Mortgage Choice’s loan book continues to run off, as high levels of refinancing and higher repayments offset a pick-up in settlements during the December half.

The broker franchise group’s inability to increase the size of its loan book, and hence its trail commission income, has become chronic. The book has not grown since 2018.

Mortgage Choice reported 21 per cent growth in settlements to A$6.1 billion during half, compared with the previous corresponding period. However, the size of the loan book fell from $54.3 billion in the December half 2019 to $54.1 billion in the latest half.

Origination commission increased 18 per cent to $36.4 million, while trail commission fell 2 per cent to $49.1 million. After payments to brokers, net core commission fell 1 per cent to $21 million.

Operating expenses of $15.6 million were down 2 per cent on the previous corresponding period.

The company reported a 26 per cent increase in net profit to $5 million, but after adjusting for the carrying value of future trail commissions the cash profit was up 1 per cent to $5.6 million.

The company said it expects settlement activity to keep growing, while run-offs will settle down as economic activity resumes.

The company’s financial planning division, FinChoice, continues to disappoint, with funds under administration increasing marginally from $1.1 billion to $1.2 billion and a loss of $238,000.

The company is also struggling to grow its franchise network. Despite recruiting 11 new brokers to greenfields franchises, the network only grew from 385 to 386. The FinChoice network was unchanged at 33.

The company has made “recruitment, regeneration and retention of franchise talent” a priority for this year.