Australia’s regional and mutual banks are bolstering their distribution channels as competition for home loans intensifies.
A mortgage market report by S&P observed that the smaller, retail-focused Australian financial institutions cannot afford a long-term price war with the major banks while continuing to maintain their business franchises, financial viability or current ratings.
“Despite these dynamics, Standard & Poor's current base case view is that the regional banks and many mutual financial institutions will successfully defend their business positons to a level that will divert any need for a rating change,” the report said.
Underpinning this is an expectation that the smaller lenders will successfully deliver on a number of fronts, including online and third-party distribution.
“In order to support their current and future competitive positions, all retail-focused financial institutions will have to continue to actively manage and progressively develop their bricks-and-mortar branches, their mobile sales forces, their third-party distribution arrangements, and their online banking capabilities,” the report said.
“The smaller banks and mutuals are increasing their push to develop broker-generated business, which now represents 50 per cent of the Australian home loan market,” it said.
Over the past 12 months MyState Bank has focused on reinvigorating its relationship with mortgage brokers across the country to win more business.
MyState general manager of sales and distribution Huw Bough said the broker channel remains a key strategic pillar for MyState as the organisation continues to expand and broaden loan diversification nationally.
“Already, we have experienced a 225 per cent year-on-year increase in home loan originations by making critical improvements to how we work with mortgage brokers,” Mr Bough said.
Meanwhile, non-major lender Suncorp Bank is broadening its third-party distribution reach by building long-term relationships with customer-centric brokers.
Speaking to Mortgage Business, Suncorp’s head of intermediaries, Steve Degetto, said the bank’s primary focus is being seen as a genuine alternative for brokers.
“We really want to send the message that we are absolutely open for business,” Mr Degetto said.
“We want to fill that mantle of being the genuine alternative to brokers at the busiest time of the year.”
Mr Degetto has worked in the banking industry for 20 years and says he can’t remember the mortgage market being more competitive.
Teachers Mutual Bank has seen its home loan portfolio grow 11.44 per cent in the 12 months to 30 June.
Having made a highly successful entry to the mortgage broker channel in 2013/2014, chief executive Steve James attributes much of the result to broker-generated loans.
“Our entry to the broker home loan channel has gone exceptionally well, and contributed in part to our very sound performance in home loans,” Mr James said.
“With 50 per cent of Australian home loans facilitated by brokers, we can now serve more members and potential members for their mortgage needs,” he said.
ME Bank reported a 28 per cent profit increase over the 2013/2014 financial year, driven by growth in home loan settlements, up 19 per cent to $3.8 billion.
Since establishing its broker offering in December 2011, ME Bank has partnered with 18 of Australia’s largest aggregation groups and accredited nearly 5,000 brokers, delivering $1.2 billion in home loan settlements, up 143 per cent from $500 million the previous year.
Meanwhile, online distribution is gaining momentum as customers increasingly turn to mobile applications for their mortgage solutions.
“The ability to process new loans efficiently, entirely online (directly or through mobile bankers or brokers) all the way from application to approval to settlement, will eventually become the norm for the lending mortgage market,” the S&P report said.