Yes what you have raised is correct. The binge that the big...

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Westwind

675 Posts.

114

17/07/23

18:14

Post #: 68829718

Originally posted by jamber ↑

Not all good news. What is good about - "“This tilts the playing field in favour of the major lenders with their funding advantages and higher interest rates for existing customers creating an arbitrage that has enabled them to offer discounts and ‘cash back’ deals to lure new customers,” he said.

“It is pleasing to see cash back offers largely being removed from the market. The next quarter will be the time where we see whether the smaller lenders are now able to compete for customers, after being squeezed by the pricing and cash backs on offer.”

A clear example of the impact the actions of the major banks have had on non-major lenders is evident in the flows of volume to AFG Home Loans, which was 5.4% for the quarter, down from a historic high of 10.4% in the same quarter of 2022. “AFG Home Loans took the decision to not write-sub economic loans as the majors leveraged their funding advantages to take market share,” he said. “Reduced competition means Australian homebuyers will inevitably be left with higher real long-term borrowing costs.”

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Yes what you have raised is correct. The binge that the big banks have fostered on the market to win market share, with cash backs/discounts, has lead to a major decrease in loans written by our brokers. We will be relying on the historical long term "book" of loans, written over the last 10-15 years to soften the blow for FY22-23 profits. Broker forecasts have been saying for quite some time that the eps will drop significantly from FY21-22 to FY22-23, as detailed in the table below.

AFG Earnings & Dividends Forecast (cents per share)

1 Curr 2023 2024 2025

2 EPS 23.1 16.4 18.3

3 DPS 16.6 12.3 12.2 11.9

This is why the share price has dropped from around $2.40 - $2.60 to $1.50 - $1.80 over the last 18 months. However prospective investors should not be too alarmed. The forecast yield at current prices is still around 7% fully franked, with growth to return in coming years. The share price will probably move lower as this information and the coming FY23 results are digested - a good time to consider share purchases if you are looking for good yield and some future growth.

All in my own opinion, and DYOR.

Cheers Westwind