Analysis: Return of the Red Star

NAB’s shock announcement last week of a major rebranding and the reintroduction of first-year trail commissions marks a significant milestone for the lender.

By doing away with its Homeside-branded mortgages – a relic of its 1992 acquisition of BNZ – NAB has boldly marked its competitive broker-originated offering with a Red Star.

The Homeside brand has always created a level of confusion for brokers selling the product to their end customer, NAB general manager of broker distribution Steve Kane said.

“Brokers have always had to explain that Homeside is owned by NAB, which added that extra layer of difficulty in terms of the overall conversation,” Mr Kane told Mortgage Business.

While the rebranding exercise will arguably make NAB’s loans easier to sell, the reintroduction of first-year trail commissions are a salutation from NAB for the ongoing relationships brokers foster with their clients.

Mr Kane said the broker fraternity is “a serious business partner” for the bank, with one in two loans now being written through the third party.

“The reintroduction of first-year trail is recognition of the work that brokers do in managing that customer beyond just the initial transaction,” Mr Kane said.

“Part of the legislative piece around NCCP responsible lending was really that brokers and anyone providing credit needs to ensure they are looking beyond the initial transaction.

“So it was recognition of the role that brokers will play in managing the relationship and it’s also recognition, of course, in the value they create for the bank.”

Trailing commissions are paid to ensure the customer receives an ongoing service proposition from their broker.

“We recognise that through our ramped trail as well,” Mr Kane said. “We pay an increased trail amount over the life of the customer relationship, not necessarily the loan relationship.”

With over 25 years in financial services, a majority of which has been spent in mortgages and the third-party space, Mr Kane has seen the broker market experience significant growth.

Mr Kane was previously chief executive of aggregation group FAST, part of Challenger Mortgage Management, which was acquired by NAB in 2009.

The acquisition included aggregation platforms FAST, PLAN and Choice, which together account for 29 per cent of brokers in the market.

“With the purchase of the Challenger Mortgage Management business, NAB recognised the value contribution and the significant market presence brokers were going to have in the home loan market,” Mr Kane said.

“That is the reason we have entered into the market in the way we have.

“The transition from my personal perspective has been seamless: I have been involved in financial services for over 25 years and in the mortgage and third-party market for the last 20.

“Whether that is on the banking side or the mortgage broking and aggregation side, the reality is the market has moved considerably in the last few years in terms of its professionalism, in terms of the licensing regime and regulatory environment and so it was almost a seamless transition for me."

Asked whether the return of funding and subsequent profitability of mortgages could lead to further consolidation, Mr Kane told Mortgage Business that NAB would assess opportunities individually.

“The marketplace will be driven by the economics of each business, and each of these businesses are quite different so therefore it is really the individual economics of each business and how they are structured that will determine to a large extent how much consolidation we will see in the future,” he said.

“There is no doubt that there has been consolidation and there more likely could be in the future but I think it is more down to the economics of each business.”

 

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