AFG & Volt strategic alliance launches Sparc and Handl.

After announcing a strategic investment in neobank Volt earlier this year, AFG has today announced the completion of the first stage of work planned for the alliance.

After four months of close collaboration, the teams at AFG and Volt have successfully launched the white labelled AFG Home Loans Sparc product which is accompanied by a new personal finance manager (PFM) app for customers called ‘Handl. by AFG’.

AFG Chief Executive Officer David Bailey has thanked the teams for their work in delivering the important milestone. “The AFG Home Loans Sparc product has been made available to a pilot group of 125 brokers, with plans for a full rollout to the balance of the 3,050 AFG brokers early next year.”

The Sparc product features a very competitive interest rate for owner occupiers and investors with sub 80% LVR and promises a fast turnaround. “Sparc will round out AFG’s white label banking products and responds to the increased demand for digital banking services from our brokers and their customers.”

“By leveraging Volt’s personal finance manager tool, the teams have developed Handl., a full PFM to manage a customer’s accounts, budgets, and financial insights. Handl. will also serve as the new AFG Home Loans Sparc product’s customer banking application.”

“The development and availability of the Handl. by AFG app is an important part of ensuring our brokers and their customers have the best opportunity to participate in the benefits of Open Banking as it builds across the market,” he said. “These first steps have harnessed Volt’s nimble banking as a service offering to deliver innovative solutions for our brokers and their customers. We look forward to expanding the rollout and to support our brokers with the tools they need to succeed.”  

“The new Sparc product is the ninth white label home loan in the AFG Home Loans suite and the breadth and depth of our offering ensures we are delivering on our commitment to provide competitive alternatives to the major banks,” concluded Mr Bailey.

Read more about the product launch and the AFG & Volt alliance in the Volt press release.

AFG successfully completes upsized A$500m RMBS transaction

Australian Finance Group Ltd (ASX: AFG) wholly-owned subsidiary AFG Securities Pty Ltd has successfully priced an upsized A$500m Residential Mortgage Backed Securities (RMBS) issue.

The AFG 2021-2 Trust $500 million issue of Australian prime residential mortgages is
AFG Securities’ 12th issue since 2013, taking the total paper issued to the market by AFG Securities to A$5.325 billion. The transaction is due to settle on Thursday, 14 October 2021.

AFG Chief Executive Officer David Bailey welcomed the support received for the transaction from both domestic and international investors. “We are very pleased to be able to upsize the transaction from $350 million to $500 million, particularly in the light of a degree of market uncertainty in recent times.

“The value proposition of brokers in the Australian home lending market has never been stronger and well-positioned products such as those offered by AFG Securities provide choice to Australian homebuyers,” he said. “In addition, our conservative underwriting standards and consistent management of the portfolio means our loans track well below the Standard & Poor’s Performance Index (SPIN).

“We are very pleased with the upsizing of this transaction and look forward to continuing to deliver a competitive range of home loans to our brokers and their customers and sound investment opportunities to the RMBS market,” he concluded.

Details of the notes are as follows:

NAB and ANZ acted as joint-lead managers on the transaction.

Accelerating our commitment to environmental sustainability

As our community tackles the challenges of climate change, the reduction of carbon emissions is a shared responsibility. AFG has taken a number of steps to measure, reduce, and compensate for unavoidable emissions generated by our business.

In May 2021, AFG engaged with Carbon Neutral, a market leading Australian carbon offset provider to carry out a detailed audit of our carbon footprint and emissions and assist us in understanding the next steps required to ensure we are an environmentally sustainable organisation.

Speaking to staff recently, AFG CEO David Bailey said; “We’re committed to ensuring that AFG is minimising our carbon footprint wherever possible. To do this we plan to build on the positive steps we have taken to reduce waste and increase recycling in our offices, improve technology for brokers to help reduce carbon intensive processes, reduce travel and review our procurement and supply chain so that environmental and social impacts are a key consideration.”

One element being measured in the audit is AFG’s staff and transport emissions as a result of daily commuting. We’ve already taken a big step to reduce our emissions through the Work From Home Policy, encouraging all staff to work from home one day per week. To track travel on the other days, over 200 AFG staff were surveyed, with questions centering around work-from-home habits, carpooling arrangements and the type of vehicle used to commute. Results will help shape AFG’s environmental action plan, which staff will be encouraged to actively engage in.

We are looking forward to receiving the measurements from Carbon Neutral and will be providing details about the audit in AFG’s 2021 Annual Report.

Read more about our commitment to environmental sustainability.

AFG Launches New Digital solution, Customer360

AFG Customer 360 mock-up

Australian Finance Group Ltd (AFG) has launched Customer360, a new broker fact-find and document collection tool which is now available to all AFG brokers Australia-wide.

AFG Chief Operating Officer, John Sanger said, “Customer360 is the first product to be rolled out as part of AFG’s full technology and platform refresh and will sit as part of our game-changing platform for brokers called Suite360”.

“The ability for a broker to deliver a frictionless and user-friendly fact-find to their customers is key to ensuring a good experience and driving their efficiency.”

“For those customers who prefer a digital engagement experience, Customer360 saves time by collecting the right information at the right time in the application process.”

“In addition, it lays the groundwork for a faster application process by securely collecting supporting documents and integrating seamlessly with AFG’s new CRM platform.”

Customer360 is part of AFG’s broader suite of broker tools, which includes other products like their award-winning SMART Marketing and Learn L&D platforms.

AFG Chief Operating Officer John Sanger spoke about how AFG’s strong focus on continuous technology innovation is key to keeping pace with changing industry demands and customer expectations. “We have taken this opportunity to refresh our underlying technology platform, working with leading enterprise technologies together with start-up innovators,” said John. “We have been very fortunate to have support from a range of broker groups, from individual operators to large scale enterprises, to ensure the design of new products like Customer360 work for all business types.

“We would like to thank the AFG Brokers who have taken the time to provide their insights and test the tools as we develop the new suite. Their help has been invaluable and ensured that the customer experience is kept front and centre.”

“The changes we are making now will give us flexibility and agility as we build tools and applications for brokers into the future.”


Mark Hewitt recognised in Mortgage Global 100 List

AFG is proud to announce that AFG General Manager Industry & Partnership Development, Mark Hewitt, has been named in the second annual Global 100 list.

Spanning the US, Canada, Australia, New Zealand and the UK, the Global 100 recognises leaders making a difference in today’s market through the achievements of their own companies, industry associations and industry education.

Mark is a prolific contributor to the Australian Mortgage Broking industry with dual roles as AFG General Manager Industry & Partnership development and co-chair of the Combined Industry Forum.

Click here to view the full list.

AFG successfully completes inaugural $500 million Non-Conforming RMBS issue

AFG Head office

Australian Finance Group Ltd’s (ASX: AFG) wholly-owned subsidiary AFG Securities Pty Ltd (“AFG Securities”) has successfully priced its inaugural non-conforming Residential Mortgage Backed Securities (“RMBS”) transaction.

The AFG 2020-1NC Trust $500 million issue is AFG Securities tenth issue since 2013, taking the total paper issued to the market by AFG Securities to $4.075 billion.

This being the first issue under its non-conforming program, the portfolio includes low-documentation and non-conforming loans originated by AFG Securities.

AFG Chief Executive Officer David Bailey highlighted the support received for the transaction from domestic and international investors. “We are very pleased to be able to upsize the transaction from $350 million to $500 million due to strong interest from both new and returning investors.”

“100% broker introduced, AFG Securities’ loans have always performed well and have consistently tracked well below the Standard & Poor’s Performance Index (SPIN),” said Mr Bailey. “Our underwriting standards, arrears-management processes and policies as well as our low historical arrears and loss performance, have informed the support of the transaction.”

Details of the notes are as follows:

Class Expected Rating S&P / Fitch A$M Amount Credit Enhancement (%) WAL (years) Benchmark + Margin
A1-S AAA(sf) / AAAsf 137.000 27.50% 0.7 1M BBSW + 0.90%
A1-L AAA(sf) / AAAsf 225.500 27.50% 3.1 1M BBSW + 1.55%
A2 AAA(sf) / AAAsf 92.750 8.95% 4.3 1M BBSW + 1.80%
B AA(sf) / NR 20.250 4.90% 4.3 1M BBSW + 2.65%
C A(sf) / NR 9.750 2.95% 4.3 1M BBSW + 3.65%
D BBB(sf) / NR 6.000 1.75% 4.3 1M BBSW + 4.70%
E BB+(sf) / NR 3.750 1.00% 3.8 1M BBSW + 7.85%
F NR / NR 5.000 5.1 Undisclosed
Z NR / NR Undisclosed

National Australia Bank Limited was the Arranger on the transaction and acted together with Commonwealth Bank Australia as Joint-lead Manager.


AFG and Connective announce merger

Australian Finance Group Ltd (ASX:AFG) has entered into a binding conditional implementation deed to merge with the mortgage aggregation business of Connective Group Pty Ltd. Connective has a network of over 3,600 brokers across five states with a panel of more than 50 lenders. The combined group will create a significant national mortgage distribution network, with more than 6,575 brokers and combined mortgage settlements of $76 billion in FY19.

Under the transaction, Connective Group Pty Ltd will receive $60 million in cash and 30,886,441 AFG shares valuing the acquisition at $120 million, with AFG to primarily fund the cash component through a new corporate debt facility.  The transaction is expected to be EPS accretive (pre-synergies) in the first full financial year post integration and AFG is currently expected to maintain a dividend payout ratio of between 60 and 80 per cent.

AFG Chairman Mr Tony Gill said: “The merged business will have a significant national footprint in Australia’s $1.8 trillion home loan market.  The delivery of competition and choice to the Australian lending market is at the core of our strategy. The expanded distribution channel and broader diversification of products the combined group can supply will provide greater choice for both brokers and consumers”.

AFG Chief Executive Officer David Bailey said: “AFG’s ongoing successful execution of our earnings diversification strategy in recent years has the business set up for strong cash flow generation and well positioned for growth. The prospect of complementing AFG’s existing business with the cultural fit and similar customer-focused philosophy of the Connective business is compelling.

“Competition is at the heart of both businesses with the non-major lenders representing 48 per cent of residential mortgage lodgements through AFG’s network in July 2019. Greater geographical portfolio diversification positions the merged group to further enhance choice and competition for consumers in all markets across Australia. Together with AFG’s existing growth plans, the opportunity presented by the sale process undertaken by Connective was absolutely aligned to our strategy.

“With extensive experience in the mortgage broking industry and proven management expertise, respected senior executives Glenn Lees and Mark Haron will continue to run Connective’s business and will retain a significant shareholding in the merged group.  I look forward to working with Glenn, Mark, the Connective team and their network of brokers to create a driving force in competition in the Australian lending market.”

Connective CEO Glenn Lees said: “The coming together of the Connective and AFG teams is a natural fit.  We share a strong set of values with the priority to always work on behalf of our brokers.  I am incredibly proud of the business and, alongside the team, I look forward to continuing to drive the success of our brokers who positively impact the lives of thousands of Australian home buyers every year.

The transaction remains conditional upon a court validating the transaction as not being unlawful or able to be set aside (a non-customary condition), Connective Group Pty Ltd shareholder approval, approval from the Australian Competition and Consumer Commission and AFG Shareholder approval (if required), as well as other conditions typical of a transaction of this nature.

Mr Bailey said the transaction represents an opportunity for all AFG shareholders to benefit from the diversification and flexibility of the combined group.

“Connective brokers will have access to AFG’s securitisation program and the combined network also offers the opportunity to grow scale in both asset finance and commercial lending. Connective brings a contrasting revenue model based on fixed membership fees and offers services across residential, commercial and asset finance, as well as its own range of white label home loan products under the Connective Home Loans brand.”

“This should result in more lender and product opportunities for brokers, which in turn means more choice for their customers.  This is particularly important for the self-employed and SME sectors of the market that are presently under banked.”

“When we also consider the possibilities for both cost and revenue synergies together with the leverage of the distribution potential, the transaction becomes one we are delighted with. We will continue to update the market as we reach key milestones in the process.”

On completion of the transaction, Mr Lees, a founding shareholder of Connective, will be offered the opportunity to join the board of AFG.

Further details of the key terms of the transaction are set out in the schedule.

AFG will keep the market informed of progress of satisfaction of the conditions precedent to the transaction in accordance with its ASX continuous disclosure obligations.


Established in 2003 and headquartered in Melbourne, mortgage aggregator Connective Group has a network of over 3,600 brokers providing access to a range of financial products sourced from its panel of more than 50 lenders. Acting as an intermediary between lenders and borrowers, Connective Group offers services across residential, commercial and asset finance, as well as its own range of white label home loan products under the Connective Home Loans brand.

Operating from five Australian office locations with 128 full-time employees, Connective Group brokers originated total settlements of $42 billion in FY19.

Connective Group’s business model is underpinned through the charging of a fixed monthly membership fee for brokers.  This contrasts with AFG’s existing revenue model, which is oriented towards a percentage of the upfront and trailing remuneration generated by the broker.  AFG currently intends to keep both business models operating concurrently.

Connective Group generated FY19 revenue of $63 million and pro forma reported FY19 NPAT of $10.9 million (unaudited).


  • AFG has entered into a binding conditional implementation deed to merge with the mortgage aggregation business of Connective Group Pty Ltd (Connective Group).
  • Under the transaction, Connective Group will receive $60 million in cash and 30,886,441 AFG shares issued a $1.9426 per share (being the 10-day volume weighted average price (VWAP) up to and including 9 August 2019, valuing the acquisition at $120 million.
  • AFG to fund the cash consideration primarily through a new corporate debt facility, with expected post-transaction debt/ pro forma underlying FY19 EBITDA ratio of 1.0x.
  • In addition, AFG retains the right to cash settle up to 50 per cent of the AFG shares to be issued as consideration at completion. If the cash settlement is funded via a new equity raising by AFG, the price is the higher of a 7.5 per cent discount to AFG’s 10-day VWAP up until the date on which AFG issues a cash settlement notice or the issue price of any new shares. If the cash settlement is funded through other sources (i.e. existing cash or debt), AFG’s 10-day VWAP up until the date on which AFG issues a cash settlement notice.
  • The AFG shares issued to Connective Group will be escrowed for 24 months, with a release of 25 per cent of the shares at 12 months and a further 25 per cent of the shares at 18 months from completion. If AFG is subject to a control transaction during the escrow period, Connective Group has agreed to accept the offer in circumstances where the control transaction has been recommended by a majority of the AFG board (subject to certain fiduciary and regulatory exceptions).
  • The transaction is structured so that it will proceed as an asset sale of the assets and liabilities of Connective Group and its subsidiaries but can proceed as a share sale in certain circumstances and where the parties agree.
  • The transaction represents pro forma unaudited reported FY19 PE multiple of 11.0x (pre synergies).
  • Connective Group to retain a significant shareholding in AFG, ongoing executive management roles and an offer of an AFG board seat for the current Connective Group CEO (and largest shareholder), Glenn Lees.
  • The transaction is expected to be EPS accretive (pre-synergies) in the first full financial year post integration and AFG is expected to maintain a dividend payout ratio of between 60 and 80 per cent based on the adopted funding structure.
  • The deal offers meaningful opportunities for distribution of AFG’s securitised products through the combined group’s national network of brokers.
  • On an unaudited pro forma basis, the combined business would have FY19 reported NPAT of approximately $44 million.
  • The transaction offers AFG shareholders exposure to an alternative mortgage broker aggregation model with strong ongoing brand recognition whilst also providing access to a broader distribution channel on an earnings accretive basis.
  • The transaction remains conditional upon a court validating the transaction as not being unlawful or able to be set aside (a non-customary condition), Connective Group Pty Ltd shareholder approval, approval from the Australian Competition and Consumer Commission and AFG Shareholder approval (if required), as well as other conditions typical of a transaction of this nature.
  • An initial hearing to seek the court order is expected to take place within the next month. The consultation process with the ACCC will be run in parallel with the process to seek the court order. On satisfaction of the conditions, the transaction is currently anticipated to complete in the second half of FY20.

Download Full – AFG Connective Market Release

Download – AFG Connective Fact Sheet

David Bailey speaks at Parliament House Forum in Canberra

Today industry, government and consumers came together at Parliament House for a forum discussion about issues affecting the housing industry, including changes to broker remuneration and the ALP’s proposed changes to negative gearing and capital gains tax.

I was invited by Senator Zed Seselja, Assistant Minister for Treasury and Finance, to be part of a panel of experts to address the forum. With me were Connective Director Mark Haron, Yellow Brick Road CEO Frank Ganis, Housing Industry Association Chief Executive – Industry Policy Kristin Brookfield, Property Investment Professionals Australia Chairman Peter Koulizos and Property Investors Council of Australia Chair, Ben Kingsley.

The forum discussions were across mortgage broking and housing tax with open questions from the floor to the panel of experts. It was an incredibly valuable event, providing great insight into the likely impacts from Labor’s proposed negative gearing and capital gains taxation proposals. Like proposed changes to broker remuneration, it’s clear that the unintended consequences need to be considered, particularly the unintended consequences that could potentially flow on to you customers and your businesses.

AFG is committed to actively advocating and engaging in discussions with key political decision-makers across the country.  Many of you have already taken up the challenge to engage with your political representatives and it has been very effective in educating decision-makers about the vital role our industry plays in providing competition in the lending market and choice to consumers.  We are currently planning a series of events to provide a platform for the broker voice, and this is where you come in. Please keep an eye out for these events as they are announced – we encourage as many of you to attend as possible.

Please see below for a recap of my address to the forum prior to participating in the forum discussions.

Remarks to Housing Tax Forum, Parliament House Canberra, 4th April 2019

Many thanks to all of you here today.

In the two months since the release of the Banking Royal Commission’s final report, Australia’s mortgage broking industry has been thrust into the national policy spotlight.

It’s not a place where we are comfortable. Or where we wanted to be.

Our industry is a highly connected community of professionals, small businesses and their customers who believe in choice, fairness and prosperity for all.

We don’t usually talk about ourselves. It’s not our style to trumpet how good we are.

We are focused on our customers. If they keep coming back, that’s a win. If they refer us to their friends and family, that’s a reward for good service. That’s our benchmark and how we judge ourselves.

But the Royal Commission has forced us, as an industry, to rally together and contribute to important conversations in the community about the role and value of mortgage broking in Australia.

We have found our voice.

We are a significant industry. The mortgage broking sector generates $2.9 billion in gross value added to the Australian

economy each year. And we support the employment of more than 27,000 workers.

The public discussion about our sector in the past few months has led to a greater understanding of what we do. I’m sure Zed agrees.

We have seen respected economic institutions including the RBA and Treasury and the heads of some of the big banks join the public debate, highlighting the benefits we bring through competition and warning of the dangers of poor policy that could damage the sector and hurt consumers.

Of the 76 recommendations from the Royal Commission, only one – the one relating to mortgage brokers – was not fully embraced by the Government.

Both major parties have acknowledged the role our sector plays in generating competition in the home loan market and rejected the Royal Commission recommendation for an upfront fee. Both the Government and Labor have agreed this approach would be an unnecessary financial burden and risk to competition and choice.

The Treasurer’s announcement on trail commissions last month – where the Government decided not to prohibit trail commissions on new loans and opted to review their operation in three years – is welcome additional support.

The decision reflects the considered approach we have been urging all along and provides certainty. It would seem sensible for the Labor Party to adopt a similar position.

We all want to avoid our sector becoming a political and policy football heading into the election.

In the meantime, we are committed to advocating our case. That’s why we are here today. We will be working with all

parties to explain our position and avoid any negative impact from policy proposals.

That’s one of the big takeaways from the Royal Commission process. The more people know about us, the more favourable they are.

Our customers know us best. And more than 95 per cent of customers are happy with the performance of their broker. That’s why will be taking any opportunity to tell our story.

AFG warns homebuyers will pay more if competition in home loan market is eroded

Australian Finance Group Ltd (AFG) said the Federal Government’s public acknowledgement of the importance of competition in the home loan sector directly recognises the benefits mortgage brokers bring to consumers.

AFG welcomes the Government’s support for the industry and the need to protect competition in Australia’s home lending market.

In its response to the final report of the Banking Royal Commission, the Government highlighted the contribution the mortgage broking sector makes in lowering borrowing costs and broadening choice for consumers.

Following the Royal Commission recommendations the Government has proposed ending the payment of trail commissions from lenders to mortgage brokers and aggregators on any loans taken out from 1 July 2020. Importantly, Treasurer Josh Frydenberg said the Government had not endorsed the Commission’s recommendation for upfront payment of mortgage broking fees by the consumer to be introduced immediately, instead pointing to a three-year review period to examine the impact of any changes to competition in the sector. AFG welcomes the announcement of a set timeframe for the industry to demonstrate the clear benefits the mortgage broking industry provides consumers so that information can be shared and the industry can define its effectiveness across the market.

AFG chief executive David Bailey said: “Both the Government and Opposition yesterday highlighted the need for any changes to the mortgage sector to be introduced in a phased and considered manner. At a time when navigating the complexity of the Australian mortgage market is more difficult than ever for consumers there is a danger the proposed changes, if not handled properly, could place assistance out of reach for some customers. Those hardest hit will be low-income earners and the changes could deliver pricing power and higher margins back to the major banks.

“That is why AFG and the broader mortgage broking industry will work closely and constructively with policymakers in coming months. We need a considered regulatory response that understands the home lending market and implications for all parts of the economy.

AFG was disappointed by the emphasis the Royal Commission placed on comments by the CBA about mortgage broker remuneration models as the major bank’s positioning was clearly self-serving and designed to win market share from the smaller banks.

AFG also noted the Royal Commission recommendations relating to campaign and volume-based commission have largely been implemented through the Combined Industry Forum.

The Government outlined an extensive consultation process involving the Council of Financial Regulators and the ACCC to review the impact of the recommendations and the implications for competition. AFG will work with industry bodies to ensure any recommendations are implemented in a way that improves outcomes for customers and changes work in the best interests of customers.

Mr Bailey said the full market and economic impact must be considered.

“With market share for the mortgage broking sector at an all-time high, customers clearly trust mortgage brokers. This fact should be front and centre in the minds of policymakers.

“The Royal Commission has created an opportunity to restore trust in the broader financial services sector. It is crucial that the transition to a new policy and regulatory landscape is a considered process to ensure any changes deliver better outcomes for customers. Leaving consumers and the economy worse off, which is a real danger if we don’t get this right, would undermine the whole Royal Commission process.

“Our response will be framed by a commitment to shareholder value and ensuring a competitive mortgage sector. Without competition, homebuyers will be left with less choice and higher costs of borrowing.”


Download Market Release:
AFG warns homebuyers will pay more if competition in home loan market is eroded

AFG response to the Interim Report of the Royal Commission into Misconduct in the Banking, Superannuation and the Financial Services Industry

Last Friday AFG provided our response to the Royal Commission’s Interim Report.

We are of the view that the erosion of public confidence in the major banks and their failure to meet community expectations is inextricably linked to the immense market power that they wield.

We have told the commission the competitive tension delivered by a viable mortgage broking channel is vital to help limit oligopoly behaviour in an industry that is dominated by the four major banks. The clear majority of mortgage brokers are small business operators with customer service at their core. Without the delivery of good consumer outcomes, you would not have sustainable businesses and broker market share would not have grown to record levels.

The Commissioner questions the remuneration structure of the industry, levels of disclosure and in whose interest brokers act. Industry has acknowledged the concerns raised by ASIC after its extensive Broker Remuneration Review, and the Combined Industry Forum (CIF) has developed clear actions to address potential conflicts of interest. Clearer disclosure, a customer first duty and changes already underway to remuneration structure address concerns raised by the Commission. This is consistent with the approach suggested by both Treasury and ASIC and, together with ASIC’s new regulatory powers, needs time to become entrenched.

The Commission has also raised consideration of the extension of FOFA-style regulation for the industry. We contend that the services provided by mortgage brokers have both similarities to and differences from, the services provided by financial advisers.

It is simply not appropriate to replicate the personal financial advice regime and apply it to mortgage brokers without considering the differences and the effect that each component would have on every Australian homebuyer and the Australian economy as a whole.

In examining the remuneration model, it is important to reflect on Treasury’s submission that stated the balance of responsibility and interests must be carefully weighed. A model that is too prescriptive risks being commercially inefficient and having a negative effect on competition.

Such a move would result in the uneven playing field being further skewed towards the major banks and away from efficiency and competition. An outcome that would be celebrated by the large lenders.

AFG will continue to advocate for our industry, competition should not be the inadvertent casualty of reform.

Click here to read our submission