O'Brien has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Kate O'Brien