COMMONWEALTH Bank of Australia has signaled an intention to take full control of John Symond'sAussie Home Loans, as it moved to a controlling stake in the mortgage broker.
In its first deal since the$373 million purchase of wealth group Count Financial last year, CBA today said it has inked a deal to increase its investment in Aussie to 80 per cent, from 33 per cent.
The nation’s largest lender also said the deal provided the “right to subsequently move to 100 per cent ownership”, signalling an eventual takeout of the broker.
CBA, which has long been seen as the eventual owner of Aussie,did not disclose the terms of the deal, labeling it immaterial to the bank, but is thought to have paid about $200 million for the increased stake.
The transaction is subject to approval from the Australian Competition and Consumer Commission. We recognise the strength and reputation of the Aussie brand and name in the Australian mortgage market and also the importance of broker distribution of home loans and other financial products,” said CBA’s executive of strategic development Rob Jesudason.
Mr Symond will remain as executive chairman and Aussie will continue to operate as a standalonemortgage broker and financial services provider, CBA said.
Mr Symond, who will retain his 20 per cent stake in the lender, said itwas an opportunity for Aussie to accelerate its growth.
"The Commonwealth Bank will give us additional strength to grow and service our customers," he said, adding: "It's business as usual for Aussie."
Aussie was established byMr Symonds in 1992 as an alternative to the Big Four banks and now lends $38 billion to morethan 250,000 customers, backed by a panel of 18 lenders. It also sells insurance, personal loans,credit cards and other financial products.
CBA, along with Westpac, already controls the majority of the mortgage market, ahead of rivals National Australia Bank and ANZ.
The deal comes as the Reserve Bank tries to kick-start the property market and other areas ofthe economy sensitive to interest rates by cutting official rates to offset the peak in mining investment, expected as early as next year.
It also follows the recent tie-up between Macquarie Group and Mark Bouris's Yellow Brick Road, which will see YBR distribute white-labelled financial products manufactured by Macquarie, starting with aggressively priced home loans.
The deal came as JPMorgan today downgraded CBA to"underweight" following the bank’s 6 per cent outperformance relative to the banking index this year, a gain which has boosted its market value to almost $100 billion.
"Despite 175 basis points of cash rate cuts over the last year, net new mortgage lending commitments are still contracting,” analysts at Citi said last week, showing credit growth is giving little sign of an imminent rebound, which is weighing on the banks’ growth prospects.
