Bendigo and Adelaide Bank’s shares have tumbled over 17% as the bank, who is not taking the same path as arch rival Commonwealth Bank, by allowing loans to people building a house in a factory is now facing a major backlash from investors, despite this process now being labelled as the new “Modern methods of construction”.
Net profit tumbled 23 per cent to $282.3m in the quarter.
Bendigo Chief executive Richard Fennell said “Our earnings have been challenged both on the income and expense lines. Income was impacted by margin pressures, driven by higher funding costs to support accelerated lending growth. Expenses have also increased due to continued investment to deliver our transformation program.”
Internally Bendigo Bank account managers who process loans, are telling ChannelNews that they are “fed up with the Companies loan attitude” claiming they are knocking back the building of homes in factories”.
“Consumers want to build in a factory because it’s quicker” said one frustrated bank executive who did not want to be named.
“One manager said, “People are coming to us to invest in this new method of construction but the bank has refused to accept the processes involved in building this way, despite there being less risks”.
One occasion a customer who had no debt, and substantial assets was strung out for two months when he applied for a loan on a house set to be built in a factory, where multimillion dollar homes are now built, along with schools, hotels, and commercial properties.
The house had been designed by a leading architect, working in conjunction with Melbourne based builder Prebuilt and their engineers.
Loan account managers apologised at the time describing senior loan management as being “old fashioned and out of touch”.
24 hours later another non bank financial institution offered the custom a $5.2M line of credit at 0.25% above the Bendigo Bank proposed rate based on the asset to loan calculations that Bendigo had spent 3 months trying to come to grips with.
Prebuilt home being costructed, every build process is controlled.
Earlier today Bendigo and Adelaide Bank, saw their shares plunge today by 17% per cent to $11.19, after investors dumped the stock.
One bank insider said “The bank is so old fashioned that management cannot get their head around the processes involved in building a house in a factory. They still want to send out a quantity surveyor to measure each step of a build which in some cases can take two years.”
The funding of a build in a factory by a financial institution is easier and quicker with fewer payments over time as they are only making one claim for all of the trades working on site.
When each payment is due a quantity survey is sent to the factory to confirm the work.
With a normal build on site banks insist on inspecting every single element as well as invoices from a multitude of individual trades.
As for the NSW project proposed to Bendigo Bank the job came in on budget with only one overrun of $15,000 after asbestos was found in the 100 year old house that was being pulled down for a new waterfront residence.
Another advantage of factory build is that the ground works that involve the pulling down of a property and the preparation of a block for a prebuilt house are happening as the house is being built in a factory.
Companies such as Melbourne based Prebuilt who are now building multimillion dollar homes that are going into premium locations such as Byron Bay, Mosman and Clovelly as well as Toorak and along The Great Ocean Road in Victoria are able to better control trades and the quality of a finished job, a process that has not gone unnoticed by Commonwealth Bank who earlier this month announced that they will become the first bank to join prefabAUS, the peak body for Australia’s off-site construction industry.
Also announced were policy changes to simplify the home buying journey for consumers who want to invest in homes built in a factory.
Unlike a traditional build Companies such as Prebuilt are able to control the quality of materials, and the building process without trades “Tripping over each other” or simply not turning up.
Scheduling of when work has to be done is better managed in a factory over a building site that is open to the elements claims Prebuilt management.
At the Treasurer’s Investor Roundtable in November, banks and other investors committed to addressing barriers to financing modern methods of construction, in particular prefabricated housing.
Mike Vacy-Lyle, Group Executive Business Bank at CBA. said “Prefabricated construction is fast, efficient and can play a meaningful role in addressing Australia’s housing shortage. To date however, everything about construction has been created with traditional, on-site work in mind, and we need to rapidly reimagine how we support this industry to unlock scale and deliver more quality and sustainable homes to market sooner,” said Mike Vacy-Lyle, Group Executive Business Bank at CBA.
The move has led to Companies such as Harvey Norman Commercial and E&S picking up business from companies that are moving to building houses in factories.
Under the new policy – which is a first among the major banks – Commonwealth Bank will enable customers to access progress payments prior to the property being affixed to land, up to 60 per cent of the total contract price, rather than the customer having to fund up to 90 per cent of the upfront costs, which has previously been the case claims the Commonwealth Bank.
For the six months through to December 31, Bendigo posted cash earnings of $265.2m, a 1.1% fall on the prior corresponding period.
Scheduling of when work has to be done is better managed in a factory over a building site that is open to the elements claims Prebuilt management.
At the Treasurer’s Investor Roundtable in November, banks and other investors committed to addressing barriers to financing modern methods of construction, in particular prefabricated housing.
Mike Vacy-Lyle, said “Prefabricated construction is fast, efficient and can play a meaningful role in addressing Australia’s housing shortage. To date however, everything about construction has been created with traditional, on-site work in mind, and we need to rapidly reimagine how we support this industry to unlock scale and deliver more quality and sustainable homes to market sooner,” said Mike Vacy-Lyle, Group Executive Business Bank at CBA.
Under the new policy – which is a first among the major banks – Commonwealth Bank will enable customers to access progress payments prior to the property being affixed to land, up to 60 per cent of the total contract price, rather than the customer having to fund up to 90 per cent of the upfront costs, which has previously been the case claims the Commonwealth Bank.
