We'll take business from the big banks with our service

Liberty Financial Group is confident that it can deliver better customer service that will siphon business from major banks. The non-bank lender predicts that strong housing demand will drive net profit up 18% this financial year, according to a report from The Australian Financial Review.

Liberty Financial’s recent initial public offering saw its stock, issued at $6, spike 11% to $6.70 at its open. In the deal, led by Credit Suisse, 17.5% of the company was sold to investors, raising $321 million and bringing the non-bank’s market capitalisation to about $2 billion. Liberty founder and executive director Sherman Ma still holds 47.5% of the company’s equity.

Liberty CEO James Boyle told AFR that Australia’s economic recovery and improving housing markets could drive the company’s growth next year.

“We are seeing a resurgence in demand for housing – it’s like the traditional spring season was delayed and is making its way to market now,” Boyle said.

However, Boyle said Liberty wouldn’t pursue a price-based strategy “because we can’t win against the majors on price” thanks to the big banks using cheap funding lines to offer sub-2% fixed-rate mortgages.

“Ours is a service and solutions-based strategy,” Boyle said.

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Liberty boasts a broad range of products – including those banks are reluctant to offer, such as unsecured lending to small and medium-sized businesses and loans tailored to self-managed superannuation funds. About 10% of Liberty borrowers are classified as non-prime – meaning they don’t meet the majors’ lending criteria.

“We have always been there to help customers that mainstream [banks] don’t do as well at,” Boyle told AFR. “There haven’t been as many of those customers around during the [strong economic] times. Perhaps there will be more going forward. We think we are well placed to help customers that have been hit with one-time impacts from the pandemic – as well as mainstream customers.”

Liberty has an $11 billon loan book including home loans, motor vehicle, commercial, personal and business loans, and general insurance. The portfolio has grown at an average compound annual growth rate of 20% over the past decade. Nearly 75% of its loans are residential mortgages.

The company is predicting a net profit for the 2021 financial year of $153.9 million, which would be an 18% rise, on projected total income of $838.2 million.

“We are feeling pretty optimistic about 2021,” Boyle told AFR. “We think the government has done an exceptionally good job at managing not only the pandemic but the economic fallout from the pandemic, and what we are seeing from our customer base is pretty good signs that our customers are feeling better about the path forward.”

Boyle said that Liberty, with 400 employees, is “smaller and more nimble” than the majors, allowing it to respond quickly to ongoing market disruption.

“When change comes, big organisations struggle to implement change at speed, so our ability to out-service big institutions is a question of whether there will be more change – and we think there will be,” he said.