Mortgage Choice cuts dividend as profit slumps
Mortgage Choice’s profits slumped by 44 per cent after an overhaul to its broker remuneration model, the slowdown in the home loan market and uncertainty caused by the royal commission.
The listed broking chain reported net profit after tax of $6.4 million and cut its dividend to 3c a share, from 9c last year. Cash earnings, a less volatile measure, fell 43 per cent to $7.1 million, in line with guidance for the full year that it gave in December.
Most of the fall in profit was due to a change announced last year, in which the company agreed to give a bigger share of revenue to franchisees, but settlements were also down 12 per cent, as house prices in Sydney and Melbourne fell.
Tighter lending standards meant it was taking longer to approve loans, and uncertainty caused by the royal commission had added to this, it said.
"Settlement volumes have been impacted by the slowing property and home loan markets. Loan applications are also taking longer to submit due to tightening lending policies," chief executive Susan Mitchell said.
"The uncertainty surrounding the Banking Royal Commission recommendations has added to this, to create a very different operating environment for the company and its network of franchisees,” Ms Mitchell said.
Mortgage Choice shares have been pounded since the royal commission this month recommended brokers' commissions, paid by banks and worth $2.4 billion a year across the industry, be scrapped and replaced with an up-front fee paid by consumers.
Shares in the company have fallen 33 per cent, from $1.05 before the royal commission to 70c at Wednesday's close.
The broking industry is mounting a lobbying campaign against the changes, to which the government has been cautious. Labor had previously said it supported the Hayne recommendations "in principle" but it was reported on Wednesday it was backing down, by looking at options that do not involve an up-front fee paid by the consumer.
"Mortgage Choice is calling for both sides of government to initiate a consultation process with the industry and is committed to working with policy makers to ensure Australian borrowers continue to have access to competitive pricing, choice and the expertise they have come to expect from their mortgage broker," Ms Mitchell said.
The company's financial planning business recorded a 28.8 per cent lift in funds under advice, but net revenue from this part of the business also fell after a change to planners' remuneration.