New kid offers lower-cost loans

Integer is headed by Simon Stockley, who pioneered securitisation to finance home loan books when he founded South African Home Loans (SAHL) in 1999.

Integer's investment partners are listed financial services groups Investec and Purple Capital. Transactional banking facilities will be provided by the newly named Bidvest Bank, and Absa will make its branches available for deposits and other transactions.

To an extent Stockley will be replicating what he did eight years ago with SAHL (his restraint of trade recently ended) by parcelling together good-quality mortgage loans and selling these into local and international capital markets to raise cheaper home loan financing.

All-in-one package

"What's different this time, though, is that we won't just be offering home loans. Clients will also have a credit facility on a Visa debit card and free internet banking. It's like the offering a client would get at a private bank, but it's aimed at the mass retail market."

Stockley has been working on the idea for two years, during which time he says customised technology systems have been developed at Integer. "That will be one of our points of differentiation. Our service will be quick and flexible, and able to customise banking products for clients."

'Competing on price'

He adds that Integer's total package will not necessarily be the cheapest on the market, but will compete with the large banks on price. "You can't shy away from price, it's important to consumers. Where we will be adding value is in our service and innovative products." For instance, the credit facility on the Visa card will attract interest charges at the client's home loan rate rather than much higher credit card rates.

"We're not setting out to rock the boat, but inevitably we will. I believe clients get terrible service from the large banks that dominate the industry - they are tired, indifferent, and a bit boring. We're going to be a lot funkier, a bit different, and introduce some choice to the market," Stockley says.

Integer will offer standard 20-year amortised home loans with two payment variations. Loans will be for 85% of the value of the home, and up to an amount of R2.5m.

Since Stockley introduced the first residential mortgage backed security issue to capital markets in 2001, securitisation has grown rapidly as a form of finance, especially amongst private banks and vehicle finance banks. The institutional appetite for securitisation issues has increased partly due to the relatively few new gilt issues by government.

Though not a bank, the arrival of Integer coincides with a revival of smaller banks since the credit scare in 2002. Bidvest Bank will now be expanding into the retail market as a service provider for Integer clients, and Grindrod Bank has recently moved into the retail market by offering a smart card payroll system.

- Fin24