CBA broker flows drop

When looking at the overall retail banking group – which includes both CBA and Bankwest brands – the banking group’s mortgage portfolio totalled $584 billion across 2 million accounts as at June 2023, up from $556 billion in June 2022.

It holds approximately a quarter of Australia’s home lending share.

However, the group funded a smaller volume of new mortgages in the financial year. The report showed that $149 billion in new home loans were written at the group, down on the $152 billion of new mortgages funded in FY22.

The broker channel originated around 47 per cent of new flows for the two banking brands, up on the 46 per cent in June 2022.

However, while Bankwest broker flows have been growing (as the bank redirects investment to digital banking and the broker channel amid branch closures), when looking purely at the loan book of the Commonwealth Bank of Australia, new funding was down by around 13 per cent (or $20 billion) over the year to June.

Indeed, when excluding Bankwest, the major bank funded $125 billion in new mortgages in FY23 ($65 billion in the first half and $60 billion in the second).

Brokers were responsible for around 39 per cent of new CBA flows in the six months to June 2023.

While only slightly lower than in the same period the year before (when it was 40 per cent), this marked the lowest proportion of broker-originated loans for the big four bank in recent years (tied joint last with FY21).

It echoes a trend seen in the monthly Broker Pulse survey from Agile Market Intelligence that has shown that around 40 per cent of brokers have been writing CBA loans in recent months, down from around 47 per cent three years ago.

The bank has not accounted for the drop in broker flows for new lending but a spokesperson provided the following statement to The Adviser: “Broker partnerships are incredibly important to CBA. Over the last 18 months we have grown our number of relationship managers, have invested in learning and development for our brokers through our Training Hub, and have dedicated technology teams to ensure we lift the capability of our services.

“We continue to take on board feedback to ensure our overall approach is simpler, better and easier.”

The bank has also been working to protect its extensive branch network recently and driving large investments into its digital brands, including digital mortgage unloan, which has funded more than $4 billion in refinance loans since launch and is expected to roll out a ‘purchase experience’ in FY24. The bank also rolled out a self-service refinance option for proprietary channel customers earlier this year.

The financial results showed that direct loans are being written much faster than those in the third-party channel. For example 66 per cent of proprietary applications were auto-decisioned through the proprietary channel in FY23, while the vast majority of broker-introduced applications (88 per cent) were manually decisioned within five days.

CBA chief executive Matt Comyn flagged that new lending had softened in the last two months as a result of the rising interest rates (which has reportedly hit those aged 25–55 the most), cost-of-living pressures, and as the major bank pulled its refinancing cashback offer (and doing so before other majors).

Speaking to investors on a briefing call on Wednesday morning (9 August), he said: “We’ve taken a number of steps to ensure our lending posture delivers sustainable financial returns. This has had an impact on our volume performance, particularly in the last quarter.”

He noted that there had been “very, very aggressive price-based incentives” from the market on home loans, which he said he would “consider not to be sustainable” and suggested that cashbacks had been “distorting” customer behaviour.

The CEO told investors that he was therefore “comfortable losing some share of low return” as a result.

“We want to make sure that there’s a sustainable margin profile to support customers going into the future,” he explained.

According to the major bank’s FY23 results, the banking group had helped 150,000 Australians buy a new home and lent $35 billion to help small businesses grow.

In fact, the bank has grown its business banking deposit balances by 43 per cent since June 2020, to $68 billion. This followed the porting over of business banking to CBA from Bankwest, which started last year.

[Related: Brokers ‘really important’ to Bankwest customer support: CBA CEO]