Talking Business - John Symond

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John Symond is the founder and CEO of Aussie Home Loans, the largest retail lender outside the four biggest banks in Australia. He is with us to discuss the alternative to bank lending and his forecast for the credit industry, including where interest rates are headed and what we can do in order to prepare for the hard times ahead.

My first guest on Talking Business is John Symond from Aussie Home Loans, and he’s had a fantastic year, and a very challenging year. Thanks for joining us on Talking Business John.

JS Great to be here, Peter.

PS Okay, so this is about a really unusual time for everyone in the mortgage industry, but you’ve come away with an unusual, but positive outcome. You’ve sold a third of your business to the Commonwealth Bank and you’ve also picked up your rival of all those years, Wizard Home Loans, as well. Tell us how it came about John?

JS Well, first of all, with Commonwealth Bank Peter, they approached me in early 2008 and I had never ever gone out looking to sell Aussie, part or all, I’ve been very independent. We’ve built a very strong team over the years and we’ve proved to be a very viable alternative to consumers, taking competition up. However, the market, because of global events, has impacted every sector, and of course the non-banks don’t have big balance sheets so that sector has been pretty hard hit. I considered the Commonwealth Bank opportunity because they recognise that Aussie was going to be one of the winners in a non-bank sector, and they wanted to have in on that sector. I guess they worked out that Aussie was a great vehicle and I was happy to talk to them on the basis that they could help turbo charge our business by providing wholesale funding, access to a balance sheet if a good opportunity came up, but the under-riding rule was we maintain total independence, they have no involvement on the operational side and I’m still in charge. So we subsequently agreed on those terms and, to the credit of Commonwealth Bank, they’ve stuck by that. And very late in 2008 we had a hard look at Wizard because National Bank had been in there negotiating for seven or eight months and it became apparent that there was a stalemate, and I’ve been of the belief that Australians need a strong alternative to the banks and notwithstanding the success of Aussie and the fact that we’ve been travelling against the trend, it gave us an opportunity to really achieve scale by taking in the Wizard brand that had been built as a very good operation.

Mark Bouris did a good job, he sold it four years ago to GE. GE, like most offshore financial institutions, has been absolutely smashed, and GE had to liquidate assets around the world and in Australia. An asset of Wizard, they had funded up to 11 or 12 billion dollars in home loans and they need to liquidate that into cash, and that gave a great opportunity for us to achieve scale by taking on 150 to 160 franchises, 300 odd experienced mortgage writers, fold that into Aussie to provide 800 or 900 hundred experienced mortgage writers and 200 shop fronts which really makes Aussie the largest retailer of financial services outside the big four banks. I’m very excited about it because it really does ensure that consumers will have a stronger non-bank presence in Aussie, and it’s absolutely critical because the banks, notwithstanding Commbank, have got a minority interest, but banks in Australia, fortunately for Australians, are in a much, much, better solid, safer position than global banks.

But it’s also enabled the big four banks in Australia to get a bigger strangle hold, enforcing consumers to deal with them. So I do believe that this is absolutely critical for the Australian public, not just for Aussie, not just ensuring that the experience is it, Wizard people have a great career rather than getting out of the career because they’ve done it tough the last two months. So it‘s been a good partnership, so far, in a short period of time between Commbank and Aussie and hopefully it will prove to be a good move for the Australian public.

PS Okay, one of your smartest decisions, looking back, must have been to get out of just being non-bank lending and becoming a mortgage broker as well where your business can actually look around for the best loans in the market and provide it to a much wider audience?

JS Yes, back about seven and a half years ago, Peter, we changed dramatically our business model, even though we were the largest non-bank lender – and probably performing better than the dozens and dozens of non-banks – it was becoming apparent to me that consumers were wanting choice. Consumers wanted trust and I felt then that being an originator exposed a lot of risk going forward, and I certainly wasn’t clever enough to see what would unfold in 2007/2008 but I look back now and look on that decision as being a really critical decision, as you say, because it took us from exposure to the global credit markets, to a very miniscule exposure, and we changed the business to a big supermarket of mortgage broking where we offer a couple of thousands of different configured loans to consumers.
We’ve since even diversified our business model further. We’ve got a very successful Aussie Mastercard, we’ve got other financial products, car loans, personal loans, and now we’re rolling it into insurances. So Aussie became a very diversified financial services provider, and with the Wizard shop fronts – we’ve got 200 shop fronts, 800 odd mortgage writers and a bigger say to negotiate better deals on behalf of our consumers.

PS Now, what about the Aussie economy John? Do you think we can come out of this either avoiding a recession or just having a mild recession?

JS Well, one thing’s for certain, Peter, we’re in the best part of the world to combat this global fallout. Now, not for a minute do I think that we will avoid it unscathed, we will cop some black eyes, we might even cop a few broken bones, but we’re not going to get run over. If we do end up in recession it will be, if I can use the term, light recession, I’m very confident of that because we’ve been in great shape for 10 or 12 years, we’re very fortunate to have China, Indian and countries buying up big with our resources and commodities, and we’re in great shape. We will cop a few hits but I’m very, very, confident that we won’t go into deep recession. Yes, we’ll see some unemployment rise, we don’t like that, but, all said and done, we are in the best part of the world for doing this.

PS Okay, let’s go to the credit markets... Which is the core of the problems that we’re suffering under? How do you see those things developing here?

JS Well, the credit markets’ are still virtually shut down because the cost of raising credit through the global market is prohibitive. We are fortunate that our big banks here have a huge deposit base, they probably fund 50 per cent of their requirements to provide funding to customers, big and small, including home loan customers. However, it is an absolutely critical problem for all of us in Australia, as well as globally, because its basically shut down the non-bank lending – and let’s remember, the competition in home loans came from outside the banking sector and I’m proud to say we started that in 1992. You can’t go out and raise money through the credit markets and lend them to consumers at a competitive interest rate because the big banks have that huge advantage in Australia where they take on deposits, they get a lot of deposits where they’ll pay very little or no interest and, you know, that’s playing into the banks corner. But they will open up eventually, nothing goes forever, Peter, for all businesses, not just the credit markets. Today it’s all about survival and anything above that is a bonus. There will be organisations, hopefully Aussie will be one of them, who can seize some opportunities and ensure that their business comes out of this far better than when we were going into it. So I guess I’m someone who always looks at the glass being half full, there are opportunities there, you’ve got to be extremely carefully whatever business or industry you’re in, but I still look at the future on the bright side and I’m very, very, happy to be a proud Australian. Australia offers some fantastic opportunities for us and we’ve got to be positive, because it’s all doom and gloom that headlines read, people talking negativity, but I still look on a very positive future.

PS One last question John. Over the years you’ve built a great business and you’ve always built a wonderful brand name around Aussie... Was that part of the plan? Was this your entrepreneurial plan, to get a character that people actually related to which then would help the growth and the development of this Aussie Home Loans brand?

JS It was a bit of a fluke Peter – you know, having a friendly face in a faceless cold industry such as banking – but the reality was when I started Aussie Home Loans, and coincidently that was also in a recessionary period but I was broke, I was facing bankruptcy, I came out of a failed joint venture with the State Bank of South Australia and I was naive in those days. Who would have thought that a State Government bank would go belly up, and I had all my eggs in one basket, the impact broke my marriage and everything else, but you know what? It gave a great opportunity, it led to the whole creation of the non-bank industry, and during that course, because I was broke and had no money, I couldn’t employ anyone, I couldn’t go and book marketing costs, I couldn’t employ people to deliver the message. I often joke when people ask, ‘how come you do your own ads?’ and I say to people, ‘well look, I really couldn’t afford actors’ and they have a chuckle thinking I’m joking, but the reality was I had no money and I was passionate. I had a strong team around me and a small team then, we were passionate about trying to give Australians a fair go, and the banks were getting away with blue murder in those years. Fortunately, they’ve changed a hell of a lot for the better, and I guess during that period my profile rose because I was very outspoken, I was a straight shooter. Consumers heard from me things they were already thinking, and I guess I developed the brand, and I’m very proud to have played a very important role.

PS And we’re very proud to have you on the show. Thanks for joining us on Talking Business.

JS Thank you Peter.

Talking Business airs on Qantas Inflight Radio. Click here to download complete Talking Business transcripts from the Qantas website.

Published: Monday, June 29, 2009

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