Australian Finance Group (AFG.AX): A solid result, yet housing slow down weigh on FY27E

Research evidence excerpt

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20 Aug 2026 09:30:04 ET │ 14 pages

Australian Finance Group (AFG.AX)

A solid result, yet housing slow down weigh on FY27E

CITI'S TAKE

AFG delivered a solid FY26 result (profit +39%), albeit partly due to one-off

income. This aside, the result further demonstrates the increasing diversity

and resilience of AFG’s income base (Figure 4). Looking ahead, the housing

slowdown is creating headwinds with new flows down ~16% while AFG

noted some early signs of stabilisation. For now, we retain our FY27E

lodgement forecast of -15% yoy. Overall we see AFG as a proven cyclical

business with lots to like (more diversified revenue, undemanding valuation

~9x PE), but the housing slowdown likely weighs on the prospect of a

material re-rate in the near term. We lift FY27E/28E EPS by ~3-4%, mainly

due to stronger lending income. We retain Neutral but with a new TP of

$1.73ps (-$0.10), as lower peers’ multiples offset the EPS changes.

Volume – sound, but outlook dims — For 2H26, AFG’s mortgage lodgement remains

solid, up ~12% yoy to $58bn. However the headwinds from rate hikes and tax

changes are having an increasing impact, with AFG seeing new flows down ~16%

(similar to banks – Figure 1). Notably AFG pointed to some moderation in recent

weeks, but it is too early to call it a trend. Looking ahead, we retain our FY27E volume

forecasts of down ~15% yoy as the housing slowdown evolves. We estimate a further

10ppt yoy decline in new mortgage flows will impact FY27E profit by ~3% (Figure 5).

n

Neutral

Price (20 Aug 26 16:00)

A$1.60

Target price

A$1.73↓

from A$1.83

Expected share price return

8.1%

Expected dividend yield

6.3%

Expected total return

14.4%

Market Cap

A$432M

US$308M

Price Performance

(RIC: AFG.AX, BB: AFG AU)

NIM – expansion gets harder — Margins rose 2bp hoh to 1.26% (CitiE: 1.25%) for

2H26, benefiting from lower funding costs. Looking ahead, the June exit NIM rose

further to 1.28%, while funding tailwinds should also continue, albeit at a

moderating pace. That said, we expect much of the benefits will be offset by growing

asset competition as the industry volume slows (FY27E: 1.24%).

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