A non-major bank has bucked the trend of the big four by lifting its margins over the year to 30 June, a period marked by “intense” competition and heavy discounting.
AMP Bank yesterday reported operating earnings of $59 million in 1H16 from $50m in 1H15, an 18 per cent increase.
Total revenue increased 13 per cent over the year to 30 June, driven by improved net interest margin and growth in the loan portfolio, the group said in a trading update.
“Net interest margin was 1.71 per cent for 1H16, up 18 basis points from 1H15, and up 7 basis points from 2H15. The impact of increased competition for owner occupied lending was offset by enhanced liquidity management and pricing decisions on investor and owner occupied loans in line with market conditions.”
AMP Bank’s return on capital was 17.2 per cent, up 0.9 percentage points from 1H15 (16.3 per cent).
The bank noted that it had maintained a competitive lending position over the six months to 30 June, with the total loan book growing by $816 million to $16.0 billion in 1H 16, an increase of 5.9 per cent on 1H15 and 5.4 per cent from 2H15.
“Residential mortgage competition, particularly in the owner occupied market, remained intense in the period with continued market-wide discounting,” the bank said.
“Within this environment, AMP Bank delivered residential mortgage book growth of $808 million in 1H16 to $15.4 billion (an increase of 5.5 per cent from FY15 and 5.8 per cent from 1H15) driven by strong growth in owner occupied lending.”
The non-major highlighted that growth in investment property lending, including SMSF property loans, is improving since the bank recommenced investment lending in November 2015.
AMP’s loan growth over the half-year was delivered through both the broker and AMP aligned adviser channels.
“Whilst sales through AMP’s aligned adviser channel were up on 2H15, its portion of AMP Bank’s mortgage new business fell to 19 per cent (from 24 per cent in FY15) due to strong growth in the mortgage broker channel. This partially reflects ongoing weakness in investment lending growth, in line with market trends,” the bank said.
Owner occupied loans made up 73 per cent of the mortgage portfolio at 30 June 2016, while investment property loans were 27 per cent.
[Related: AMP Bank exits non-resident lending]