by kjgg1104 | Feb 9, 2008 | Industry Interest, Media, Media Coverage
08 February 2008 – Desné Masie
Integer is a new player in the mortgage space dominated by the commercial banks and SA Home Loans.
Its main feature is the way it combines transactional features with home loans.
CEO Simon Stockley says: “The product starts its life as a mortgage account. We are encouraging people with mortgages to switch to this product.” If the bond is in your name, there are no registration fees and Integer’s attorneys will negotiate a 50% discount on bond fees for you. There is an initiation fee of R2950.
The Integer model enables a salary to be paid into a bond account. What does this mean and how does it work out?
Savings can be significant over time. Most SA consumers are paying off a loan at the prime rate of 14,5%. According to Integer, assuming a R500000 bond payable over 20 years, and a monthly salary of R14750, as much as R55829 can be saved over 13 months.
Homeowners can borrow up to 85% of the value of their homes. Integer has found people are borrowing about 70%. Like similar models, it can be seen as a line of revolving credit for your home.
Stockley is aware that the concept of a single banking account is not new. FNB offers the One Account, which allows consumers to consolidate their homes as a cheque account, overdraft, personal loan and home loan.
The difference, claims Stockley, is flexibility: “We have taken the general principles of a mortgage and tweaked them a bit. With the One Account, you have to put your whole salary into it. Here you can split your salary between your cheque accounts and Integer.” Some debts can come off Integer and others off a cheque account. This is because “people would rather have a small positive balance on their transactional accounts. It is quite scary to see a negative balance of R900000 on your account.”
One of Integer’s features allows an additional credit loading of 1% of the value of a home onto a debit card, in addition to the maximum loan of 85%. This can be paid back at a lower rate than an overdraft, because payments would be made at the same rate as the Integer home loan.
The concept has apparently worked in developed markets. In SA it has been offered in the private banking space, but, says Stockley, “not really in the mass-banked sector. I suppose it is not offered for good reason. Banks make money from the inefficiencies of their products.”
Is it a good time to launch yet another mortgage product, when the global housing market is becoming depressed?
Absolute house prices have also come down in SA and made it a buyer’s market.
Says Stockley: “It’s a good time for a new product. But we can’t compete on product alone, so we will have to compete with our service and fees, especially on the rate we lend to customers. Banks advertise the worst possible rate to consumers.” Most people don’t realise you can negotiate your lending rate down from prime.
A lot of South Africans started to think about unlocking the equity in their homes during the property price hike by increasing the size of their mortgages.
How is an independent player like Integer funding this business? Unlike banks, Integer does not take deposits. Banks use retail deposits to fund their loans and mortgages.
Stockley responds that “we are funded by securitisation in the capital market. This is a mechanism I pioneered at SA Home Loans. We are looking to securitise towards the end of this year, as we are still in the ramping-up stage and building up our loan portfolio.”
Is this not a business risk, with the global market tightening as a result of the subprime meltdown? Stockley believes the SA capital market is still sound and interested in this product: “But there is still a risk that when we need to securitise, we might not be able to.”
He says Integer will have to look to alternative sources of funding should it not be in a position to securitise. “We could (potentially) access Investec’s balance sheet on a short-term basis to ride out any disruptions to the capital markets,” he says, and cites the example of Northern Rock. “If you look at the real casualties of the subprime, it is those specialist lenders without bank shareholders that have been worst hit.”
Integer funds its loan portfolio through securitisation, but the venture capital for the loan portfolio has been provided by Investec and Purple Capital.
Stockley says: “Since we launched in October, we have had applications in the sum of about R775m, but about 40% of the projected gross applications will be registered, which is about R300m.
“But this is a patient sort of business and definitely a long-term investment for Investec and Purple. It’s going to take about three to five years for this business to become profitable.”
The actual mortgage switches can take anything from four to six months. This means consumers also have to exercise patience before deriving benefit. For example, commercial banks will make clients wait for up to three months or pay three months’ instalments, before they effect a switch.
Mark Barnes, CE of Purple Capital, is also chairman of Integer: “The reason we are also on the board is that our cost of capital is higher than other financial institutions, so we want to be involved. This is a good entrepreneurial venture with good professional skills. We expect a good return.”
by kjgg1104 | Oct 22, 2007 | Industry Interest, Media, Media Coverage, Uncategorized
EMBARGOED: 07.00AM MONDAY 1 OCTOBER
MEDIA RELEASE FROM INTEGER
NEW HOME LOAN PROVIDER LAUNCHED
A new home loan provider was launched today with the stated aim of introducing further competition into the South African home loans market which is currently dominated by the big four banks.
The new company, Integer, led by Simon Stockley who founded SA Home Loans in 1999, has as its investors, Investec and Purple Capital, the listed financial services group.
‘We are aiming to replicate what has happened in many international markets by challenging the status quo with a product that is flexible, very competitive on price and provides customers with a service that is personal, easy and fast,’ said Stockley. ‘In a mortgage market characterized by poor service and high costs, we believe that the market is crying out for a fresh option. We are looking for South Africans who are tired of poor service, high interest rate charges and fees.”
The strong points of differentiation for Integer will be service, product, innovation and price. Integer believe that the average South African home buyer has never experienced the fast, professional and personalized service they deserve when committing themselves to probably the largest single investment they will make in their lives.
Craig Beney, Managing Director said, “Integer’s offering amounts to a range of service and product offerings, usually only made available to private bank clients, but we are for the first time extending this range of product offerings to the mass retail market. Thanks to our custom built IT platform, customers don’t have to adapt and search for features. It comes in a personally tailored package. Our turnaround times will be significantly faster than the current average of 5 to 7 days that characterizes the industry. We aim to achieve a full credit approval, including external valuation, within 48 hours. We will be targeting both new and switch clients.”
Integer offers a standard 240 month amortized home loan with two payment variations. Loans will be offered up to 85% of the home value, and up to an amount of R2,5 m. All Integer home loans come with a standard one percent credit facility on a Visa debit card at their home loan rate, and free internet banking.
Financing for Integer’s loan book will be provided via securitization in the capital markets, a technique pioneered in South Africa by Stockley and SA Home Loans. The South African securitization market has grown exponentially over the last seven years with total issuances exceeding R86.7 bn in August 2007. Stockley says in countries such as the UK and Australia, the use of securitization has allowed the home loan market to evolve to a point where banks now only account for approximately 54% of the mortgage market in the UK, and approximately 75% in Australia. “With the South African debt markets now rated as the 6th most liquid in the world (source:BIS) and the relaxation of exchange controls allowing offshore funding, there is an opportunity for new entrants into the home loan market, increasing competition and benefiting home buyers and owners.
“We do not see the current US sub prime meltdown as a problem for launch,” said Stockley, “but rather as an opportunity. Once the dust has settled, asset managers will once again be seeking quality mortgage assets to fund and we are targeting the very best underlying collateral. Also, an element of caution is not misplaced in the quality of the initial book insofar as that impacts on its rating and the ultimate cost of capital funding.”
For further information please contact:
FD Beachhead
Nic Bennett 0766 877429 / nic.bennett@fd.com
Jean Dennis 021 487 9000 / jean.dennis@fd.com
Integer
Simon Stockley, CEO 0832760068 / simon.stockley@integer.co.za
by kjgg1104 | Oct 22, 2007 | Industry Interest, Media, Media Coverage, Uncategorized
Graduating with a Bachelor of Law degree in 1985 Simon Stockley, after serving articles of clerkship, left the profession to pursue an independent career in property development and marketing, establishing and managing the Townhouse Group of Companies over a ten-year period.
In 1998 he began researching alternative funding mechanisms for the South African mortgage market and in January 1999, in association with venture capitalists, established South African Homeloans, South Africa’s first discount home loan specialist and non-bank mortgage lender. He was appointed the company’s first Chief Executive Officer in 2000, a position he held until his resignation in October 2004. Simon was instrumental in raising initial venture capital required in order to establish the enterprise and subsequently negotiated equity participation in the company with The International Finance Corporation, JP Morgan and Standard Bank.
During his tenure as CEO of SA Home Loans, the Company grew its mortgage portfolio from a zero base to in excess of R20 billion ($3.5 billion) and, at the time of his resignation, the business was taking on over 2000 clients per month, claiming a 15% market share of South Africa’s highly competitive mortgage market.
Simon has received numerous awards in recognition of his management and, particularly, his marketing expertise, including The Institute of Marketing Managers’ KwaZulu Natal Marketing Man of the Year Award and The British Airways/Natal Mercury Business Excellence Award.
He has spoken widely, both locally and internationally and has written numerous articles on “securitisation”. He led the team which brought South Africa’s first residential mortgage backed security issue (Thekweni 1) to the market in November 2001 and was, subsequent to this issue, intimately involved in the structuring and marketing of a further three Thekwini bond portfolios. The Thekwini securitisation program was the first private sector residential mortgage backed security issuance outside of Europe, Australia, and the USA and represents an international benchmark for Emerging Markets. Simon is acknowledged as the pioneer of South Africa’s now burgeoning securitisation industry.
Simon consulted exclusively to SA Home Loans for a year subsequent to his resignation and has, since November 2005, been retained by Kingdom Installment as an advisor to the Board. Kingdom Installment is a specialist loan finance company operating in the Kingdom of Saudi Arabia. During this period, Simon successfully launched the Gulf’s first Sharia compliant mortgage securitisation program (KSA MBS) and executed a strategic alliance on behalf of the Company with Arab National Bank and the International Finance Corporation, in terms of which KIC will be recapitalised in excess of $550 million, making it the largest specialist home loan finance company operating in the GCC.
In March 2007, Simon merged his investment and advisory activities under Catalis (Pty) Ltd, through which entity he now consults to a wide range of both national and international clients. Catalis has recently acquired a private equity stake in Integer, a mortgage start-up operation in Cape Town, where Simon is currently deployed as CEO, responsible for launching the company.
In addition to Simon’s executive responsibilities he acts as Non–Executive Chairman to a specialist mortgage finance company in Ghana, Ghana Home Loans, and is also the Non-Executive Vice Chairman of Diamond Mortgages, a Nigerian based mortgage lender.
