While the major banks’ share of the mortgage market is firmly bedded down, broker perceptions have revealed some major differences between the big four. Now the banks have their say...
2011, FOR the major banks, was all about competing on price and consolidating market share. All four majors lifted their share of the mortgage market last year, according to data from business research house RFi.
They currently account for more than 81 per cent of all Authorised Deposit-taking Institution (ADI) housing investment and owner-occupied home loans in Australia. Westpac has the greatest market share, accounting for 24.3 per cent of all owner-occupied mortgages written.
The Commonwealth Bank of Australia is a close second, boasting market share of 22.9 per cent.
National Australia Bank has a 17.4 per cent share of the market, while ANZ has a 16.5 per cent slice.
Competitively priced products and other incentives have helped the majors to grow their market share.
Borrowers, meanwhile, are rate savvy. They also aren’t afraid to look around and are increasingly aware of what is on the market. The majors have therefore needed to get more creative when it comes to offering discounts and incentives for home loans.
However, a new lending environment has also emerged in recent months, with some banks increasingly adjusting their interest rates independently of the Reserve Bank – including making upward moves out of cycle.
The majors are in the best position to do this, which is one reason why they are winning greater market share.
Homeside, however, has been the true standout performer of the past 12 months, having grown its market share by 1.4 per cent.
While this result is hardly surprising, given that the bank has boasted the sharpest standard variable rate for over two years, the lender’s success can be attributed to more than just rate, NAB Broker’s general manager, distribution, John Flavell says.
“We have made many changes this year to our proposition and they have been well received,” Mr Flavell says. “We will continue to do what we can to help our broker partners.”
These changes have significantly improved the way Homeside is perceived by brokers.
Earlier this year, brokers were given the opportunity through the Third Party Banking Report – Majors Lenders, to provide the big four with critical insight into their entire third party operations.
The report revealed the views of more than 500 brokers, all of whom regularly write business with the majors.
Each respondent was asked to rate the banks on a scale of 1 to 5 (1: “very poor”; 2: “poor”; 3: “average”; 4: “good”; 5: “very good”) across 17 categories covering product, support, technology and commissions.
The responses were then analysed by RFi, ensuring the methodology was transparent and the results credible.
The majors were subsequently given the chance to consider their perceived strengths and weaknesses in light of the report’s findings.
FINDING A WINNER
Homeside shone in every single area, topping 13 of the 17 categories and proving the lender has come a long way from its last place performance 24 months ago.
In fact, Homeside managed to improve its broker satisfaction rating in all but one of the categories.
After the 2010 Major Lenders report was released, NAB Broker’s John Flavell told The Adviser the lender would seek to redevelop its broker proposition, paying particular attention to the areas judged by brokers to be “poor”.
Homeside has succeeded in that task and is currently reaping the rewards.
At the other end of the spectrum, Westpac failed to strike a chord with brokers, coming in last in each of the 17 categories.
Perhaps more disappointing for the lender was the fact that its broker satisfaction rating fell in every category bar two.
The story was not dissimilar for the Commonwealth Bank of Australia. The major lender’s broker satisfaction rating fell 3.59 this year, down from 63.04 in 2011 to 59.45.
ANZ performed consistently well across many of the categories, helping the lender to retain second position for the third consecutive year.
In this issue of The Adviser, the majors unveil their responses to the survey, and in many cases, outline how they plan to address the areas of their business where brokers have agreed there is room for improvement.
LAST BUT NOT LEAST
Despite being placed last in each of the Third Party Banking Report – Major Lenders’ 17 categories, Westpac remains positive about the future
THE THIRD Party Banking Report – Major Lenders has provided Westpac with valuable insights into the areas of the business that require attention, the lender’s general manager, mortgage broker distribution, Tony MacRae told The Adviser.
According to Mr MacRae, Westpac is eager to provide its broker partners with a strong service and aims to introduce a raft of initiatives over the next 12 months.
“We know and understand that there are certain areas in the business where we fail to meet broker expectations,” he says.
“With regard to overall advocacy and support, we are currently undertaking initiatives to ensure we are delivering strong broker service throughout key areas of the Mortgage Processing Unit, Credit and Settlements.”
Mr MacRae says the bank is also looking to build on the partnership work that is being done at local level through which accredited Westpac brokers meet their local bank managers and broker squads face-to-face to adopt a ‘one team’ approach.
“This has led to reductions in potential channel conflict and improved cross selling opportunities locally,” he claims. “We will continue our focus on building stronger local relationships between brokers and our branch teams that result in delivering sustainable and valued business partnerships to benefit the customer.”
Westpac hopes to add further benefits to its Platinum Broker offering over the coming months, as well as develop a new product package.
The lender is also in the midst of extending its SMSF product offering in a bid to improve broker satisfaction with its product suite.
“We’re investigating other products that could work for brokers in terms of distribution and provide them with an opportunity to earn revenue,” Mr MacRae says.
“Moreover, Westpac’s continued focus is on delivering exceptional turnaround times and a better service level experience to all our brokers. The feedback from professional brokers is very clear: delivering fast service for their clients is still top priority. We believe keeping a single-minded approach in this regard will deliver an improved overall service proposition to brokers.”
According to Mr MacRae, while Westpac understands the bank isn’t everyone’s favourite lender at the moment, it takes the feedback it receives from its broker partners very seriously, so that Westpac can make improvements to its proposition.
“We highly value and review important feedback that mortgage brokers provide, because it may help deliver improvements across our business,” he says.
“The recent Third Party Banking Report – Major Lenders presents us with a great opportunity to do more and clearly understand our key partners’ needs in the current market environment.
“Overall, our key focus is to ensure that all Westpac-accredited brokers can provide an optimal customer experience and quality advice about Westpac’s mortgage products, policies and associated services.”
Tipped from the top
For the first time since The Adviser’s Major Lenders survey began, CBA has been knocked from top position. But does the lender agree with the findings?
DESPITE BEING knocked from the top of the leader board, the Commonwealth Bank of Australia remains bullish about its performance in the third party distribution channel.
Kathy Cummings, CBA’s executive general manager, third party and mobile banking, says she is pleased with how the lender is performing, regardless of what the survey suggests.
“The findings of this survey do not completely correlate with our own research, considering we won the Best Third Party Lender Award at the Australian Lending Awards in February,” she says.
“Also, we are very close to our Diamond partners and their feedback does not correspond with many of the findings in this report.”
Ms Cummings went on to highlight certain categories within the report where the lender believes it performs better than the results suggest.
According to the Third Party Banking Report – Major Lenders, CBA failed to impress brokers in the areas of product range, BDM support, turnaround times and commissions.
Ms Cummings, however, dismissed the idea that CBA is not well positioned when it comes to commissions.
“Our broker remuneration is in line with the market and we are very competitive when commission is based on a five-year loan,” she says.
“Next to this, we also offer additional revenue on the referral of products through the CONNECT Referral Program. The fact is, the more products a customer has with a lender, the stronger the likelihood they will remain with that lender. This means the broker can feel more secure over the continuity of their trail.”
But while Ms Cummings was quick to dismiss any suggestions that CBA was not competitive on commissions, she accepted that the lender had some work to do to regain its top spot next year.
“The report’s findings do provide areas for us to work on and we will do that,” she says. “We will be working very hard to be number one again next year.”
One of those areas on which the lender will be working is its product suite.
According to Ms Cummings, the bank is conscious that the lack of a transactional offset is a concern for some customers and brokers.
“This will be rectified with development of our lending platform under our CORE system replacement, which is scheduled to happen next year,” she says.
“This appears to overshadow the strong market appeal of our other mortgage products, such as our MAV package and the No Fee Home Loan, which is totally unique.”
The lender is also looking to make inroads into a number of the categories highlighted as “problem areas” for the lender, Ms Cummings adds.
“We are always working to improve turnaround times,” she says. “We have a strong focus on straight-through processing and we will be working with our brokers to achieve higher straight-through processing results.
“We also recognise customer retention and quality, and reward our key strategic business partners and head group partnerships through our growth business incentive.”
Finally, Ms Cummings says, the lender will continue to help brokers improve efficiency by providing CBA administration staff with log-ins to CommBroker, enabling its senior support staff to track the business they are doing.
“We will also support those brokers who want to diversify into commercial lending products and encourage successful commercial referrals through our CONNECT commercial referral program,” she says.
Second to None
Highlighting its commitment to the third party distribution channel, ANZ has already starting implementing new broker-focused initiatives
ANZ, WITH notable consistency, has come second in the Third Party Bank Ranking – Major Lenders every year since its inception.
But while the lender has yet to secure the top spot, ANZ has managed to improve its overall broker satisfaction rating every year – an achievement of which the bank is particularly proud.
“We were really pleased to see an improvement in our result and it’s a great recognition of the changes we’ve been making over the past year to make ANZ even easier to do business with,” ANZ’s head of third party and relationship channels, Meg Bonighton, says.
“The report gives us really great information on our strengths and also some insights into areas that we really need to focus on to ensure that brokers are getting the support they need from ANZ.”
According to Ms Bonighton, the bank has already made some changes to its broker proposition and introduced various initiatives in response to the Third Party Banking Report – Major Lenders.
While ANZ performed strongly in a number of categories, notably broker communication and client support, it failed to strike a chord with the third party distribution channel in other areas – including business support, training and education and cross sell.
“We recognise that providing support and training for brokers to support them in helping their customers is vital,” Ms Bonighton says. “We need to make sure that we are easy to do business with – it’s as simple as that.
“We’ve launched a number of initiatives to give brokers greater support since the Third Party Banking Report was released, including simplified training in credit policy changes, more consistent PD day training materials and the quarterly ‘ANZ Business Leaders Boardroom Series’ in partnership with The Adviser to help provide specialised business support and professional development to brokers.”
ANZ is not afraid of constructive criticism as it ultimately helps the bank to achieve its number one goal – becoming the lender of choice for the third party distribution channel, Ms Bonighton adds.
“We embraced mortgage brokers more than 14 years ago and we greatly value the relationships we have developed over that time,” she says.
ANZ’s approach indicates why the bank has worked hard to make improvements to its product policy and service proposition.
Over the past year, ANZ has focused on lifting its performance across the board. For example, the ANZ Breakfree package provides customers with, according to Ms Bonighton, a stand-out suite of banking benefits and discounts with a low annual package fee.
“While we’ve made some great progress, we’re certainly not slowing down,” she adds. “At the moment, the initiatives we’re working on include continuing to make improvements to our award-winning products and packages and to our broker website, streamlining our communications, and investing in continued upskilling of our BDMs.”
Shooting to the top
Two years ago, Homeside was placed last in the Third Party Banking Report – Major Lenders; this year, the lender took top spot. Yet Homeside says it still has more work to do
NATIONAL AUSTRALIA BANK blitzed the field in this year’s Third Party Banking Report – Major Lenders, taking out first position in 13 of the 17 categories.
More significant is the lender’s managing to improve its broker satisfaction rating in every single category bar one.
But despite Homeside’s tremendous success with the third party distribution channel, NAB Broker’s general manager, distribution, John Flavell says there is still plenty of room for improvement.
“The focus for Homeside will be turning some of our perceived weaknesses into strengths,” Mr Flavell says.
“We would like to top all 17 categories next year, rather than 13. To do this, we know we need to deliver a good service proposition, consistent service and a competitive product suite.
“We are committed to being the lender of choice for brokers. As such, we will continue to place more focus on our broker partners through our advertising. Moving forward, you’ll definitely see us focus on the direct promotion of our brokers from a group perspective.
“Last year, we rolled out television commercials that encouraged borrowers to talk to their broker or bank branch manager today. We will continue to do this in the future. We know borrowers want to deal with brokers. We also know how important this channel is, which is why we will be doing everything to support the channel in the future.”
According to Mr Flavell, the bank will also look to improve the documentation process and send documents through in one pack, rather than two.
“We are in the process of simplifying our documentation in accordance with broker feedback,” he says. “Hopefully, we will be able to unveil something in this area later this year.”
Mr Flavell says the bank will also continue to improve and enhance some of the successful initiatives launched this year.
“Earlier this year, we changed the way loans are processed, so that if something goes awry in the loan approval process, there is a Homeside employee ready and waiting to call the broker and rectify the problem within minutes.
“Previously, there has been a lot of back and forth between brokers and assessors. We have changed the way we do things and will continue to improve this process.”
Mr Flavell adds that the feedback Homeside received from the report correlated closely with the bank’s own findings.
“We are constantly in touch with our brokers asking for feedback. Luckily for us, we are receiving some really positive feedback. Brokers are telling us, ‘I like the enhancements you are making’, which is really positive,” he says.
“What this report showed us was we have put our effort into the right places. We haven’t wasted our time or energy. The enhancements we have made are being felt across the board. We are making a positive difference to brokers and their businesses – which is our number one goal.”