Challenger ready to step up in banking

John Kavanagh

Retirement income specialist Challenger is getting serious about its move into banking, reporting that it has received approval from APRA for its ADI subsidiary to start offering non-retail loans.

In an investor presentation yesterday, Challenger said it is looking at opportunities in SME lending, commercial real estate finance and corporate lending

Last year, Challenger acquired ADI MyLifeMyFinance from MyLifeMyMoney Superannuation Fund (formerly Catholic Super) for A$35 million.

At the time, it said its interest in acquiring an ADI licence was in being able to compete in the term deposit market – a significant asset class for Australian retirees.

Term deposits would complement Challenger’s existing term annuity offerings, which are sold by its life company.

Yesterday it said it expects to have a new term deposit range in the market this year.

Currently the bank has $182 million in deposits and a $320 million loan book. It is led by Mark Ellis and has 42 staff. Over the next few months it will change its name to Challenger Bank.

The bank will distribute direct to customers and also tap into Challenger’s retail adviser network, which is a similar approach taken by AMP with AMP Bank.

In yesterday’s briefing, Challenger also provided an update on its joint venture with US alternative asset manager Apollo Global Management.

In February, Challenger entered into a non-binding memorandum of understanding with Apollo, with the intention of establishing a joint venture to “build a leading non-bank lending business in Australia and New Zealand”.

Apollo has an 18 per cent shareholding in Challenger.

At the time the JV was announced, Challenger said the initiative was aimed at enhancing its retirement services offering, which will involve funding the lending business through income-generating managed funds.

Yesterday it said the parties were building their lending platform. It said the strengths of the partnership included Challenger’s proven origination record and Apollo’s best-in-class origination platform and global reach.

The group’s aim is to have a range of yield-based income products extending from lifetime annuities and term deposits to a credit income fund, a private lending fund and a private lending opportunities fund at the high-risk, high-return end of the spectrum.