Thank you for standing by, and welcome to the Resimac FY 2023 investor call. All participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session. If you wish to ask a question, you will need to press star key, followed by the number one on your telephone keypad. I would now like to hand the conference over to Mr. Scott McWilliam, CEO. You may now go ahead. Thank you. Good morning. It's my pleasure to welcome you to Resimac's Results Investor Conference Call for the year ended 30 June 2023. I'm Scott McWilliam, CEO of Resimac, and with me is Jason Azzopardi, our CFO. We'll be talking to our investor presentation launch with the ASX this morning and welcome questions at the end of the call. In today's presentation, we'll take you through our performance highlights, an overview of the macroeconomic environment, the quality of our portfolio, and our focus for FY 2024 and beyond. Today, we announced another year of strong shareholder returns. I'm pleased that the last 12 months we've made significant progress on our strategic objectives amidst extremely challenging macroeconomic environment. The resilience of the business throughout these cyclical challenges is testament to the strength of Resimac brand in home loans and capital markets. Strategically, we continue to deliver on our diversification agenda for Resimac Asset Finance, continue to lay the foundation for scale on several fronts. Firstly, our cloud-based origination system recently went live, giving us the ability to expand our broker reach with a market-leading application process. We materially increased our funding capacity with a global bank, adding to our extensive list of incumbent banking partners. And finally, we created an asset finance back-office team in Manila to drive cost efficiency as we scale origination and AUM. We are encouraged by the growing demand for our commercial auto and equipment and secured business loans as we head into FY 2024. Our home loan business in Australia and New Zealand faced headwinds throughout the year, driven by low system activity, the uncompetitive TFF facility, fiercely competitive behaviors by the major banks with large upfront cashbacks and discounted interest rates, and an aggressive monetary tightening cycle environment. We managed them prudently from an origination and retention lens in FY 2023, albeit this came at the cost of lower AUM, particularly in Prime. The economic operating environment for home loans remains challenging, albeit improved since earlier this year. Housing credit growth remains lower compared to 12 to 18 months ago, driven by low supply and RBA rate uncertainty, dampening confidence. We expect the end of this tightening cycle to improve consumer confidence. Furthermore, cashbacks for home loan ref inancing have largely been removed, albeit a small number of lenders, including ANZ, continue to offer small cashbacks today. Funding markets remain open and viable. Spreads moved wider during the year, but we're starting to see them tighten back to historical levels. Put simply, our market-leading funding program remains buoyant. Although arrears continued to track higher. Although arrears were high during the year, we're pleased to see credit losses remain low, with only four loans without LMI about 31 plus days in arrears and a dynamic LVR greater than 90%. Furthermore, we remain conservatively provisioned on our balance sheet. Finally, our people remain the cornerstone of our success, driving consumer outcomes and operational efficiency. I'm proud of the efforts of our teams have sustained during this challenging year, and I'm confident we have the platform for success moving into FY 2024. I'll now hand over to Jason Azzopardi to expand on the financials. Thanks, Scott. Starting on page seven of the investor presentation, I'm pleased to report the group continues to generate strong shareholder returns, reporting an FY 2023 normalized NPAT of AUD 73.7 million. This normalized NPAT excludes fair value movements on our interest rate derivatives. Our cost to income ratio of 43.6% increased year-on-year, a product of net interest income headwinds from lower AUM and higher operating expenses. During the second half, we have executed a number of cost-saving initiatives, which will result in lower operating expenses moving forward. We are targeting lower OpEx in FY 2024 and expect to achieve that. Loan impairment expenses remain low at AUD 2.2 million for the year. As Scott mentioned, arrears have increased over the year, albeit stabilized in the last couple of months. The low average LVRs of the portfolio have ensured losses remain low at this stage of the cycle, demonstrated by our home loan-specific provision on our balance sheet at 30th of June 2023 of only AUD 1.8 million. Our conservative collective provision of AUD 40.6 million provides us confidence we can absorb future losses in both the home loans and asset finance segments as and when they arise. Return on equity for the year was 18.6%, lower than previous years as our asset finance book requires higher capital ratios in the book build phase, a timing drag on ROE. I'm pleased to report the board has declared a fully franked final dividend of AUD 0.04 per share, a payout ratio of 43.5% on a normalized basis, and a yield of 8.74% on the closing share price at 30 June 2023. Moving to slides eight and nine, you can see the impact of the home loan market headwinds we have faced in the second half, particularly in Prime, where AUM runoff continued. The lower Prime AUM is a direct result of the anti-competitive TFF funding advantage that was handed to the ADIs, allowing the big four, in particular, to target refinances with aggressive new business interest rates and cash backs during the year. These headwinds are gradually being removed, and we are hopeful we are reaching the bottom of the AUM cycle. During FY 2023, we made the strategic pivot to focus on specialist originations, where returns were higher than the prime segment, where ADIs were admittedly writing new business below their cost of capital. We managed to keep the specialist AUM broadly flat during the year, despite a soft second half where system activity softens. Our asset finance offering continues to make steady progress, settling AUD 482 million during the year. We remain focused on increasing asset finance settlements to AUD 1 billion of annualized settlements in FY 2024. Moving to page 10, I'm particularly pleased to report our prudent NIM management resulted in our NIM remaining broadly flat compared to FY 2022, decreasing five basis points to 176 basis points. This represents a first half NIM of 175 basis points and a second half NIM of 177 basis points. The June exit NIM was 172 basis points. BBSW increased in line with the cash rate, increasing from 85 basis points to 410 basis points during the year. Despite the BBSW curve moving from an inversion to cash rate, to a curve tracking ahead of anticipated RBA rate increases during the year, we have managed our repricing strategy accordingly to offset these BBSW increases. Pleasingly, BBSW is resetting circa 5 basis points below cash in August. Funding costs increased 11 basis points, driven by an increase in our RMBS tracker rate and repricing of our warehouses. We utilized warehouse capacity at lower costs where possible, to avoid issuing RMBS at peak pricing. Our warehouse pricing events have been completed, and furthermore, we were pleased to announce to the market yesterday a AUD 750 million prime deal was priced with senior margins of 125 basis points over bills, 20 basis points lower than the RMBS we issued in the first half of 2023. This pricing, along with the normalization of ADI funding costs, provides us optimism for AUM growth moving forward. Finally, I wanted to say a huge thank you to our finance team, who have worked tirelessly over the year-end. I'll now hand over to Scott to provide a strategy and outlook overview. Thanks, Jason. Our strategy and focus for the next 12 months and beyond are broadly unchanged. Our strategic focus on NIM management over AUM growth in FY 2023 was successful, but with the recent changes in the, in the home loans market and the normalization of credit spreads in capital markets, we've started to ramp up our home loans origination activities. As Jason mentioned, our growth aspirations for asset finance remain high. We are targeting to double our asset finance settlements in FY 2024, underpinned by a wider broker reach and a significantly improved digital experience for our broker partners and customers. Whilst we've seen an increase in early-stage arrears across the last 12 months in line with market, we remain confident Resimac's portfolio will absorb any stress. Furthermore, our conservative approach to provisioning over the last two years ensures our provisioning coverage is more than sufficient to absorb any potential credit losses arising from arrears. And lastly, our cost management will continue to be a major focus for the business in FY 2024. I'm pleased to say that our investment in operational efficiency processes and core technologies over the last two years should help us to drive a lower operating expense in FY 2024. I'll now hand back to the call moderator, and we're happy to answer any questions. We will now... Thank you. If you wish to ask a question, please press star then one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star then two. If you're on a speakerphone, please pick up your handset to ask your question. Our first question will come from Minh Pham with Barrenjoey. You may now go ahead. Hi, Scott, Jason. Good morning. Thanks for taking my questions. Just two, if I could. Firstly, just on the 90-day arrears that you've seen in home loans, I think... I'm not sure if that was a bit of a restatement from the disclosure last half, but it does look to, specifically for the specialist, home loans, it does look like that 1.3% are back to arrears level seen in, 2012 for your portfolio. Just interested in whether or not there's been some credit appetite change as well. It is quite a significant, trend growth compared to what we've seen for your peers. Are you seeing it in specific cohorts or vintages? Yeah, whatever detail you could provide. Thanks. Hi, Minh. How are you? I'm sorry, were you referring back to 2012? Yeah. So, slide five, I think you provided a similar longer-dated arrears chart in your presentation last half, and it kind of just looks like the specialist home loans arrears are well above what you saw in, you know, 2012, 2013 levels. But yeah, I wasn't sure if that was a restatement or what you're seeing there. No restatement. We didn't think anyone took notice from it ten years ago, Minh, but I'm glad that you do. That's a detail you show, but look... [crosstalk] You provided the chart last half, so. Yes, we did. We did, no doubt. Look, specialist arrears have definitely increased. It's a combination in there of near prime and specialist loans. I would say that while they have increased, they're certainly coming off extreme lows. What we are seeing is certainly in the last few months of the year, that they actually, we saw a really significant spike initially, and that's started to stabilize now, which we're pleased to see. I think the other comment there is the LVRs of those arrears are still very low. So, from a credit risk loss perspective, we're feeling very comfortable in terms of potential loss. Yeah. Are you seeing it in specific cohorts or vintages? Is it the 2020 to 2021 mortgages that you're seeing it in, or is it also just the natural seasoning of the book? No, no, we're not. That and that's initially why we had that, that chart on slide one in terms of showing, the last couple of years' originations and the LVRs of those, because it probably our initial theory was that would be the case. We're seeing it more in, in, more seasoned vintages, probably, more in the three to four years, where people have taken on additional debt since taking on the home loan, rather than it being a product of the new originations. But no specific industry bias, no specific, geographical bias. It's pretty broad, but I wouldn't say it's, it's skewed towards that. Sure, there are people from the last two years who potentially overstretched, but it's not, it's not isolated to that. It's not something systemic. We just think it's an across-the-board, affordability slash, you know, cost of living, whether that's taking out new debt or taking on additional debt since you took on your home loan. Great. Thank you. And maybe just a second question on margins. Thanks for providing some exit NIM guidance. It does appear to have held up better than peers, and obviously that's a function of the pricing decisions you made and where you chose to grow volumes this half. But given your stated guidance to grow home loan AUM in FY 2024, do you expect that some of that will lead to margin declines as you try to bring that back to growth next year? Yeah. Yes, I think you're right. We did manage NIM pretty tightly. I mean, I can't speak for others, but we did certainly made some pretty difficult decisions during the year, in repricing above the cash rate, and that's how we've been able to manage that book. And we've always talked about a variable loan book being a good hedge against funding costs. So we were quite aggressive at that and, you know, we may have taken a bit of pain in AUM because of that. In terms of NIM outlook, we have stated that we, you know, believe we're getting close to AUM trough, and there's an AUM growth opportunity there. But certainly, in the first half of 2024, we are expecting to keep NIM broadly flat with the exit NIM for June. Great. That's very clear. Thank you. Pleasure. Our next question will come from Tom Strong with Citi. You may now go ahead. Oh, good morning, guys, and thanks for taking our questions. Firstly, I just wanted to ask on, on the asset finance growth and then you sort of seeing a pickup in settlements and still targeting AUD 1 billion run rate by the end of FY 2024. Could you just perhaps comment on what you're sort of seeing around the level of pricing in that market? And then you sort of hear varying feedback as to whether pricing has been irrational or not. Could you just perhaps comment on what you're sort of seeing in that segment against your maintained ambitions there? Yeah, look, it is a competitive environment. You know, we're seeing, you know, a number of non-banks and also just kind of more mature banks in that space, targeting different risk profiles, targeting different audiences. And so it is competitive, and so therefore, you know, it is a price competitive environment. You know, we will maintain our NIM kind of in and around our return hurdles. So, while we are saying that we're doubling our volume, you know, let's be brutally honest here, we're still coming off a pretty low base. You know, we're two years into this particular strategy. We have spent a lot of time, effort, and dollars in terms of getting the shop right. That's across talent and technology, and positioning, as well as our kind of our funding program. You know, this is the first full we'll have the opportunity to leverage all of those investments. And we will broadly be targeting, you know, commercial, auto, and equipment. As I mentioned earlier, you know, secure business loans, we like. We like the return and also the risk hurdles. But it is a competitive environment. We have seen pricing come in, from a number of players, but we've broadly held our pricing in line, you know, with our own return hurdles. And our expectation is that, you know, doubling our origination, you know, coming off, let's call it, you know, AUD 500 million, targeting, you know, AUD 1 billion for the year is a more than reasonable target. You know, slightly aspirational, but I'd say it's a target that we need to set with the investments we've made to date. And we're also comforted by the fact that we've seen even near base periods, you know, punch out, punch out some pretty impressive numbers. So, it is a deep market. We're not necessarily always chasing the same audience or origination channel. B ut we see a lot of growth in, especially in commercial auto and equipment. Yeah, and just to add to what Scott said, Tom, half of our originations are broadly auto and equipment, where I think you're alluding to some of the trial specials that have been out there, and it hasn't been constant throughout the year. There has been the odd promotion, but the other half down in terms of secured business loans, we're not probably competing against some of the brands you're talking about, and the NIMs there, you know, are not too aggressive. So, we're feeling comfortable off the low base that we're coming from, as Scott said, that we can maintain our target NIMs in that business and still hit our targets. Okay. Yeah, fantastic. That's, that's very clear. Thank you. Just a second question, just around your cost of funds. We've seen in the prime with that deal you've just announced at 125 basis points. It kind of looks back to historical levels as sort of about 17 to 20. What's your expectations around the specialist senior margin? I mean, it's quite elevated in 2023 at 177. What's the sort of normalized level there, and would you expect it to track back like the prime has? Yeah. Look, good question, and I suppose you need to ask yourself actually what is normal? But look, Tom, I've got the same view. It feels like credit spreads, whether it be non-conforming or prime, are starting to track back to, let's call it post historical levels. So, the way that we think about it is, you know, pricing for prime, I'd say normal levels, you know, anywhere between 110 to 130. I'm talking non-bank here. So, if you take prime as the benchmark, well, then add 20 to 25 basis points on top of that, and it probably gives you your range for non-conforming. So, if we say prime, you know, in a normal environment, you know, take the bookends as normal, call it 110 to 130, well, then really, you're talking kind of 135 to 155, I would say then to non-conforming. And once we have just obviously priced and announced a prime deal, we're also in the market with a non-conforming trade, a larger non-conforming trade, and once we'll probably bring currency into this trade, we are starting to see a tightening of spreads, even for non-conforming. Just the one thing I'd add to that is, on slide 11 of the investor preso, although those senior margins were a lot higher in 2023, we didn't issue much in 2023. When you look at that compared to previous years, you know, we had significant warehouse limits. We utilized warehouse where we could before repricing events to manage our cost of funds. And already with that prime deal we've done in August, of AUD 750 million, that outweighs the total prime issuance in 2023. So, in terms of the impact on tracker rate, that spike visually is large, but it's not as bad as it could have been if we had to issue a lot more in that year. And Tom, it's also helpful where, you know, let's be honest, you know, warehouse pricing really is based on where term levels are, you know, with kind of, you know, some cut timing in there. So, you know, it is helpful to see it come in. I would say where we—the peak of this particular cycle, we're getting to the top of that, where it becomes somewhat sub-economic. So, you know, I think the market coming in, especially coming in so quickly, certainly 20 basis points in the last four to six weeks, whilst it feels, you know, feels normal, that's, that's quite a big movement. You know, so the demand for, you know, the, the underlying asset, across all non-banks, just, just not really, you know, it's been very healthy over the last couple of weeks, and we expect that to continue. To be honest, it actually is helpful having some of the larger brands back in the market. You know, ING's trade, you know, at 110, was definitely helpful at resetting levels. And we expect that will be helpful for us when we are talking about pricing with our warehouse providers. As we're seeing cheaper spreads rolling off from earlier deals, you know, we're rolling, you know, we've got more expensive deals out there that are more recent. But in terms of just managing the pipeline, having the market coming in, resetting levels in term markets is definitely helpful when we're talking pricing w ith our warehouse providers. Yeah. Understood. Thanks for the answers, guys. Appreciate it. Yeah, Tom. You're welcome. Our next question will come from Jeff Cai with Jarden. You may now go ahead. Good morning, everyone. Just a question on mortgage book runoffs. That's deteriorated a little bit in the half. Just interested in your thoughts, that do you see the worst is over for runoffs? And to what extent has the 1% like-for-like refi from the major banks has had an impact on your book so far? So yes, I sincerely hope the worst is behind us, and it feels like it is. You know, we're looking at some of those grassroots, and if we're looking at the decisions other parties are making, you know, the major banks pulling back on cashback, you know, pulling out altogether. I think we'll see them, all the major banks exit, will be fully out of it over the next couple of months. I think the only outlier there, and maybe Suncorp still has something to do with that. We're also seeing, in fact, a normalization or banks moving back to more sustainable interest rate levels as well. So that's helpful. And you know, the other part that will probably take a little bit longer is just the pickup in overall activity as consumers get used to a higher interest rate environment. But obviously, you know, it feels like either we're at the peak, peak or nearing the peak of this tightening cycle. So that, that can only help with consumer confidence. I'd say that the one, are you referring to the 1% serviceability buffer for like-for-like refinance? Sorry, originations. Yes. Yes. Yeah. Look, not, not specifically. I don't think that kind of 1%, you know, dollar for dollar really is creating any more activity. I think it was fierce enough. You know, we were one of the earlier banks to lower our buffer to 2%, and it sounds like most of the non-banks have kind of followed suit. So I wouldn't call that out as necessarily having a heavy weighting on overall, you know, refinance activity or the aggressive nature of it. But, you know, it is helpful. It is pleasing to see some of the banks returning to more sustainable and normalized pricing. Got it. Just a question also on costs. I mean, it sounds like you've got pretty good visibility of costs given your cost out initiatives. Can you give us some color on how we should think about the cost outlook into 2024 and I guess, the range of outcomes in terms of how much lower it could be? Yeah, well, without putting dollar numbers to it, if we can look at the table on page seven, you can see the half-on-half operating expenses there and some of the decisions we made late in the first half will flow through to the second half. Look, we're expecting to get to be lower again in the first half of this year on OpEx. Okay, thank you. Our next question will come from Richard Wiles with Morgan Stanley. You may now go ahead. Good morning, Scott and Jason. I've got a couple of questions on the pricing in the mortgage market that you've referred to. We know it's improved a lot over the last few months. Can you talk about some of the recent trends? Are you continuing to see pricing improve in both the prime and specialist market? And can you also comment as to whether the lenders who aren't offering cash backs, particularly the major banks, whether they're competing more on rate to keep their business against those who are still offering the cash backs? Yeah, look, it's interesting. We're seeing the major banks move on two fronts. Obviously, the first one is to remove or reduce cashbacks, but they've actually been probably more visible in terms of increasing their new business pricing. So the majors have actually moved on both. They've moved new business pricing out, and they've also removed cashbacks. We're probably seeing the second-tier banks hold their interest rates. They appear to be more competitive. I'm talking just prime here, Wiles. They appear to be more competitive than the majors, so holding a few of the cashbacks, but they're also holding, you know, interest rates. But we are starting to see a trend of even that pricing moving out. And it may be that, you know, the second-tier banks are looking at this market, thinking, "Look, here's an opportunity for us to try and, you know, grow originations by holding rates and some of them holding cash backs." But every day, we seem to see a movement away from cash back or a movement up in price. And Richard, what was your first question? Oh, the first question was really about the recent pricing trends, so which I think you partly answered, but I know, we know rates are a lot better than they were back in sort of March, April. The question was really: Are they continuing to improve, you know, through July and August? And I get the sense your answer is yes. Yeah. It depends how you're asking improve. You ask a customer, they don't like which way they're heading. For us, in a competitive environment, well, then, obviously, we do. Yeah, and your comments on new business pricing, are you referring to both, simple mortgages, where there's a headline rate, as well as, the more common sort of discounting relevant to the standard variable rates that the majors have? Yeah, look, good question because it's sometimes hard to see through some of the carded rates. You don't really know what's happening in the background, but our broker partners, you know, are probably the best source of information for us, where, you know, the feedback we're getting is that they seem to be holding on a number of those carded rates. They may chase, you know, a particular deal because of the LVR or loan size, but as a whole, they seem to be holding firm on those higher rates as they look for a better return on investment. Okay, thank you. You're welcome. Once again, if you have a question, if you wish to ask a question, please press star then one on your telephone and wait for your name to be announced. Our next question will come from Marcus Barnard with Bell Potter. You may now go ahead. Yeah, morning, all. I've got a couple more questions on the asset finance business. Just, how big is the book? How big does the book need to get to before it's break even? And roughly, what's the term of the loans you're selling? I'm assuming it's about three years, but can you let us know? Yeah. So, the book's about AUD 650 million value in. It's profitable, it's a profitable business. Slight, very, very slight profit, small profit, but it's past break even when I allude to ROE drag, as you're building out the warehouses and the capital that you need to put in them, they just, it's just in advance of the returns that you get. So, it's just a, it's a timing drag on ROE that we expect to rectify. Your last question was term of products market. So, we have two key products in that, in that segment. The first one is auto and, and commercial equipment. Sorry, auto and equipment in the commercial space, sorry. And they're all, they're generally fixed products, three to five years, two to five years, generally three. Our other ones are secured business loans, which are secured against residential property, and they're probably more the 12 t18 months, but they can revolve, they can roll regularly, those loans. That's great. Thank you. Have you told us what sort of interest margin you charge over your cost of funding on that? I know you've given a sort of guide that it's on ROE, but what sort of rates do you charge on that business? We're targeting... I mean, there's various rates depending on the fixed rate term, and SBL is actually, the majority of that's variable. But look, we're targeting a NIM in the high twos in that business. Okay, that's helpful. Thank you. There are no further questions at this time. I'll now hand it back to Mr. McWilliam for closing remarks. Thank you. Look, I'd like to thank all of our shareholders for their continued support. As always, if you do have any further questions or you would like to catch up with Jason or myself for a one-to-one, you know, we're more than welcome to arrange that. Look, you know, on behalf of the board, again, we'd like to thank Scott and Jason. I'd like to thank you and your team, you know, for putting together a very, very clean set of numbers. Enjoy the rest of the day, everybody. Thanks, everyone. That does conclude our conference for today. Thank you for participating. You may now disconnect.