Australia Non-Bank Lenders: Volume slow down not as bad as feared so far

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Australia Non-Bank Lenders: Volume slow down not as bad as feared so far

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25 Jun 2026 04:36:02 ET │ 25 pages

Australia Non-Bank Lenders

Volume slow down not as bad as feared so far

CITI'S TAKE

Jeff Cai, CFA AC

Our recent discussions with the companies indicate that housing volumes +61-2-8225-2688

are slowing but resilient, with investor loan applications down 10-20% post jeff.cai@citi.com

the budget. However with risks skewed to the downside, we now factor in a

sharper decline in our forecasts with FY27E investor loans down ~30% yoy. Nigel Pittaway

Hence, we cut FY27E EPS by 2-13% (Figure 12) across the non-banks. +61-2-8225-4860

Elsewhere funding tailwinds are moderating but continue to support gross nigel.pittaway@citi.com

margins. Overall, we are constructive on the non-banks given undemanding

valuation (6-9x PE) and proven through-the-cycle value. We upgrade RMC Donna Fu

to Neutral (from Sell) given recent share price correction while div. yield and +61-2-8225-4801

term funding cost tailwinds provides some support. Our preference order: donna.fu@citi.com

PPM (Buy), AFG (Neutral), LFG (Neutral) and RMC (Neutral). We cut TPs for

above companies by up to ~20% reflecting the EPS changes and applying

+10% weight to our PE based valuation due to near term headwinds.

Volumes – robust in 2H26E, but 10-15% decline for FY27E — For 2H26E, we expect

new mortgage flows to remain strong given in-market share gains by non-banks

(Figure 1). However, recent channel checks suggest new flows are slowing, albeit not

as bad as feared despite the combined impacts from rate hikes and changes in CGT

/ negative gearing. Indeed, post the budget: 1) AFG/LFG/PPM noted investor loans

fell ~10-15%, 2) RMC noted falls of ~5-10%, while 3) WBC noted investor

applications down ~20% yoy.