More than a specialist lender

Bluestone's national head of sales and marketing Royden D’Vaz explains what's on the horizon for the non-bank 

To say the last 12 months have been important for Bluestone is somewhat of an understatement.

From the non-bank’s acquisition by Cerberus Capital Management to its activity in the near prime space, the business has undergone somewhat of a transformation.

With a renewed focus on near prime loans, applications and settlements of the clear-credit product Crystal Blue increased 255% in the six months to October 2018, when compared to the previous six months.

In FY19 year to date, Crystal Blue has accounted for 40% of all Bluestone’s settled loans – up from 17% in FY18 – meaning that near prime now outperforms uptake of credit-impaired products by a significant stretch.

Securitisations have also been strong, with the first transaction of 2019 taking place in April. At $400m it was Bluestone’s first deal to be made available to European investors.

Building on the success, the non-bank most recently expanded its APAC operations by welcoming additional team members and moving into new, bigger offices across three key APAC locations, Sydney, Auckland and Manila.

“Although the overall market has been down, at Bluestone we’ve had a fantastic year as our results show, and our settlements have increased by 69%,” says Royden D’Vaz, Bluestone’s national head of sales.

Another defining moment for Bluestone was its re-entry to New Zealand at the end of 2017.

While the geographic proximity makes such an expansion a no-brainer, the opportunities are what really sets the market apart.

For example, New Zealand’s aggregation space is highly concentrated.

Seeing the opportunity there, Bluestone this year partnered with Loan Market/NZFSG – the largest aggregator in the country with a majority market share – to offer a series of exclusive products.

These include a white label loan, the Select Home Loan, that went live in early June.

The rest of the product suite will also enjoy a facelift, with new names and terms expected to be rolled out in the second half of the 2020 financial year.

“We are a leading non-bank with competitive rates...There is a lot more to Bluestone today than there was 12 months ago” Royden D’Vaz, national head of sales, Bluestone

“The business has set and achieved some important goals this year, with the number one being the release of our white label product into the New Zealand market,” says D’Vaz.

Predominantly, Bluestone’s success has been attributable to internal drive, but there have been market forces at play too, not least a federal election, the royal commission’s final report, and a readjustment of appetite across the banks, which in itself left a void to be filled.

However, while momentum is strong, D’Vaz has a new focus for this year: to remind the industry that there is more to the non-bank lender than brokers and borrowers assume.

“Bluestone is changing. It used to be that brokers would only consider Bluestone after our competitors due to the brand’s legacy being linked to servicing customers with impairment, arrears or bankruptcy.

Now, however, upwards of 80% of our volume is in the clear-credit, near prime space – in the past this was never the case,” D’Vaz says.

“We are a leading non-bank with competitive rates, and we are always innovating. There is a lot more to Bluestone today than there was 12 months ago, and we have even bigger plans for next year.”

New-look loans

Across the four products available in Australia – Clean Slate, Business Easy, Lite Blue and Crystal Blue – Bluestone now offers new discounted fixed rates, starting at 3.84%.

Since mid-April, new borrowers have been able to access rate reductions across all loan products of 20 basis points for two-year fixed term loans and 30 basis points for three-year fixed term loans.

The update went hand in hand with policy updates for selfemployed borrowers who take out a Crystal Blue loan.

This means that those without traditional income verification documents can now prove serviceability with six months of business bank statements and either six months’ BAS or an accountant’s letter.

The policy update is one of hundreds witnessed across the market in recent months as the industry has come to terms with new competition dynamics.

Additionally, the mainstream media coverage of bank and non-bank lenders, and the brokers who drive their business, has also inspired consumers to take greater control of their financial circumstances. According to D’Vaz, the typical customer in post-royal commission, post-election Australia today not only shops around for the most competitive rate; they also shop around for their broker.

“Brokers must continue to keep up to date with what is happening. Customers are getting a lot savvier and many are far more aware of what is happening in the market,” D’Vaz says.

“Customer sentiment is changing. They aren’t just shopping between lenders; they are shopping between brokers too. From a broker perspective, it is important to have some very good structures and strategies in place to counter that.” More than 90% of Bluestone’s business is originated through the broker channel, and with big plans and even bigger targets for the second half of this year and beyond, D’Vaz says business is on the right track.

“Now that we’ve executed our first priority, it’s time to think about the next big thing. Our next priority is ensuring our proposition remains relevant in the market, that it resonates with brokers, and that we continue to evolve to help our broker partners help more borrowers,” D’Vaz says.

Bright future

While it will take some work to beat 2018’s figures, the current year is already shaping up to be a strong one, and D’Vaz has big plans through to 2020 and beyond.

If these growth plans are exceeded, there could even be another office move on the cards. What is more concerning is the dramatic and constant shifts in the market.

Urging brokers to keep a positive mindset, D’Vaz says, “A lot has been happening and it is a lot to keep ahead of, but I think brokers have to concentrate on their core business and give diversification a shot.

It’s something to consider without forgetting what their core business is.”

The market will continue to fluctuate, and the loans offered across it will continue to adapt. However, the overriding takeaway for brokers is that change happens, and keeping ahead of it may be difficult, but knowing each lender’s specialty in a shifting marketplace is the way to stand out.

“Brokers need to be nimble and agile enough to respond to the changing conditions. As much as they can, they need to get some professional development, whether it’s through coaches or mentors or attending some of the many sessions run by their aggregators or other lenders, such as webinars, training sessions or workshops,” D’Vaz says.

The final piece of the puzzle is how borrower behaviour will influence the broker and lending space. While D’Vaz says conditions are ripe for an influx of investors, there are plenty of other factors to consider too, including proposed changes for first home buyers and the recent RBA rate cut.

Yet one of the biggest takeaways from 2018 is that borrowers no longer fit the square holes lenders put them in.

Research from Morgan Stanley shows that the non-bank sector is growing at twice the rate of the big four majors, and the near prime space is also booming, driven by everything from bank policies to the gig economy. For Bluestone, a strong demand for credit will ensure business remains equally robust, and, as borrowers and brokers realise more of the competitive advantages of the non-bank sector, the stage is set for another record year.