Mortgage Choice (MOC.ASX) detracted as it returned –10% following a softer than expected result. While the growth of cash NPAT adjusted for one off failed M&A costs was a respectable 7%, this appeared to disappoint expectations given the background of strong growth in mortgage originations seen during the half (c20% year on year). We would note however that this growth was primarily driven by refinancing activity rather than new loans for purchases which dragged on the growth of the mortgage book (which drives trail revenue). The book growth was also hurt by the staggering COVID-19 lift in savings rates which saw loan balances paid down and cash held in offset accounts (trail is paid on net balances outstanding). We would expect greater operating leverage to the strong housing finance growth currently being seen to emerge in the 2H21 as these latter two factors abate. At c8.5x annualised EBIT Mortgage Choice still looks lowly priced given the favourable tailwinds being seen in mortgage finance growth.
SEC Price at posting:
$2.12 Sentiment: Hold Disclosure: Held
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