National Australia Bank Nabs Challenger’s Mortgage Ops

The trend of larger financial institutions gobbling up other firms or divisions of their business to form conglomerate mortgage-lending entities — similar to Branch Bank and Trust‘s (BBT) recent takeover of Colonial Bank‘s assets — is not isolated to US institutions. National Australia Bank agreed to acquire mortgage operation segments of Sydney-based Challenger Financial Services Group. National Australia takes on the mortgage distribution and multi-brand lending businesses. The firm will pay A$385m (US$316.8m) for A$4bn of residential mortgages held in warehousing. The deal will add earnings to National Australia’s balance sheet and expand its mortgage market presence in the land down under. It also signals Challenger’s move to update its business focus away from residential mortgages and toward opportunities in the retirement income and investment management markets, CEO Dominic Stevens said. “Whilst we are very proud of our history and performance within the mortgage industry, the changing dynamics of that market has meant that the significant capital tied up in the business will be better refocused into growth opportunities within the organisation’s other divisions,” Stevens said in a corporate statement (which can be downloaded here). The acquisition by National Australia is expected to close by Oct. 31, 2009 and includes a 41% stake in the listed mortgage origination company, Homeloans. At the same time, Challenger Life Company paid A$575m for A$11bn of term funded mortgages. Challenger Financial Services said it will inject A$200m into Challenger Life to support the asset purchase. Challenger said in the statement it expects pre-tax earnings of A$135m from its Mortgage Management for the full year ended June 30 2009 after widened asset margins and increased business with mortgage broker platforms. Write to Diana Golobay.