Thank you for standing by, and welcome to the Australian Finance Group Limited Investor Briefing for AFG 20 21 Full Year Results Announcement. All participants are in a listen only mode. I would now like to hand the conference over to Mr. David Bailey, CEO. Please go ahead.
Thanks very much, and good morning, everyone. It's very pleased that you could join us today and talk through our FY 2021 results, which represent a record result for AFG. If you go to Page 2, I'll just walk through the presentation. I won't touch on every line item in this, so we can move into questions. But the reported NPAT is up $0.35 to 51,300,000 dollars which drives the final dividend of being up of 0.57 percent to $0.074 per share.
The underlying NPAT is up 37% as well to 49.6%. So this result is really a reflection of a really strong residential settlements, which were up by 28% to $43,600,000,000 IFG Home Loans as a subset of that also experienced a 10% increase in settlements to arrive at $3,450,000,000 and the trial book now is $11,200,000,000 within that part of the business. AFG Securities, we talked at the half year about AFG post the pandemic starting to build flow. It's very, very pleasing. The second half lodgments and settlements are up 80% and 35% respectively on FY the second half of FY twenty twenty.
And the closing book is up 17 percent to $3,390,000,000 as of June 2021. Operating cash flow is up 45%, which is a testament to the cash flow generation capabilities of the business model and our broken numbers are up to 3 are over 3,050 as of 30 June 2021. A little bit look of a closer look at the full year results. Residential settlements were up 30 at up 28 percent to $43,600,000,000 and this growth was obviously supported by government stimulus, low interest rates and improved economic outlook. The first time buyers and upgraders were the main drivers of that sector and also an increase there was an observed increase of flow to the 3rd party or broker channel.
The IFG Securities book, we said that we'd be building on the within that business post the pandemic and to have a $3,390,000,000 loan book, which is up 17% after the slow start for the first half was very pleasing. The strong second half of the financial year really reflects increased activity across the market. We've talked about AFG security settlements. The lodgments are up 80% on the second half, which will drive a strong settlement pipeline into FY 2022. Similarly, commercial settlements for the first half were soft due to the obvious reasons of the pandemic.
But in the second half, they are 23% higher than the second half of FY 2020. Revenue as a consequence of all that is up 11% in FY 2021 on the back of settlements and loan growth across the business. Net interest is 35% higher in FY 2021, being driven by the 17% growth in active securities loan book. Operating cash flow, Ben will talk to shortly, is up 45% to $58,600,000 The total dividend has been maintained at 80% of underlying profit. So the underlying profit excludes the share of profit and associates and I'll talk about the increased contribution from our investment in Think Tank very, very shortly.
So that overall represents an increase of 32% on FY 2020. So we think we're well positioned to continue to grow our earnings diversification strategy. Cash and other financial assets of $282,000,000 provide core balance sheet strength. The net securitization interest plus net cash flow from aggregation and white label trial books is up 20% and sits at just under $83,000,000 Strong cash flow generation is supported by the established trail books, which provides the annuity style cash flows. So the strategic and market outlook, the market outlook, the market continues to grow at record levels.
We've talked about our settlement volumes and with the initial loss there's been an initial increase in 1st homebuyer volumes, this is being replaced by investors we've seen coming back into the market and supported by ongoing refinance and upgrader activities. So the volumes remain elevated. Additionally, the RMBS market remains buoyant and the cost of funds allows a competitive environment for our IFG Securities business. Opportunities for nimble and fast moving non bank lenders continue to be present in this marketplace and the commercial finance market has recovered in the second half. The strategic outlook really hinges on brokers remaining important to the sector.
The market share of brokers has increased during the period. And the overriding thematic is ongoing restrictions and lockdowns together with varying lender turnaround times increases the value of brokers to borrowers. Competition among aggregators remains high, however, and lenders including NEO and Digital Banks continue to look to brokers to distribute their products and grow volumes. Our NIM has benefited from a lower cost of funds and we would expect this to continue in the short term. So we think we are well positioned to continue to deliver growth.
We're continuing to diversify through investment into growth opportunities, including high margin AFT securities products, strong cash flow generation from a new restyle and trial and loan books together with a debt free balance sheet will allow AFG to move quickly and take advantage of organic and inorganic opportunities. Our investment and strategic alliances with Volt will begin to reap Volt Bank will begin to reap benefits in FY 2022. We'll introduce a white label product in the second half of this half together with integration we commenced integration of key parts of their technology into our AFG securities program. If I move over to AFG home loans, the settlements increased by 10% and there's a chart there that shows the mix of those settlements. The loan book grew 7% to $11,200,000,000 As highlighted at the end of December half year, we stabilized the stabilization of the funding market.
We made the decision to begin to grow AFG securities and those volumes have returned. And the investment, again, with and on strategic alliance with Volt, will introduce a new white label mortgage to the AFG home loan stable of products in the second half of this half. The AFG Securities business achieved settlements of $1,350,000,000 and those volumes are up 35% on the second half of FY 2020. The loan book was $3,390,000,000 higher margin near prime products refreshed sorry, we refreshed the higher margin near prime products in this half and then launching an SMSF product in the first half very, very shortly to broaden the product range even further. I think the important part is IT Securities provides a lending a valuable lending proposition to brokers and customers.
We are consistently in the top 5 lenders in terms of turnaround times, but whilst we're also growing our book. And I think that is one of the key attributes of our IFT Securities business is its decision time and consistency of credit decisions, which lend credibility and confidence to brokers recommending a product, which is well priced and competitive in the marketplace. The increasing loan book as well as high NIM delivers a significant contribution to IFG's record financial performance. The net interest margin includes the impact obviously the impact of the inverted BBSW, which drives an improved cost of funds. We expect our current cost of funds outlook to be expected to be continued for the next at least the next 6 months.
And warehouse capacity as well as ongoing demand for our future and further R and D transactions remain strong. If you go to Page 11 of the book, you can see we've been able to continue to grow our IFG Securities business without having to sacrifice credit quality. The average loan size still sits at around about $450,000 to $500,000 The LBR band still remain very conservative and the geographic distribution is broader, basically where a majority of the population sits in the country. The AFG Securities book performance remains excellent. You can see there, we've got 27 loans out of 11,237, which are in greater than 30 days.
So it demonstrates a strong quality book and strong credit underlying credit proposition. No loss has been incurred on non LMI insured loans. And we mentioned there, there's been due to the lockdowns in Sydney and Melbourne in particular, the hardships have moved to at 10 August to 0.93% of the book, which is about 61 loans. The more recent update on that is that number as of yesterday was 72 loans, of which 50% of them were actually still having interest only payments on those. So a very, very strong position in terms of outlook around hardships.
Our white label, I think our investment in Think Tank has been one of our other success stories. As highlighted, commercial activity in the first half was probably a little bit softer due to the overriding impact of the pandemic. So that is really also a tale of 2 halves. There's been strong demand and improving volumes in the second half of FY twenty twenty one. Importantly, our equity investment of 33 percent of into Think Tank has driven a $5,300,000 contribution to earnings and we're very obviously very, very delighted in the progress Think Tank have made over the last 2 years in particular.
Moving on, one of the things we are doing is continuing to invest in technology. And our CRM platform is a key pillar of that widening investment in technology. We are starting to look at migration of each broker into that platform. And as we manage very, very carefully recognizing that some of our brokers have been with us for a long time and there's a large amount of data. So we will do it safely and slowly to ensure that the transition drives an excellent outcome for our brokers and ultimately their customers.
We're continuing to invest in our analytics platform to drive insights for our brokers and also our own lending decisions. Brokers will obviously benefit from our investment in AFG Securities via our new lending loan processing platform to enable an even quicker time to yes. And obviously, the investment with Volt will also drive a stronger digital proposition for our brokers, but also as a white label alternative across our AFG home loan stable. AFG business platform, that's probably been the softer one for the period. Obviously, on the back of the slowdown in commercial and asset finance areas in that first half, in commercial and asset finance areas in that first half, it's been the result is down 42%.
The other point to remember is that we created AFG Business as a tool for residential brokers
to
transition into becoming a commercial broker as well. Importantly, at a time when brokers have never been busier in terms of volume and customer demand, their ability to branch out or their desire to branch out has been impacted because they're catering with the demands that they've got already with their existing residential customers. So we will look to as the market continues to evolve, we'll look to step that part of the business out again. But in the short term, we would expect our results in that to be relatively flat moving forward. I might just hand across to Ben who can talk some of the financial information.
Thank you, Dave, and good morning, everyone. Before I
get into the summary cash flow on Page 16, I'd just like to point something out in the P and L this year that we've reclassified. So the commission expense relating to AFG securities loans has been reclassified from commission expense to interest income and we've reclassified the comparative figures as well. So this is disclosed on Page 59 of the annual report and it's the movement in the current year was $9,900,000 and the comparative figure was $7,200,000 Moving into the summary cash flow. It has been a strong year for the cash flow generation of the business, which has been driven higher by higher activity in the business and the positive working capital movements in the year compared to last year. That's across the residential businesses that strong volume growth and also the AFG securities business with the book up 36%, driven by book growth and lower cost of funds in the market.
The AFG home loans trial book has also increased over the period, which has contributed. FY 2021 cash flows also included the funding of our investment in technology, mortgage advice bureau and the bulk bank out of existing cash and cash reserves. The investment in intangibles is primarily CRM technology projects that Dave has touched on. Moving on to Slide 17 and the summary balance sheet. Our balance sheet remains simple and strong with the key elements, the AFG residential, commercial and home loans trail books, which are now $98,000,000 on a net basis, the AFG securities loan book and unrestricted cash of just under $107,000,000 That balance sheet leaves us well placed to fund future growth either organic or inorganic.
On Slide 18, we touch on the travel accounting, which is driven under 1 profit up 37%. As you would expect in this environment, we have significantly higher refinance activity. The loan life of loans within our trial book has reduced slightly. You can see on the slide there down from 5 0.1 years to 5 and then 3.2 to 3.1 at the bottom end of that range. On Slide 19, we touch on other income, which remains a continuing positive story with service fees in particular 13% higher in FY 2021.
This is a result of good growth in broker numbers as well as the take up of additional services. Service fees in this regard cover compliance, P and I, marketing and technology services. On Slide 20, we touch on our July 2021 trading update. Again, there's strong growth across the majority of the country, the AFG home loans business and the AFG securities business and settlements as well in July were a record for the business as the strong license pipeline for the half has continued to fade through. That one call out there, it looks a little bit different to the rest is the growth in license in WA, up 1% year on year.
And that's really a function of the fact that WA this time last year was already out of lockdowns and benefiting from the stimulus activity and was up 49% on July 2019 in 2020. This believes us in a strong position to continue the volumes into the sale of FY 'twenty two and we're encouraged by this. I'll hand back over to Dave now to conclude.
Thanks, Ben. So in conclusion, this has been a record financial performance for AFG representing a 35% growth in NPAT and 45% growth in operating cash flow. So the success of AFG's ongoing earnings diversity strategy, which we set upon basically at and around just after listing and cash flow generation ability of the business is pretty clear. The residential market has continued to grow. Early signs is that this will continue in FY 2022 despite some of the lockdowns across the country.
Brokers are growing their share of the mortgage industry and we expect brokers to continue to gain share. And as a participant in that, we expect to be successful in also growing our own share of broker. AFG is rolling out the new technology to efficiently service the customers' needs. We remain committed to further technology investment to support brokers and customers. AFG Securities is continuing its loan book growth, have got a significant current pipeline of business and there's been improvements in higher margin products also providing an effective entry into the marketplace.
The funding markets importantly remain conducive to growth. So we are positive about the outlook of the mortgage market. We are well capitalized. We have a strong balance sheet and continue to be a capital light business model. And as you can see through the result, there's been a continuation of the strong cash flow generation capability of the business.
So I'd like to thank you for your time and we would open to questions now.
Thank Your first question comes from Tim Wilson from Macquarie. Please go ahead.
Hi, David and Ben. Thanks for taking my question. Just around the comment you make on
sort of margins, can you just sort of unpack that
a little bit, what you're seeing on pricing competition and the sort of timing of when you next
get to read back in
the market from warehouse to RMBS?
Sure. So the RMBS market remains as of today, it remains very conducive to issuers in the marketplace. And we're probably continuing to be at strong low levels for the AAA piece. And so in terms of what we're seeing in the marketplace, the fixed rate product seems to have stepped out a little bit in terms of pricing. And the new battleground is really in some ways around the variable piece.
So that drives competition, but at the same time, we would be expecting based on that growth of the business, we would be expecting we always said we'd be back to the market in September, October, November, and that's that period with a term transaction, and that's we're still on target for that.
Okay. Thank you.
Thank you. Your next question comes from Brendan Sproul from Citi. Please go ahead.
Good morning, gents. I just have a couple of questions. Firstly, on the commission pay away, it looks like it's increased around 100 basis points over the year. Obviously, you've had the accounting change there. That's probably not as big as we saw in the first half.
Could you maybe talk about the drivers of that looking forward? And then I have a question on net interest margins.
Yes. That's I think it made the comment around half year as well. The difficulty in looking at just the pure commission expense line over the commission income is the mix between residential and actually home loans with a different pay away. So that can impact it. I think the thing I would point to is the Slide 18 where we talk to the impact of travel book accounting, the percentage paid away to residential brokers on average is around 94.3%, which is disclosed on that page there, which is up slightly on last year.
So we typically see that grow somewhere between 15 30 basis points on an annual basis. And with the competition in the market, we'd expect to continue for a little while at least.
Okay. And just a question on the net interest margins in your securities book. Just sort of the outlook going forward given that the funding costs, particularly as you mentioned the securitization market, look quite favorable at the moment. How are you it's a big benefit by our funding costs in this year. How do we think about this next year in terms of the benefit of securitization funding and then what you'll pass on ultimately in your pricing?
And then my second part of the question is the sort of big shift towards self managed super and also the near prime, should that expand the NIM over time?
Yes. Look, it's a good question. I think the cost of funds in the warehouse and RMBS markets at the moment remains quite conducive, as we said earlier in the presentation. And as long as BBSW remains inverted where it is, that will continue to provide some benefit. The counter to that is there's a high level of competition in the particularly in the prime low LBR segment of the market, which is an important segment for RMBS transactions.
So what you I guess, we're benefiting from on the cost of funds side, we're probably losing a little bit on the needed rate to customer to continue to grow the book. And that's where the SMSF and other high margin products becomes important to increase the mix of those into the book to continue to maintain the NIM at around its current levels. There's certainly some pressure on it from a new rates customer perspective and competition in the market as there always is in the industry. So I think they we expect those probably largely counterbalance each other over the next 3 or 6 months.
I think that's Brandon, the most important call out there is there's been a considered step out some of the near prime piece. We've always had a linked product, but we haven't really concentrated on as much and we certainly recognize the high level of competition in the marketplace for pure prime. And so to step out into some of the near prime and the launch of the self managed super fund has been designed to control any NIM contraction and therefore basically offset any impact that we may have in terms of competition for the prime piece.
That's great. Thank you.
Thank
you. Your next question comes from Richard Wiles from Morgan Stanley. Please go ahead.
Good morning, David. Good morning, Ben. I have a couple
of questions.
Firstly, your positive commentary on the outlook for the mortgage market, does that make any assumption as to whether APRA and the RBA would introduce some macro prudential measures? And if they do, can you make any comment on the potential impact on volumes? And any comment on what types of measures might have the most detrimental effect on your outlook for settlements? And then secondly, David, you mentioned in the presentation, I think it's in the slide as well that AFG Security sits in the top 5 lenders on turnaround. What is the turnaround time?
How are you defining it? Why do you think you're so good? And why do you think some of the larger organizations haven't improved their performance given how important this issue is and how it's been an issue for a couple of years now? So two questions, macro prudential measures and turn it over times.
Our view around macro prudential is still remains that whilst there's uncertainty in the marketplace in terms of lockdown, that there's probably been pushed down the road a little bit. The easiest if there was macro prudential likely to impact the majors and APRA regulated organization. It's probably a debt to income ratio. It seems to be the simple one. And that would probably slow down certain areas and certain lending in places.
The impact that that would have on us, I made the comment in the pack that non bank financial institutions are probably a lot more nimble than others. And in terms of something a trickle down effect, non banks can generally move credit decisions and action into the marketplace into new areas faster than other organizations. And in particular, AFG, in terms of the data we have around our brokers and our activity and the types of loans being written, we've always felt that we are more nimble than even the non bank financial institutions. So in terms of I think it's debt to income if it comes. Does it is it obviously, they introduced those things to slow down, so it would slow down.
I'm not convinced at this point in time that that slowdown would slow down AFG securities significantly in the marketplace. However, we are a microcosm of the broader mortgage market, but I still think there's opportunities for us to grow if that was to watch through. What we're seeing at the moment is we're starting to see first time buyers come out of the market. I think the latest data was they're sitting around the mid teens. We're seeing investors come back.
So those numbers are investors sort of last couple of weeks looking at over the last couple of weeks, they're probably around 27% of that flow. If the regulator wants to make some changes, they might look at investor again and that might slow things down. And the other part of the question is just escaping me. Turnaround time. Oh, turnaround time.
Yes. So our turnaround time is measured by we say top 5 that's 6 days. So it's lodged to unconditional. So obviously, lodged to unconditional means that the customer can go permanent on their finance offer or sorry on their front of sale offer or actually move straight into an auction and have confidence in being able to place a bid. Why has it I think why has it been such a long term problem?
I think there's a couple of factors. I think first of all is a resourcing within financial institutions around credit departments and which ones where the credit people are in terms of the business flow. So there's probably been some and it's been well documented, some preferential treatment of in house originated loans versus 3rd party channel. We're seeing that change over the last 6 months in particular. So we are at 6 days and we're starting to see some of the lenders come in towards that number.
But it's just around turnaround times, it's consistency of credit decision. Brokers work on making sure that they don't look stupid in front of a client because they've recommended someone into a client and they can't get a credit decision. If you build confidence with a broker around the customer proposition, you'll get return business on the provider that's in the best interest of the client. And in this market, particularly right now, the client wants to know where they've got finance more than ever. So Ken, is there a magic answer as to why think different lenders have different turnaround times for different reasons, constant changing of credit policies, resourcing, moving resourcing offshore to onshore.
There's been a multitude of factors and some are still getting it right, right. Some and you'll see that in the mortgage index organizations, which are starting to get it right because they're getting more flushing.
David, if I could just follow-up on that last piece. 1 of the large banks has just announced that they're bringing their mortgage processing centers back onshore, adding jobs in Australia. Do you think that will make a difference in the current environment?
I think it will, but there'll be a transition, right? I think it's a positive step up not only for the economy, but more so for ensuring consistency of treatment and consistency of oversight. So I think that will take without doubt it's a massive project, but I think it's positive.
Great. Thanks, David.
Thank you. Your next question comes from Azbib Khan from Morgan Financial. Please go ahead.
Thank you very much. Good morning, David and Ben. A few questions just for me. To keep it easy, I might just ask them 1 by 1. Firstly, can you explain the reasoning for excluding share of profit of associates concerning your dividend payout ratio?
I'm particularly intrigued by that given your very strong unrestricted cash position, but would just like to understand the rationale there.
Yes. It's simply linked to the fact that there's no dividend cash flow coming out of those associates at this point in time. It's a position that we'll continue to assess and reassess that.
So when will you receive that cash?
As paid in the dividend from the underlying businesses.
Right. So why isn't that coming through already then? Why isn't that coming through in the form of cash already?
They're continuing to invest within their own businesses at this point in time. They've got strong growth. You can say in the Pingtan numbers in particular, the level of growth that's been within that business and as a securitization business, there's capital requirements within it. But as you say from our own business, you hit a point in time where the cash flow that comes from those loan books is quite strong and that will come.
So if I take a look at Think Tank, obviously, the commercial settlements looks like they've been going backwards, obviously, given the conditions. You talked about improving commercial lending market in the second half. But where would Think Tank be reinvesting their profits? What areas are they reinvesting in? Are they looking to broaden their product suite?
I do know that they've been growing their home loan product pretty fast as well. But are they looking to diversify their business? Or what are the areas where they're looking to reinvest their profit?
Yes. So the settlements you're looking at that we disclosed in our investor presentation is just the settlements that come through our network. So that's not the overall settlements for the Think Tank business. They're seeing strong growth over the last period in the residential products they sell and SMSF and those types of products. So it's a combination of the existing commercial business, which is continuing to grow and the other products as any securitization business as there's capital requirements at the bottom of warehouse and securitization structures.
And they're also investing in technology across the business to lift the standard there. So it's a combination of those two things.
Okay. Thank you. Coming back to your own cash position, you've obviously talked about having an unrestricted cash position now of about 107,000,000 dollars If I try to exclude working capital requirements from that, I would estimate that you've still got surplus cash excluding working capital of above 60,000,000 Now that Connected isn't going ahead, what do you plan on doing with the surplus cash? Will you look at other opportunities to acquire distribution?
I think that's a fair assessment, Hassib. Just because Connective isn't on the table at the moment, it doesn't necessarily mean that we're ex we've stopped considering other opportunities. So other growth opportunities, you've just summed it up there, other opportunities looking for distribution.
And probably the other thing worth calling out of it is that a portion of that we don't take in reserve the Active Security business and the potential need to invest more capital in that business at points in the cycle.
Sure. In terms of your partnership with BOLT, is it fair to say that the BOLT white label economics come with a better commission arrangement than your existing white label suite?
No, I couldn't comment on something which is commercial in confidence.
So not asking for numbers, but as an indication, I mean, should when we're modeling Vault, should we be using the average extra upfront trial that you get on white label products? Or will it be a little bit better than that?
You should just use what we're using what you're currently using with it.
Okay. So it's no better than the existing.
You should use what you're currently using with it.
Sure. Okay.
Just coming back to the commercial lending market. So you've obviously talked you're saying you're seeing a bit of a recovery in the commercial lending market in the second half. Is that recovery being hampered at all by the lockdowns in the East Coast? Or is that looking like a smooth recovery?
We're seeing really good strong lodgment pipelines, is it? So it's almost like people are saying looking outside and beyond the lockdown and saying, well, when we open up, we want to be ready. So the lodging pipeline, particularly in the commercial mortgage is strong. And we've had some good periods with asset finance, some of which was obviously fueled by government standards before 30 June, but the levels of activity is still pretty strong.
Okay. Next question is probably specifically for Ben. So Ben, you've talked about the commission expense reclassification associated with the HD Securities product. But the reported NIM hasn't yet been adjusted for that, has it been?
No. We report our NIM on a pure cost of funds basis like we always have. So that excludes the commission expense that's paid to brokers driving our securities business. I think it's important to keep that consistent with the way we've reported it historically.
Okay. So you'll continue to report it this way going forward as well?
That's right, yes.
Okay. So obviously, we've seen the uptrend continue in breakout payout ratios. As you mentioned earlier, you alluded to the figure of 94.3%. Can we expect that uptrend to continue in the near term?
Yes, I would expect so. There remains to be a high level of competition in the market. So there's going to be continuing pressure on that number.
Okay. And in terms of your cost of funding, at the moment, it looks like marginal RMBS pricing is sitting notably below warehouse facility pricing. So is there potential for the cost of your warehouse funding to reduce further?
Look, we are in 12 month rolling and sort of the review date then I think for the next one is no. Yes, December. December. The other piece there, so yes, certainly at the time of review date, we'd be looking to mark to market for one of a better term. The other piece is that we do have one in the next 6 months, one existing RMBS transaction, which will get to end of life.
And as those RMBS transactions work, the longer dated pieces of those are higher priced. And so at the end of that 4 year term of those RMBS, that will roll back into the warehouse. So there'll be some pricing benefit for us there as well.
Okay. And final question from me. Ben, you have a few months ago, you were talking to a NIM headwind in terms of front to back book headwind for the 8 gs securities business of about 1 basis point per month. Is it fair to say that, that headwind has now strengthened to more like 1.5 basis points per month?
Yes, I think that's fair. I think the points we made earlier about competition in the market, there's quite a bit of activity for your prime variable right now, not just the fixed rate product. So I think that's a fair comment. And in some months, there might be slightly more.
Thank you very much.
Thank you. Your next question comes from Oliver Stevens, Private Investor. Please go ahead.
Hi, Oliver. How are you going?
Hi, Oliver.
Hi. I just noticed your staff numbers have been pretty flat since you listed and they've jumped pretty materially this year. Just wondering what's behind that? And do you expecting further growth?
Yes. Look, I think we flagged this at that half year really. The business has been very, very busy. And I think 15 months ago when the pandemic first was rolling through the lockdowns, we held on a number of recruitment roles that were open and made a couple of changes within the business. That those have come back on and around credit staff, sales staff, they're all very, very busy.
So we've certainly been close through to your settlement teams and operational teams as well. So and on top of that, obviously, with a reasonably significant IT build occurring, there's an increase in IT staff as well. So I think that number is probably reflective of the activity within the business.
Yes. And what's a much more growth there?
I'd say probably a little bit, but not we're probably at a reasonable level now. There might be some temporary and contract type the work that happens, but from on a permanent ongoing basis, a small amount more.
I think the other thing, Oli, just in terms of you've seen step up in securities, which therefore means credit assessors, but it's also people to process settlements and settlements of those loans, right? And make sure the paperwork washes through and handle those. And therefore, there's also the book grows, which means you need
to add people in terms of your customer service as well.
Yes, cool. You touched on a fair bit, but your IT program seems to be delayed. Is there potential for sort of cost play out or things just not going anywhere near to plan? Or is it more just a bit of a delay to make sure you get things right?
Look, I think there's been a couple of things there. First of all, we're a national business operating in Perth. And COVID and travel restrictions has impacted the ability for getting in touch with brokers and making sure that it's to the requirements. We've also changed some of the scoping and expanded the scope as well during the period. So is there a requirement for additional expenditure?
Yes, there will be. But is it going to blow us out
of the park at this stage? I don't think so. Yes.
And last one, I'm a bit worried about earlier up, so traumatized still from the Haim commission, but I committed the coalition committed to maintaining the upfront trials with a review in 3 years. And lo and behold, that's only sort of 6 to 9 months. So have you got any early thoughts or indication about how the review may or may not take shape?
Look, the coalition or the government has pushed that past the election. So we're talking maybe this time next year or a bit later. We're operating in an environment where brokers have increased there's been an increase in demand for broker services. The complaints around broker continue to be low. And guess what?
The market share has grown and we've got best interest duty over the top of it. So for me that tells me that every indicator so there's nothing that's fundamentally wrong with the program and with the remuneration system. And if anything, customers are even better off and better protected because all our brokers are operating under best interest duty, which is a requirement by law and no other channel for mortgages has that requirement, which a lot of our brokers see as a positive. You go into a branch, you don't get best interest.
And you haven't heard anything sort of from the opposition where they're still an issue with the trials?
No. Look, we're obviously engaged with the opposition over time. I think those factors that I've just pointed out to indicate that there's not a problem here, right? And it's something we've been saying and the industry has been saying for a long period of time. Access to finance and ability to find the right home loan is still extremely important.
Remuneration model underpins and a broker's ability to continue to service those clients. So what the opposition I think I'm not going to put words in the opposition's mouth because I suspect
because there's not a lot
of noise that probably even landed on a policy yet. So I can't say what the opposition is thinking about the subject, but I wouldn't have thought it's a number 1 or number 2 or number 3 or even number 10 on their list of policies to be developed and communicated.
Yes. It was probably a number 2 last time. Guys, thanks very much for that, Chief.
Thank
you. The next question comes from Richard Lyles from Morgan Stanley. Please go ahead.
Thank you. Just one more question from me. The hardship or deferral levels are extraordinarily low across the industry and in your business. Dave, can you add any sort of insight as to why they're so good? And can you give any particular feedback from your customers around which types of customers are seeking those deferrals?
Is it any particular sort of cohort of loans?
Yes. I think and it's probably been speaking to other CEOs around this. I think if you're drawing everyone's drawing comparison to the first incidence of hardships hitting down. And at that time, there was a significant amount of misinformation in the marketplace that moving into hardship meant you get effectively the bank or the financial institution would waive the monthly repayment on those home loans and they would never need to repay that money. So almost like a pre repayments for
a period.
And our experience when we're speaking to customers as we move them through that hardship is that all of a sudden a realization that the debt just consolidates and either extends the loan term or increases the repayments when they're back on foot. I think that together with a significantly lower interest rate environment has meant customers are saying, look, it's not free money. We'll do what we can and continue to pay it whether it be interest only. And you get as I said about 50% of our hardships are interest only. The other 50% are what I would call full decirals.
And those the common theme of those who don't necessarily are those people who are either self employed in sectors which have been impacted by lockdown or people where the family income has been compromised because part time work is no longer available or hours have been reduced
because of the melting out.
And David that mix 50% interest only and 50% full deferral, are those people who are already on do you mean they're people who are already on interest only who are now choosing to defer those payments? Or do you mean they're people who are on P and I that have chosen to switch perhaps temporarily to interest only?
The second one, yes. So the effect we said, look, I'm going to continue to keep I'm going to the conversations we're having with clients, and I'm sure it's the same with conversations across most financial institutions are, can you afford to pay anything? It's important you don't let that loan the interest capitalize and that would loan balance grow and customers realize that. And then when you convert it into monthly repayments at an interest rate of 2.5% on average, generally it's not a lot and people they're not going out and they're not spending money unless it's on Uber Eats and home shopping. It's probably easier to control your expenditure when you're in lockdown.
I know I do.
Thank you.
Thank you. There are no further questions at this time. I'll now hand back to Mr. Bailey for closing remarks.
Thanks very much. Look, I appreciate you all. It's a busy time of the year for everyone. I appreciate your attendance today and look forward to catching you up not necessarily in person, but in Zoom, but hopefully in person in the near future. So take care, everyone.
That does conclude our conference for today. Thank you for participating. You may now disconnect.