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Westpac settles $50bn in 6 months

The major bank wrote almost $50 billion in new home loans in 1H23, with the proprietary channel originating less than half of new flows.

Westpac Group has released its financial highlights for the six months ended March 2023 (1H23), revealing that its Australian mortgage book increased over the half to $472.7 billion, up 3 per cent on 1H22.

Despite the property market having cooled since its peak in early 2022, the major bank’s results showed that the bank still settled $49.7 billion of new mortgages in the six months to March. The new lending figure was down around $1.1 billion from the same period last year (1H22), when the property market was booming.

Its average loan size also grew in the six-month period, with the average new loan coming in at around $445,000.

As the bank with the second-largest market share in Australian mortgages and household deposits (behind CBA), Westpac wrote more new loans than ANZ and NAB, whose recent financial results revealed they wrote $43 billion and $35 billion, respectively. 

Perhaps unsurprisingly (given the rising rate environment), the vast majority of Westpac’s new loans (95 per cent) were for variable-rate mortgages, with just 5 per cent for fixed-rate mortgages. 

While $19 billion of fixed-rate loans reached expiry in 1H23, approximately $55 billion of Westpac’s fixed-rate loans are due to expire in the next six months, the largest proportion it has ever seen.

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Like its major bank counterparts, the 1H23 results also revealed that the proportion of new loans being written by its proprietary channel is falling, as the broker channel becomes the dominant channel for home loans.

In the six months to March 2023, just 46.4 per cent of Westpac’s new mortgages were originated by the direct channel; the lowest number it has ever recorded. (Similarly, ANZ’s proprietary channel wrote just 36 per cent of its new loans, while NAB’s direct channel wrote 38.7 per cent).

However, the proprietary channel is still settling loans faster than the third-party channel, with the ‘tight to right’ down to around three days.

Releasing its interim results on Monday (8 May), Westpac chief executive Peter King noted that the bank had been focusing on reducing the origination time for its mortgages, noting that around 93 per cent of its mortgages were processed on its digital origination platform in March.

It said it has now moved all brokers onto its one origination platform this year. As such, the bank expects the ‘time to right’ (or duration to settlement) for brokers to reduce. 

The bank is also focusing on delivering “fast and automated broker experiences” for the 20,000 “active” brokers who write loans with the bank.

Overall, the consumer business saw net loans increase 3 per cent to $480 billion, while deposits grew by 6 per cent to $294 billion.

In business banking, Westpac’s net loans increased 6 per cent to $86 billion.

Bank continuing simplification strategy, set to ramp up business lending

Speaking of the 1H23 results, CEO Mr King said that first-half reflected the progress Westpac had been making in “becoming a simpler, stronger bank”.

“We’ve grown in a disciplined way in mortgages, performed well in business and institutional banking and stayed the course on risk management and simplification,” he said (flagging that Westpac completed the exit of another two businesses in the half).

“Our balance sheet strength sees us well positioned to support customers to grow and navigate any future economic challenges. Many customers are adjusting to repayment increases and we’re ready to help those who need time to transition.”

Indeed, he noted that it had been one year since the RBA announced the first rate rise of the current tightening cycle and that while “this has been difficult for many customers and more are calling us to discuss their situation”, the loan portfolios “remain healthy” at a macro level.

“Most mortgage customers are ahead on repayments. Offset balances were little changed and mortgage delinquency levels are low,” he said.

“Interest rates are now closer to their forecast peak, but we are focused on how long they stay high and what this means for household budgets and discretionary spending.”

However, he warned that the bank does expect to see “more stress in the period ahead, particularly in small business”.

“While the Australian economy remains resilient with low unemployment and high population growth, it is expected to slow over the remainder of 2023. Credit growth – both housing and business — will ease,” Mr King told shareholders.

“Intense mortgage competition is expected to negatively impact industry and Westpac’s margins in the next half.

Looking forward, the Westpac CEO said the bank was “now entering a new strategic phase, repositioning the group’s priorities to focus on the future”.

“This includes placing customer care at the heart, being easy to do business with, providing expert solutions and tools, and advocating for positive change,” he said.

The CEO also flagged that the bank aims to grow its presence in key markets such as business lending, while managing downside economic scenarios”.

“Westpac enters this environment from a position of strength. We’ve set the balance sheet for the tougher outlook. We continue to run the bank conservatively, with the flexibility to support growth and handle the more challenging conditions,” he concluded.

[Related: ANZ book bolstered by brokers]

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