National Australia Bank plans to buy Challenger Financial Services' mortgage business, along with A$4 billion ($3.2 billion) of residential mortgages held in warehousing for A$385 million.

According to press reports, with the securitization market effectively shut, Challenger struggled to fund its mortgage business. The A$4 billion of mortgages it is selling to NAB were awaiting securitization.

NAB said that the deal will boost its mortgages under administration by A$110 billion. 

“Challenger is looking forward to taking advantage of significant strategic opportunities that exist in the retirement income and investment management markets,” said Challenger CEO Dominic Stevens. “Whilst we are very proud of our history and performance within the mortgage industry, the changing dynamics of that market has meant that the significant capital tied up in the business will be better refocused into growth opportunities within the organization’s other divisions.”

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