A debate between two Crikey subscribers has created this interesting piece on the financial skeletons of Aussie Home Loans boss John Symond.

A reader writes:

“Another one for your list with an interesting story:

John Symond the Aussie Home Loans founder, MD and Parrot mate was well and truly on the brink of financial disaster back in the very early nineties following the collapse of his Commercial Mortgage broking firm Mortgage Acceptance Corporation. This little outfit was famous for its very attractive and tax effective race horse syndication lending deals (one of which some readers may recall led to the very public downfall of a few partners in the Sydney Office of US multi-national law firm Baker & McKenzie).

The irony in this is that “Aussie John” was only saved from complete financial destruction ( ie bankruptcy) by the generosity of a few banks who refused to go for the jugular and cut a deal to leave him with some dignity and a bit of spare change. This was on the basis of the old banking adage “If you owe the bank $20,000 its your problem but if you owe the bank $20,000,000 it’s their problem”.

With the spare change, “Aussie John” took a trip to the US and discovered how popular non-bank originated home lending was over there. When he returned he set up Aussie Home Loans which has established its whole business strategy on the back of relentlessly bashing the banks.

The Aussie Home Loans business is now huge and has recently signed a naming rights deal whereby it gets to call the Sin City Football Stadium “Aussie Stadium” for 5years. Bet a few of the bankers in their corporate boxes at the rugger over the coming months will love that.

Just to show how a great spin can be put on financial failure, here is an extract from Aussie John’s Resume (taken from a Lebanese Community Speech which he gave on Australia Day 2001 and displayed on www.ualm.org.au)

John Symond was born near Goulburn in NSW, he studied one year of dentistry, two years of Arts and then Law. He established one of Sydney’s biggest suburban legal practices. In 1984 he set up his own financial services group which ran into tragic times causing him a loss of ten million dollars in assets and a three million dollar debt, still he refused to go bankrupt. John was financially broke at that time, but he was never short of determination and will to put up a fight against the unfair domination of banks .So he came up with a secret formula that could be summed up in his saying “Unless you do something better than your competitors you won’t stand out” and thus in 1992 John Symond established Aussie Home Loans and he has since built the company to now to be Australia’s sixth largest home lender and the largest non-bank lender. Aussie Home Loan’s loan portfolio is now worth more than $9 billion , with the average monthly loan volume worth about $250 million and 120,000 customers in both city and country areas.

Love the references to “tragic times” and “refusing to go bankrupt”. It is also interesting that the focus is on Aussie John losing “ten million dollars in assets”. A few of the banks and other creditors may find that quite amusing.

Cheers, Embittered Ex-Banker

IN DEFENCE OF AUSSIE JOHN SYMONDS

Hey Stephen,

I have known Aussie Home Loans boss John Symond for many years and would like to clarify a couple of points in yesterday’s email by the embittered banker.

He was by 1989 one of Australia’s largest originator of mortgages, much the same business model as he does now. This was well in advance of 1992 when he went to the USA as reported in the story [which I am sure he did as he did every year, to the mortgage bankers annual event]. I recall, back in those days when this amount in that industry was really something, he was the first to reach A$100m of mortgages under management. He was brought undone – as many good entrepreneurs were in early 1990s by the huge credit squeeze of the banks on everybody at that time. Let’s face it the financial system nearly lost Westpac and did lose others, banks were desperate!

It was however the bank in Adelaide that was the trigger – State Bank of South Australia subsidiary Beneficial Finance. It went bust and brought down its clients to whom it was obligated to provide funding. Bottom line is that Aussie John, and I having known his business deals intimately during all that period, fought through an horrific time – and yes, probably played dirty at some stages to survive – although I hasten to add, not illegal. And knowing how hard he and his then wife [with whom he sadly also split under the pressure although they remain good friends] worked to get back on top, he deserves all the money and accolades he has got. Let’s keep in mind, Australian mum’s and dad’s today save A$4b per annum on interest to the banks on their mortgages because of his initiative. Not a bad turn for the average guy huh! What’s your correspondent done lately? Credit where credit is due.

Subscriber 29

Embittered bankers responds again

Stephen,

I see that my earlier piece has prompted a spirited defence of Aussie John by a subscriber who was at least decent enough to declare his personal interest. Clearly I have offended the “Don’t mention the War” ethos which is alive and well amongst some Sin City entrepreneurs.

Just a couple of points about the response which raise some wider issues:

* My previous piece was written in response to a request for stories of business failures who have returned to the business limelight. Now, regardless of the spin which you put on Aussie John’s little blip in the early 90’s, the fact is, he was at the helm of a failed business. The reasons for the failure may be very compelling but it was a failure nonetheless and money was lost (but not by “mums and dads” but rather by evil banks and state governments who were reckless with it anyway so we will ignore that). If you discounted all business failures which were justifiable in the opinion of management then our courts would be empty as I can’t seem to recall too many CEO’s and directors of failed businesses coming out, putting their hands up and saying “Yeh, I made some bad business decisions, it was all my fault, here is a refund of my salary and share options, please hand me the regimental pistol and I will go into the next room and do the proper thing” (just have a look at the NAB Home Side debacle). By definition, any business failure involves elements of bad luck combined with bad judgment (in varying proportions) but there are still a lot of financial and other organisations who were around in the early 90’s so maybe you make your own luck to some extent.

*Aussie John’s saving grace was the fact that he was not at the helm of a publicly listed company and that the losses suffered when his company collapsed were a small deficit in the petty cash tin when taken in the context of the whole State Bank of South Australia debacle. It was also nowhere near as exciting and newsworthy (even on a slow news day in Adelaide) as John Friedrich’s National Council with its non-existent helicopters, bizarre suicides etc.

* One of the main themes of my earlier piece was that there was a certain amount or irony in the fact that Aussie John came back to bite the very people who had let him off the hook. Now, I am no great fan of the banks and would not use Aussie Home Loans, but nonetheless, the pressure which Aussie John brought to bear on the banks provided flow on benefits to home loan customers of all banks by making the banks reconsider their very cosy monopoly pricing structure. Having worked in the banking industry at the time I can well recall how Aussie John’s outfit went from being regarded as a fly by night suburban outfit which would be gone within months to a serious competitor who to some degree drove the home lending agenda for the majors. It is very ironic when the hunted becomes the hunter.

* Is your correspondent seriously suggesting that we should simply ignore the past and never mention the prior sins of every resurrected businessman in the interests of giving “credit where credit is due” in the context of their current business? If only life was so easy, no criminal records, no credit checks, resumes with 20 year gaps in them, Oh and Russell Goward how would you like to manage my $20 million super fund for me? Whether we like it or not, past business failures are relevant and some would even argue that the public have a right to know in circumstances where business are promoting new companies, involved in the financial industry etc (that would make some prospectuses pretty interesting reading). It is a tribute to this great country of ours and its very liberal insolvency and corporations laws that people are able to rise from the ashes of a collapsed company so quickly and re-establish their business careers with so little collateral damage (thank you ASIC). Disclosure seems to me to be a small price to pay for this fundamental freedom.

Modesty forbids your correspondent from responding to the request that he mention his recent achievements, however, let me just say that in my spare time I have been known to drive a few battlers to medical appointments in my Ferrari with the Parrot on the radio in full stereo.

This is my final mention of the War as some bloke called Bondy is at the door asking me to invest some money with him.

Crikey Subscriber (and George Orwell Fan)

ends

Join in subscribers

If anyone else has something constructive to add to this debate then send in your emails. Consumer banking crusader Peter Mair has sent in the following:

Celebrate Aussie John’s achievements

Stephen,

I do not know Aussie John in any meannigful sense but a couple of years back I was most pleased to see that he was given a ‘gong’ at the ‘banker of the year’ presentations hosted by Sydney Banker magazine (Peter Charlton).

Except for the quantity of ore required, I would propose a life size statue of AJ be erected in Sydney. He single handedly destroyed one of the banks’ great rackets of the early 1990s — the overcharging of interest on housing loans of some 2% pa. (To ‘pay’ for the losses to Bond and Skase and Goldberg etc).

It must be galling to AJ that this achievement is now appropriated by the ‘authorities’; as an example of ‘competition’ that brought banks into line — without a word to acknowledge that the task for AJ was made harder by those same authorities being ‘careful’ about permitting such an innovation. It was a copied US ‘innovation’ with effects very similiar to the long lagged copying of the ‘cash management trust’ idea by foreign banks in Australia in the early 1980s — the base for Macquarie Bank et al.

AJ deserves a strong vote of thanks from the Australian community.

Peter Mair

ends

Not really a true battler

I am often amused to read of John Symonds “battler” beginnings. The battler from a poor family who attended Homebush High. My recollection as another Homebush boy is that John’s family lived in the best house on The Boulevarde in Strathfield and owned Symonds Arcade in Strathfield – a substantial retail and commercial complex. Hardly a battler!

Anon

ends

The Sunday Telegraph also leapt into the debate last week with this piece.

Sunday Telegraph piece on Aussie John

By Anna Fenech

Sunday, February 17

JOHN Symond takes greater care than most to avoid being run over by a bus because in a crowded home loan market he has staked a claim by making himself his company’s brand. Ten years ago (almost to the day), The Sunday Telegraph announced the launch of Aussie Home Loans, in a Page One exclusive with a slogan “we’ll come to you”, heralding that the new upstart “would be open seven days a week” to visit customers in their home to discuss loan arrangements through an army of new mobile lenders.

Today, the company has a $9 billion loan portfolio, 250 mobile lenders, 20 branches and 120,000 customers; while in a controversial sponsorship deal worth up to two million dollars a year over five years, consummate marketer Symond has renamed iconic Sydney Football Stadium with his brand. He also aims to list his business on the sharemarket within two years.

Every move Symond makes appears to be laced with symbolism. The stadium represents the “irritating” image of strength that shows up time and time again in Aussie’s surveys asking people why they still overwhelmingly go to the banks for home loans.

Mortage originators like Aussie, Wizard, and RAMS are estimated to hold only 13 per cent of a $200 billion market.

“The number one reason why people are still with the banks is this image of strength and security. There’s this idea that we may not be here tomorrow,” says Symond. He thinks the stadium will change that perception.

In March 2000, Aussie’s headquarters moved from Parramatta to the Sydney CBD. “We had grown up and wanted to be near where the big boys are.”

And for himself, Symond has bought harbourside land in Port Piper on which to build his own Australian dream.

In 1992 he was playing for much higher stakes than the battler to whom he appealed. The former Homebush High boy, made a deal with his then creditors to avoid bankruptcy giving him three years to repay three million dollars in debt from a failed business venture. His family home had been sold and his marriage was over.

“I was down on the canvas and was wondering how I would come up with the money,” he says.

His 15 years in the law and conveyancing instilled in him a dislike of banks, while a well established non-bank lender market in the US told him there was a gap in the market.

“Consumers here had no say, there was no competition, the service was poor, yet the banks had the highest profit margins in the industrialised world,” says Symond.

A family loan of $10,000 helped him fit out offices in Parramatta which he got on a two-year rent free deal.

It took him 18 months to bring together a deal that institutions would back, including a funder for the loans, and a mortage insurer.

The hook for the public was the introduction of mobile lenders who came to people’s homes “to explain things properly”, says Symond. His interest rate was struck at half a per cent below the standard variable rate. Aussie also ended discrimination against investors by offering the same rate to both investors and owner occupiers.

He then proceeded to become a high profile critic of the banks, assisted by the media. “The media were very supportive of me and really built my profile,” he says.

“By 1997, after five years in operation, there were other players like us in the market, and the banks were losing customers in droves,” he says.

“Finally Commonwealth Bank lowered its standard variable rates to match non-bank loans.”

Since then, Symond concedes mortgage originators have found it tough to compete on interest rates alone (see table) because competition saw margins shrink. “The differentiator now is service and the service fees banks charge on home loans.” Brand recognition is also important, he says.

But he considers his major new battleground to be a growing mortgage broker market in which lenders (mainly banks) pay brokers commissions for generating new business for them.

Peter Fray

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