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Westpac mortgages up $2.6bn over half

Growth in owner-occupied lending bumped up the major bank’s mortgages book by $2.6 billion in 1HFY21, but this was partially offset by lower investor lending, it reported.

Westpac published its 2021 interim financial results for the six months ended 31 March 2021, in which it reported that Australian housing loans increased by $2.6 billion during the first half of the 2021 financial year (1HFY21).

This increase was largely driven by growth in owner-occupied lending, which was up $8.8 billion or 3 per cent. However, this was partially offset by lower investor property lending, which was down $5.2 billion or 3 per cent, Westpac said.

New lending excluding refinance totalled $27 billion, with first home buyers comprising 13 per cent of this segment.

According to Westpac CEO Peter King, new lending for housing has risen by 49 per cent over the past year, including a 75 per cent jump from low levels recorded in May 2020.

He attributed this mostly to interest from owner-occupiers, but said that investors are beginning to return to the market, with investor lending up 31 per cent over the four months to February.

Westpac chief financial officer Michael Rowland told an investor briefing following the release of the results that investor lending balances have fallen by $10 billion over the half, with the portion of the lender’s Australian book on interest-only down from 23 per cent in March 2020 to 18 per cent in March 2021.

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The demand for fixed rate loans has increased, comprising 23 per cent of the mortgage book in March 2020 to 32 per cent in March 2021. Mr Rowland attributed this to low interest rates.

Investor demand has remained largely stable, decreasing from 38 per cent of the mortgages book to 35 per cent in March 2021.

Westpac’s statutory net profit was up 189 per cent over 1HFY21 compared with 1HFY20 and up 213 per cent over 1HFY21 compared with 2HFY20, to over $3.4 billion, while cash earnings spiked by 256 per cent over 1HFY21 compared with 1HFY20 and 119 per cent over 1HFY21 compared with 2HFY20 to over $3.5 billion.

Westpac to roll out digital broker origination process

The major bank reported that it has sought to simplify its processes, including by reducing forms and documents by 80 and implementing 60 process and policy changes.

Westpac also said that it has “enhanced” its credit decisioning, with around 68 per cent of mortgages credit auto-decisioned.

Furthermore, around 70 per cent of customers are accepting mortgage documents digitally.

Westpac added that as part of digitising its mortgages process, it has rolled out a first-party digital origination process, while the third-party origination is in the pilot phase.

The group also stated that its customer service hub – a new online application process launched in December 2020 for customers as part of its end-to-end digital mortgage process – allows customers to apply, track their loan application, upload documents, and accept their loan offer online, while bankers can monitor the application online.

The hub is being used by Westpac, St.George, Bank of Melbourne, and BankSA bankers.

The major bank said that the hub will be available for brokers by the end of 2021.

The platform has so far completed more than 20,000 settlements, Westpac said.

Westpac "committed" to improving processes for brokers

Loan application turnaround times and the disparity in turnaround times between the direct and broker channels has been an issue that has been discussed recently by Westpac and other major banks. Westpac recently appeared before the economics standing committee hearing for the Review of the Four Major Banks and other Financial Institutions and stated that it was looking to improve the loan application process in the broker channel.

Following the release of its interim financial results, Mortgage Business asked Westpac about how it would address this issue.

A Westpac spokesperson told Mortgage Business: “Westpac is committed to improving our systems and processes to help mortgage brokers better meet the needs of customers.

“We have made significant investments in upgrading our systems and technology and have hired additional staff in our processing and operations teams.”

It added: “Mortgage brokers are important to our business, and we are committed to supporting them and making the process of applying for loans faster and easier.”

Commenting on Westpac’s digital push in its mortgages sector, Mr King told the investor briefing that the bank is “renovating” its processes.

“We’re changing policies where they haven’t made sense, looking at how we had implemented responsible lending controls is a big piece (and simplifying those).”

Westpac NZ CEO to retire

Westpac New Zealand CEO David McLean has announced that he will be retiring after more than 20 years with the group.

Mr McLean joined Westpac New Zealand in 1999 and held various senior roles across retail and institutional banking, before being appointed CEO in February 2015.

Mr McLean will remain in the role until 25 June, after which, general manager institutional and business banking Simon Power will act as CEO, subject to regulatory approval, while a global search is undertaken to replace Mr McLean.

Mr King thanked Mr McLean for his contribution to the bank during his tenure.

“David has been with Westpac for more than two decades and has held a number of senior roles in that time,” Mr King said.

“He has made a significant contribution to the company, including playing a pivotal role in driving the New Zealand business while lifting the bank’s support for New Zealanders.

“David has led the bank through the challenges of COVID-19, with a sharp focus on helping customers adapt and supporting New Zealand through the recovery. I wish David all the best for his retirement.”

Mr McLean also commented on his departure, stating: “I have thoroughly enjoyed my time at Westpac New Zealand and have been honoured to lead the organisation.”

Westpac recently announced that it was assessing the viability of its New Zealand arm as part of its simplification process, adding that it was “assessing the appropriate structure” for its New Zealand business and “whether a demerger would be in the best interest of shareholders”.

It also revealed that it had been instructed by the Reserve Bank of New Zealand to commission a number of reports around its risk and liquidity management processes.

Westpac reported in its 1HFY21 results that its New Zealand arm’s mortgages increased 10 per cent while deposits were up 7 per cent, with growth mainly in household deposits.

[Related: Westpac earnings to dip by $280m]

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