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Major bank CEO intent on reducing ‘churn’

The CEO of a big four bank is committed to reducing “churn”, particularly in the home loan market, as he believes the concept “doesn’t make a lot of sense”.

Following the release of its full-year 2018 (FY18) financial results, NAB CEO Andrew Thorburn said that the bank would be placing a greater focus on its existing customers, particularly in the home loan space.

Mr Thorburn claimed that NAB’s decision to keep its standard variable rate (SVR) on hold following out-of-cycle hikes from Westpac, ANZ and Commonwealth Bank was motivated by its desire to earn the “trust and loyalty” of its clients and reduce “churn”.

“Banking does need to change; we need to focus back on customers, building loyalty and appreciation with them,” the CEO said.

“For me, it doesn’t make a lot of sense when you’ve got a long-term product like a mortgage that the churn is after three or four years, and thats because theyre getting more aggressive discounts and cheaper prices if they go back into the market.


“What were trying to signal here is we value our existing customers. Weve got almost one million home loan customers at NAB, and were signalling to them that we appreciate their loyalty, we appreciate your business, and we want to keep this rate on hold for as long as we can to acknowledge that.” 

Following the release of ANZ’s FY18 results, CEO Shayne Elliott also warned against changes in the mortgage market that would increase churn.

Speaking to Mortgage Business’ sister publication, The Adviser, the ANZ CEO reiterated his support for the current broker remuneration model, claiming that without trail commissions, brokers would be incentivised to “churn” loans.

However, the concept of changing loans every few years has been embraced by the Productivity Commission, whose final report into competition in the financial system suggested that making it easier for customers to change loans every few years would improve competition.

NAB reports 14 per cent profit drop following “tough year”

In its FY18 results, NAB has reported a 14 per cent decline in its cash profits to $5.7 billion, which Mr Thorburn has attributed to $530 million in restructuring costs and $261 million in customer-related remediation costs.

However, Mr Thorburn said that he was pleased with the result amid a “challenging” operating environment.

“It’s certainly been a tough year and a challenging environment, obviously with questions of reputation and trust, a housing slowdown, margin compression and many global developments of note,” Mr Thorburn said.

“Despite this, we at NAB have stayed focused, we have delivered a credible, underlying result in whats been a year of significant investment and change inside and outside the bank.”

Home lending breakdown

NAB’s FY18 results also revealed that its home loan portfolio grew by approximately $10 billion, from $293 billion in FY17 to $303 billion in FY18.

Owner-occupied home loans made up 59.1 per cent of NAB’s mortgage portfolio, up from 58 per cent in FY18, while the proportion of loans to investors dropped from 42 per cent to 40.9 per cent.

The proportion of interest-only loans also declined, falling from 29.8 per cent to 24.5 per cent.

The results revealed that the proportion of home loans originated through the broker channel and through NAB-owned white-label funder, Advantedge, increased from 33.7 per cent to 35.5 per cent, with the third-party channel originating an additional $9 billion in home loans in FY18, from $98.5 billion in FY17 to $107.5 billion.

In comparison, loans originated through NAB’s propriety channel and its bank subsidiary UBank increased by $700 million, from $104 billion to $104.7 billion; and mortgages originated through its business and private banking division increased by $400 million, from $90.4 billion to $90.8 billion.

NAB also reported that its share of the home loan market remained stable at 15.4 per cent.

[Related: NAB cut introducer program by 90%, reveals CEO]

Major bank CEO intent on reducing ‘churn’

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