Home Building Society’s new managing director is confident the business has laid solid foundations for more substantial growth and success in future.
Home Building Society’s new managing director is confident the business has laid solid foundations for more substantial growth and success in future.
Craig Coleman, who has been at Home for just more than a month, was recruited from the ANZ Bank in Melbourne following the unexpected departure early this year of his predecessor, David Jones.
With former Challenge Bank chief executive Tony Howarth installed as chairman, Home certainly has the right leadership to lift its sluggish performance.
In the year to June 30, Home reported a big increase in net profit to $5.65 million, but this was boosted by one-off gains from the sale of Cashcard shares.
Stripping out one-off factors, Home’s underlying profit of $4.4 million equated to a modest return on equity of just 8.1 per cent.
Its total lending increase – up 12 per cent to $849 million – was also a modest result at a time of booming lending growth.
A good measure of Home’s performance will come later this year when local credit societies, such as Police & Nurses, StateWest and United, report their annual results.
One Perth-based competitor that has clearly under performed is national mortgage manager Homeloans.
In the midst of a strong housing boom, it has continued an “aggressive cost cutting program” to try and lift its performance.
Homeloans latest net profit was just $1.1 million, down from $2.3 million in the previous financial year (excluding a one-off write down of goodwill).
Mr Coleman said there was evidence of improved performance in the latest results but agreed Home could do better in future.
He believes it will be aided by changes introduced over the past year, including measures to improve credit quality, such as a risk grading and portfolio review process and cutting the commercial lending portfolio.
“We’re managing that down to a more comfortable 15 to 20 per cent of assets, which is where we want to be,” Mr Coleman said.
He added that Home was ready to re-enter the commercial market as a niche lender focused on commercial property transactions in the $500,000 to $3 million range.
Mr Coleman said Home had been very conservative in its treatment of expenses, with all software development and broker commissions fully expensed.
Another positive for Home was its ‘brand’ attributes, with surveys showing a strong rise in brand awareness, he said.
Home now ranks equal first with Police & Nurses among non-bank financiers.
Mr Coleman said Home’s status as a Western Australian company was helpful but would have little impact on its own.
“The sentiment is real but people aren’t going to buy just on the sentiment of buy local. You have to deliver the substance,” he said.
In its core business of housing lending, Mr Coleman said Home was aiming to lift market share to offset a predicted slowdown in lending growth and reduced margins.
He said future earnings would be helped by the fact Home has already invested in fixed infrastructure, such as branches, technology and its call centre.
“We can handle significant growth in customers and balance sheet without major increases in expense,” Mr Coleman told WA Business News.
He added that the profits from land development activities were not one-offs.
“Our land developments are profitable, do not require further capital investment and have approximately 10 years life remaining.”