Australian Finance Group Limited (AFG) Earnings Call Transcript & Summary

Good day, and welcome to the investor briefing for AFG 2024 Half Year Results Announcement. [Operator Instructions] And finally, I would like to advise all participants that this call is being recorded. Thank you. I would now like to welcome David Bailey, CEO, to begin the conference. David, over to you.

Thanks very much and thanks everyone, I appreciate you joining Luca and myself as we walk through the half-year results. As some opening comments, I would like to say that after 3 reporting periods of results impacted by knock-ons of the pandemic, be they TFF, cashbacks and deposit arbitrage for our lending business, as we round the half and enter the 2024 calendar year, we're seeing signs of optimism. Lodgement activity for our white label business have increased year-on-year and importantly, our AFG Securities volumes are running at double -- what that was experienced in the same time last year. Our AFG Securities book has stabilized and we have moved our focus from NIM protection against a backdrop of sub-economic new business rates and cashbacks to one of book retention and growth, albeit at the expense of some NIM. Whilst competition remains strong for customers, we have found niches returning that allow us to compete more robustly. At the same time, we are experiencing growth in our distribution business segment with all the asset classes we have focused on. The background thematics for broking remain very strong. Australian customers continue to seek the advice, choice and convenience of brokers and as a consequent broker market share continues to build. Last year, APRA statistics highlighted 424 branch closures to 30 June, 2023. During this time, the need for choice and advice for the majority of Australians whose most important financial decision is buying a house increased. Our business model is built on good brokers becoming busier and on the back of this, our shared outcomes model is proving sustainable in the marketplace with good recruitment activity ongoing into calendar 2024. We are investing in technology compliance, product diversification and our people to create a stronger business in readiness for what we expect will be a transition in the industry. As with the residential market, brokers are growing their footprint in the commercial and asset finance market and our strategy of supporting brokers into these new areas is driving new volumes. With all this in mind, we are mindful of the ongoing strength in the Australian economy and as such continue to diversify our earnings space -- continuing to diversify our earnings base remains a key plank of our strategy. So if I might just go straight to the investor presentation and I will open the batting on Page 3, you can see there our portfolio of businesses is not just AFG, but it's Thinktank, it's Fintelligence, BrokerEngine, and of course, AFG Home Loans. So the Australian mortgage market, 72% of all residential mortgages in Australia are written through a broker. AFG represents 1 in 10 of all mortgages written in Australia are written by an AFG broker and 500,000 customers are helped by an AFG broker. So our business is supported by a $209 billion trail book which spins off strong annuity cash flows. Our underlying NPATA for the half was 18%, which drove an underlying return on equity of 18%. AFG's growth is centered on being the aggregator of choice, delivering higher margin products through its national networks. Our purpose is to define a fairer financial future for all and it's delivered through over 3,850 active brokers and we're creating competition and choice for brokers, customers and lenders. The 3 pillars that we build our business around is growing our broker network, providing market leading technology and leveraging our distribution to deliver higher margin products within that distribution through our segments of distribution and manufacturing and there's more disclosure which Luca will talk about in the accounts around those 2 business segments. Our strategic priorities are progressing. We are growing our broker network, a 14% increase in settlements with 87 new broker groups recruited, half of these are expected to be larger groups. I referenced the trail book before, so 65% of our underlying earnings come from annuity-style income streams. And we have increased during the period our investment in Fintelligence and included an additional $3 million in compliance and data security. We provide market leading technology through our own proprietary technology as well as our BrokerEngine technologies. We have had an increase of 408 subscribers to recurring revenue streams. We have progressed direct lodgement delivered through new broker functionality and invested $9 million in enhancing our technology platform which is adaptable to evolving broker needs. Our manufacturing book sits at $4.1 billion. During the period we had a $750 million RMBS issuance. There are no losses continue to be incurred by AFG Securities on the book. And we have delivered a new lending platform to drive efficiencies and opportunities to create products at a faster rate. Our profit before tax for 2023 half -- first half of 2020 -- financial year 2024 was $22.6 million. Our balance sheet disclosed a $66 million worth of unrestricted cash and our investments in liquid assets sit at $187 million. Our total shareholder return for the period is 15% and we have paid in the half $11.1 million in dividends and our dividend payout ratio sits at the higher end of our interim revised number at 60% of underlying -- of cash earnings. If I jump to Page 8 we can talk a little bit about economic conditions and these are all well documented throughout the market. And obviously, you have seen the cash rate jump over a period of time, but it seems to have stabilized at the moment. That stabilization is driving more inquiry with our brokers. Unemployment, which is a key statistic not just for customers' moods, but their ability to pay home loans and service home loans remains well below the long-term average. And importantly, the housing market has returned to growth and is above the 10-year average. What all this transpires to mean is that we are seeing non-banks become more competitive in the marketplace and we are gaining some of the share they lost during the pandemic and liquidity infused period which drove some unusual market dynamics. So we have seen predominantly most of the cash backs withdrawn from the marketplace. And again, as I highlighted previously, the overriding thematic is bank branches are closing at a record pace which is enhancing the role of the broker channel. The market share has jumped 4% to 72% which is in line with a historic high and the rate of change in the market and price competition, which still exists, supports the broker proposition of providing guidance and choice to customers. A little bit on Page 10 around our broker network. We have talked about that 72%. Inactive brokers indicate coming consolidation into the marketplace. So that chart on the right-hand side. We measure our activity of our brokers -- our numbers of brokers by activity in terms of they have actually got to be active in the marketplace. Importantly, we have 24% of all large broker businesses. And what that means is effectively it supports our proposition that good brokers will become busier, the inactive brokers will ultimately move out of the marketplace. And so, the build of a technology and services to provide that tools to our brokers to become those -- enable those brokers to become more efficient and meet changing customers' digital demands is underlined. We have invested $3 million, as I said, in compliance and data security, recognizing the important role our brokers face -- play in between -- sitting between ourselves, the customers and our financial institution partners. Just jumping to Page 12. We talked about the power of our core asset which is our broker network. It's delivering a 9% average earnings growth over the 6 years through our diversified products. 75% of our earnings now are coming from diversified products. We have about $4.1 billion loan book, which has stabilized and beginning to turn to look towards growth. There's no losses incurred on that book. And then we've got our distribution business, which is, obviously our $209 billion trail book, of which a subset is our $13 billion white label business. During the year -- the full year to 31 December, 2023, we achieved $3 billion in asset finance through our existing AFG broking as well as our Fintelligence business and the broker service margin sat at around about $21 million. We're delivering services and value through our investments. Our market share is increasing to 21.1% with net broker growth of 50% in the first half of 2024. We have dedicated programs to support our brokers and create pathways. The charts on the right identify the improvement and growth in our BrokerEngine and our Fintelligence broking businesses. And that sort of underpins some of our growth strategies moving forward. 30% of BrokerEngine subscribers are non-AFG. As we build and prove up our technology through our own network, they become opportunities for future recruitment and obviously additional subscription revenue. Turning to Page 14. Distribution grew earnings by 7% in the half which is further -- and further growth is anticipated as market conditions improve. These market conditions we are seeing in January and in February. We've embedded -- within residential, we've embedded a new AFG Home Loan product in Brighten and AFG Home Loans White Label has grown its market share in the second half of FY '24 and that momentum has built into the third quarter of this financial year. Our asset finance business which is supported by Fintelligence obviously and also our existing business is still growing and achieving significant scale. Fintelligence settlements grew over 10% in the second half, leveraging the market-leading technology and investing in our sales force. We've also introduced a spot and refer model which is moving out of pilot mode and is achieving great levels of initial success with brokers who would prefer to refer asset finance deals to a trusted partner as opposed to a third-party. Commercial is also an important area of growth. And we've introduced, you can see the level of activity which is building. So if 72% of originations are in residential via broker, we think it's around 20% to 30%. But as you can see, we've grown our settlements by 35% within the commercial sector, which is also including the Thinktank White Label business. We've also launched Partner Connect which is a spot and refer program for our brokers who don't want to write a commercial deal, but are happy to refer, similar to the asset finance spot and refer business, are happy to refer that deal to a trusted partner. In terms of AFG Home Loans -- sorry, AFG Securities on Page 15, there's some commentary there. The book is returning to growth. AFG maintained its pricing discipline and focus on high quality which is being seen in our risk statistics now. But the end result was we became less competitive as the banks capitalized on their funding advantage. That removal of sub-economic cashbacks has started to see AFGs settlements grow in the second half of -- in quarter 2 of FY '24 and also into the third quarter of FY '24. Product development is continuing to be a focus. We have launched Retro Thrive which targets the over 50s product with a first in the country interest only 40-year home loan. Our investment in Thinktank, we've seen Thinktank grow their book to $5.5 billion since -- and reminding that at the time of AFG's investment back in 2018, that book was sitting at $800 million. Their NIM, just like ours, has been impacted by rising costs of funds in this stage of the funding cycle. And as a consequence, their contribution to our earnings in FY for the first half is lower at $1.3 million. In terms of Page 16. We talk about our funding costs. Whilst the run-off remained elevated in the first half at 42%, we are seeing -- as I said, we are seeing signs of that stabilizing. And again, we're talking about it returning to growth in the second half of the first half -- second quarter. That makes it pretty easy to say that. We've got 3 warehouses available which have increased -- during the period increased their costs significantly year-on-year. So we're still washing those through. But the positive sign is that funding costs have peaked and starting to come back. Our exit NIM of 111 basis points is a reflection of that higher level of funding costs, but also a decision to move from margin protection to book protection on the basis of seeing those green shoots in the marketplace. If I move through to Page 17. We talk about the quality of the book. So just a reminder of our book. You can see arrears, 90-day plus arrears on the right-hand side there which sort of stands out as being a very conservative book. And a reminder that 75% of the book sits in prime mortgages or 42% of the balances are below $500,000 and 87% of the balances have an LVR below 80%. And a reminder also that anything that originated above 80% LVR requires individual LMI policies to be in place. Our arrears have increased following the pandemic credit expansion and lower loan book, but arrears have since decreased to 1.6% across the book. No losses in the first half with cumulative loss history across 15 years totaling just $260,000. Despite this impressive result, we've maintained our -- from a prudence level our loss provision at $3.3 million. Our market-leading technology is one of the cornerstones of our recruitment activity and has ability to drive efficiencies throughout business over the longer term. Our refreshed technology stack will provide a modern API services on a cloud-native platform and the CRM -- Flex CRM, we've upgraded the interface. We've enhanced our digital trust with all brokers now have multifactor authentication as they log-in to our proprietary systems. And we've also included and introduced 24x7x365 eyes on glass monitoring and response of our systems. And we're progressing our main thrust of our technology build is around a direct lodgment by a BrokerEngine. And we -- so far, we've included 2 releases, which have been favorably received. From the asset finance perspective, we have our Partner Connect platform, which is launched, but we've also Progressed Ambition Cloud version 3 which is the proprietary technology for our brokers which will include a better customer experience with a digital experience for those brokers and customers who are using that platform. I've spoken a lot now and I will pass across to Luca to talk about the financials.

Cheers Dave. So I'll start on Slide 20. And as Dave mentioned, as anticipated, it's been a very challenging first half from a numbers point of view. But it is one in which the benefit of our diversified income streams and our annuity style earnings came to the fore. The earnings we make from these diversified streams are now more evident with the new reporting segments. The segments align to the way we allocate capital and manage the risk. For those of you that were at our December update, these new segments align to those reported on then. Overall, our NPAT for the half was $14.5 million, down 34% or $7.4 million. There were 2 stories within that though. Our core higher returning segment distribution which is our aggregation services delivered a profit before tax of $27 million, up 7%. The segment delivered a return on equity of 41%. It has been well reported the pressure that non-bank earnings were under driven by a range of factors and that has really underpinned the decline in our result with our manufacturing segment down $12 million for the half. This includes our 32% share of Thinktank's earnings. Pleasingly, and as Dave had mentioned, the sub-economic competition driven by the majors has ceased. Funding costs appear to have peaked and that combined with product innovation meant we saw a stronger end to the half which has continued across January and February. You will notice that the tax expense was higher this period. This was driven by a non-cash adjustment associated with our option valuation. It was a one-off adjustment and won't be repeated. As you would expect, our operating expenditure for the half, we recorded a reduction of $1.2 million and I'll cover that reduction in more detail shortly. The final point to note on Slide 20 is our underlying NPATA. You will see that the trail commission adjustment is lower than this time last year. While we continue to see historically high levels of runoff as a result of record expansionary then record contracting monetary policy, unprecedented levels of cashbacks and the flow and impact of elevated levels of mortgages, which have now largely transitioned to variable. The runoff rate did step down in the half and we would expect that trend to continue. We have declared a fully franked dividend of $0.04 per share which represents a 60% payout ratio. The ex-dividend date is 7 March and the dividend will be payable on 25 March. Turning to Slide 21. This slide summarizes our new reporting segments. By focus first on distribution, which is our core business. It provides strong returns underpinned by our annuity sale income generated from the trail commissions. The segment generated $27 million of earnings, and as I mentioned previously, was up 7% year-on-year. The cost to income ratio of this segment, as you would expect, is a little higher given the sales force and for the half was at 45%, although an improvement on the previous year. I'll talk more about it in the coming slides, but the distribution business is the focus of our current investment cycle and as you can see on this slide, we expect to see a decent return from that investment in time. On manufacturing, which is our securitization program, this is where we take the credit risk. The earnings of that segment are materially down on the prior period and for the half were reported at $9 million. Consequently, we saw returns significantly reduce. The CPI of that segment was 62% affected by the lower net interest income. Central services which reflects the centralized costs providing services to both our distribution and manufacturing businesses reported costs of $13 million which was 3% higher than the previous year driven largely by project activity in our technology space. On the next slide, the slide shows the gross profit we generate from our business segments. Overall gross profit was down $9.7 million to $62 million, again almost entirely driven by the impact of lower net interest margin which was down $11.6 million. With our distribution business, which represents 82% of our gross profit, our earnings are split across 3 key drivers. Firstly, our residential trail and upfront commissions, which contributed -- which combined declined by 1.5% as the payout ratio continued to lift and for the half was at 96%. The second driver is the higher margin income we generate from our broker network in white label and other asset classes or via subscription income. Our white label business had a particularly soft beginning to the year and first quarter volumes were down 30%, as our partners focused on volumes from their proprietary channels. As we have reported though, our white label volumes are recovering, although they are still well off their peaks. The third is obviously our investments in Fintelligence and BrokerEngine which continue to outperform our internal expectations. They reported growth of 20% for the half. On the payout ratio, I'll just spend a couple of minutes here because I'm sure there will be some questions. The payout ratio is driven by the mix of our settlements with there being a wide range of payout ratios primarily driven by the size of the broker group. As you know, we over index in large groups and that is because of the full service offering we provide. In turn, it does mean when our white label and securitization projects and products are more competitive, we'll see a notable benefit to our integrated margin. These larger groups are also more likely to benefit from the efficiency benefits that will be delivered through our technology investments and in turn increase broker services income for AFG. The final point on this is that you can see that settlements were slightly down for the half. What we would expect is as settlements start to lift, as we saw later in the half, is that those higher volumes will provide some support for the commission income line. As commented in December, we do see a natural ceiling in the payout ratio. It is important for our brokers that we make money to reinvest in their businesses. But it will move around and depending on which of our broker groups are delivering the settlements. To NIM, I'll cover this off quickly given how widely it is analyzed and reported on. The NIM rate was 116 basis points. As David mentioned, we saw some positive signs with how this might move but our next warehouses are not due for renewal until May '24. It's also worth mentioning that our second half NIM in FY '23 was 127 basis points. On Slide 23, our operating costs overall saw a decline, but there are a few moving parts within that. If I adjust for the one-off project costs, we would have seen a decline of close to $2 million year-on-year or just under 5%. AFG isn't alone as it continues to uplift its technology capability and is therefore experiencing an increase in technology costs. I anticipate these costs will continue to experience upward pressure. The encouraging thing though is that we think there are a number of initiatives that we can look to offset that pressure. In the chart to the right on the slide, you can see that outside of IT costs, we saw a decline in all other cost categories. Turning to Slide 24 and our balance sheet and cash flow. As you know, AFG has a very strong cash-generating asset base and we have $187 million in cash and other liquid assets. This puts us in a great position combined with our higher returning distribution business to find opportunities to invest for our brokers to improve not only their businesses, but also for our shareholders to grow their returns. The chart on the right shows that we traditionally have a very high cash conversion ratio. This half, the timing of tax payments meant that we reported a fairly low conversion ratio by our standards at 80%. This timing impact will unwind in the second half. The orange and pink bars at the end of the chart show why we made the decision to temporarily reduce our dividend payout ratio to 50% to 60% for the 24-month period as our CapEx requirements lift in the near term. I'm on Slide 25. The slide shows the disciplined approach we take to deploying our capital and where we have spent our CapEx in this period. If I focus on the chart to the right to begin with, across the half, we have spent $10.3 million on enhancing our technology position. The majority of that spend is outward facing to brokers, and as David mentioned, there has been some good progress made. In addition, we invested a further $10 million on increasing our holding in Fintelligence and BrokerEngine and you saw earlier the strength of those businesses. As I mentioned on the previous slide, we did temporarily reduce the dividend to reinvest that cash into our enhancing our broker proposition and positioning the company for future growth as the industry starts to transition. We have a very prudent approach to the way we look at our investments and manage our capital. We look at it through 3 lenses shown on the left of the page. The investments we make need to demonstrate that they will move AFG forward against each of these. And as you would expect, capital investments need to exceed an internal rate of return. Finally, I'm on Slide 26, and I did just want to take a minute to demonstrate the criteria I spoke through in action and the outcomes of that discipline coming from our more recent and significant investments. The slide shows to the left the key investment, the industry trend that we are taking advantage of and how we are realizing the benefits of those investments. Clearly, we are further advanced with some of these investments like Thinktank which we invested in 2018 and has a carrying value of $33 million. Its loan book is $5.5 billion and last year its share of earnings was $6 million. The returns on this investment are clearly very strong. On Fintelligence, we spent some time talking about the strength of that business in December and its market leading position underpinned by its technology. It is outperforming our investment expectations and with settlements now in the asset finance space exceeding $3 billion, we are looking to leverage that further and in line with our strategy, deliver high margin either through white label or manufacturing. BrokerEngine has provided us the technology platform to deliver our industry leading direct lodgment solution. We are part way through that now and expect that investment to deliver a range of benefits in the near future. With that, I will leave it there and hand back to Dave.

Thanks Luca. I am just going to go to Page 28. Effectively, in summary, the key take outs for us is we believe the residential market is back to growth. AFG's near term trend is we continue to embed ourselves as providing a crucial service in Australia's financial system. Bank branches continue to close at record rates. Digital direct remains centered on simple approvals only. Regulation and compliance expectations will continue to lift and customers will continue to seek a personal convenient experience that provides competition and choice in a very complex marketplace. There has been growth in property prices and settlement activity driven by record migration, strong employment and interest rates reaching a peak. And these will underpin credit growth and settlement activity. Our brokers are reporting a high level of inquiry. We will continue to benefit from expansion into higher growth and margin asset classes as well as new recurring revenue streams. To the right, you can see the January trading update. I'm pleased to say that, that trend has continued into February as being very, very positive. With the return of non-bank competition, the outlook for our manufacturing business becomes more positive. After a period of cycling, stimulus-induced comparatives, we see our market returning to growth. Final TFF payments have occurred or are occurring replacing near-free funding with high-priced alternatives. And funding costs appear to have peaked, but NIM remains under pressure while competition remains intense. We expect our Thinktank investment will continue to grow as these markets improve. Again, a January trading update on the right-hand side. The pleasing impact is that for February those numbers -- that trend has continued. On Page 30, we talk about AFGs -- the role of AFG plays in the financial system. Now, 1 in 10 residential mortgages written in the country are coming from our brokers spread throughout the country. We believe our business -- our brokers will become bigger and busier. We believe consolidation is coming in the broker market. It's fragmented with an aging demographic. There's increasing fixed cost, regulatory technology as well as insurance, and technology-enabling broker organizations to grow faster becomes important. That technology is being provided by organizations like ourselves to provide compliance and cyber security requirements, but also our customers' increasing demand for a digital experience even with their local broker. Diversification is critical. Residential growth has kept brokers busy. Commercial and assets are opportunities to continue to grow broker earnings and provide the broader offering through their services to ensure customer retention. Our strategy is that we believe we're well-positioned for market recovery and growth. As the economic conditions improve, as the return of non-bank competition, broker is structurally critical across the channel and AFG's diversity -- product diversity, which is generating 75% off the back of strong cash flows and a conservative balance sheet, will pay dividends in the longer term. Our growth strategy reminder is based on 3 strategic pillars. Grow our broker network, provide market-leading technology and leverage our distribution to deliver higher margin across the businesses. On that note, I will pause and take any questions.

[Operator Instructions] And your first question comes from the line of Tim Lawson from Macquarie.

I will start with just one question. So just in the distribution segment growth, can you just help us understand that, obviously, resi, you said it was a broadly flat. But the high margin white label is down materially and the front book payment is up. So you're just reporting growth in that segment, can you just try and sort of unpack exactly what's going on there?

So the primary driver of the growth in that segment, I guess, is the investment that we made in Fintelligence and BrokerEngine. We've seen a reduction in the OpEx in that business as well. The thing that's offsetting those 2 positive drivers is that sort of headline reduction in the residential business, which is sort of down 1.3. And outside of that, we've obviously restated the segments. So the headline number relative to last year's segment would be significantly stronger. And what we used to do was, in the aggregation segment, as it was reported, we'd record all the sort of shared costs between the distribution business and the manufacturing business. We've now pulled those out and put those in the central services pillar. So hopefully that answers your question. But feel free to have a follow-up.

Yes. Just a follow-up. So can you maybe just sort of quantify that reallocation? I assume you've restated the PCPs, the growth's not -- it's an apples-to-apples comparison. Is that...

Yes. That's right, mate. Probably the best proxy is that central services pillar, which was reported at negative $13 million. That largely represents what would have been stripped out of the distribution and across. So although it's a bit crude, on a previous like-for-like, the distribution business would have held fairly steady.

Right. And you've talked about sort of services that you charge outside that segment before, sort of below that gross profit line. What are you doing with those sort of -- those income lines? Have they been moved as well, or have any of those been moved?

So they were always in that segment, Tim, that aggregation services segment. They're reported -- probably Slide 22 is the best one to focus in on. So that shows the gross profit number that comes from those broker services, which was reported at slightly down year-on-year at $10.5 million versus $10.9 million. I think within that there's a couple of moving parts. The primary thing is the timing of our events, and those events create some noise. So if I stripped out that noise, we actually would have seen a 9% increase in those revenue streams year -- period-on-period.

[Operator Instructions] And your next question comes from the line of Tim Strong from Citi.

Just skipping further into the reinvestment program with $10 million capitalized in this result, I was just wondering if you could provide a sense of the total investment spend and how quickly that will amortize through the P&L?

So I guess, in the half we spent 10, as Dave mentioned, we've made some really good progress. We'd expect that we'd spend another decent amount through the second half of this year. And then that will sort of bleed into financial year '25. But then that core part of work would be done and would move more into sort of a BAU technology spend. Yes. In terms of how quickly that then amortizes, it'll depend on the technology components, but we tend to look at a lifetime of 5 to 8 years.

And in terms of your, I guess, confidence in getting a return on the spend. I mean, are we most likely to see this come through, I guess, the other income lines in Fintelligence and BrokerEngine and broker services as like a service model? Is that the way to think about it?

What it will do, Tim, is it'll come through in both levels. It'll come through because the proposition will be a stronger proposition for recruitment. So the distribution, we'd expect it to accelerate some levels of recruitment into the network. But also that, you are right, the actual other fees and services for use of that technology and services will also increase.

We have a follow-up question from Tim Lawson from Macquarie.

Just in terms of the NIM outlook, obviously, you've given us an excellent NIM, which is really helpful. But how are you seeing NIMs given current funding and competition? Is the 111 a reasonable base?

I think so, Tim. I think it's a reasonable base. We're done with funding costs largely for the year, so the next time we go to market there will be in May. The big unknown is obviously competition. Dave sort of mentioned where we're finding niches to try and expand that NIM, but I think that the 111 is a pretty reasonable base. I don't know, Dave, if you want to add anything to that.

I think 111 is the reasonable base. I hate to use the word pivot. But the pivot that we've sort of done over the last 2 months in particular before the end of the financial year, which we're starting to see some signs of, is moving away from -- and this is really driven from that market, the market economics from NIM protection to book protection. So there was a phase there for probably about 15 to 18 months where there was just no point trying to match big 4 lender pricing. Remember, we talk about 75% of our book is prime. So we were faced with a heightened level of competition. We are now seeing that we can actually retain some of those customers that we've got, so we're starting to see the runoff slow down, but that's at the expense of a little bit of NIM, but not horrifically so.

Maybe 2 follow-up questions to that. In your earlier comments talking about the book growth, you talked about growth niches. Can you just -- based on your 95% prime comment, can you just talk us where your book mix is, and is that helping the NIM a little bit as well in some sense?

It's supporting the NIM, Tim. But the niches, we've seen some really good, starting to see some good flow into that self-managed super fund model product. We're actually seeing some, we've got a product called Retro Switch, which is that dollar-for-dollar refinancing using a lower buffer for existing customers with no cash out on that loan. So basically, those customers looking for a better rate, but not having a high level of buffering applied, given that they've been in that loan for a number of years and they're already servicing at that level. So from our perspective, that is the area where we're growing. And also some of the investment loans that we're writing. In other words, investment property.

Just with that NIM at 111, and the loan life you've got, I mean, just the economics of the securitization segment. Obviously, you've made the restatements and you've got disclosed numbers, but you're paying more than half the first year NIM out to brokers, and then your loan life's well under 3 years. Obviously, you've got a cost-to-income ratio against that NIM?

It's competitive. We're in a window at the moment, but we still see upside in our securitization business, Tim. We've invested in the technology platform, which will take cost out in terms of processing and double entry. The economics are still generating a return on equity for us.

And that does conclude our Q&A session for today. I'd like to hand back to David for closing remarks.

I appreciate everyone joining us today. And hopefully, we'll see a number of you on the road in the coming weeks. Thanks very much.

This concludes today's conference call. Thank you all for joining us, and enjoy the rest of your day. You may now disconnect.