The CEO of a listed Australian bank has outlined the central role mortgage brokers will play in the lender’s distribution strategy.
Heritage Bank yesterday released its draft profit results for the 2014-15 year, showing loan approval growth of almost 30 per cent.
Heritage approved loans worth $1.838 billion in 2014-15, up 27.6 per cent on the $1.440 billion approved the previous year.
Speaking to The Adviser, Heritage Bank CEO John Minz said brokers originated about 46 per cent of all loans approved in the last financial year.
“We’ve been involved in the broker channel since 1998,” Mr Minz said.
“It’s a very meaningful channel for us, it gives us diversification geographically. It gives us significant volume that we can’t get in southeast Queensland. It is a very good way of building the business and has worked for us for quite some time.”
Mr Minz, who will retire as chief executive later this year, said the bank is dedicated to further growing its broker business. He predicts that half of all Heritage Bank home loans will be written by a broker this financial year.
“Earlier this calendar year we really kick-started the work we’ve been doing for a long time with brokers,” Mr Minz said.
“We increased commission and reinforced that the third-party channel is a partnership,” he said. “We put on additional resources in WA and Victoria. That gives us the confidence that we will be somewhere around 50 per cent generated from the broker channel over this coming financial year.”
Heritage Bank has been growing its investor lending faster than APRA guidelines, and last month revealed it is acting decisively to address the situation.
Heritage recently announced an increase of 30 basis points on its special discount variable rate home loan for investors, taking the rate to 4.49 per cent.
Heritage also increased its fixed investor rates by 10 basis points across the board, with its standard one-year fixed rate now at 4.49 per cent, its two- and three-year rates at 4.59 per cent, and it’s five-year rate at 4.69 per cent.
According to APRA statistics, Heritage grew its investor lending book faster than the regulator’s 10 per cent guideline during the 12 months to May, reporting a 12.8 per cent increase.
“Like all lending institutions, APRA’s put us under a restriction of no more than 10 per cent investor lending growth in any one given year, and particularly with the strong lending we had earlier this year, we needed to do something to slow it down,” said David Ure, Heritage’s head of branch and third-party channels.
Mr Minz noted the highly competitive lending landscape, adding that despite record-low rates the bank has not seen a contraction in its net interest margin over the 2014-15 financial year.
“We are confident we can continue to invest in our business and our broker channel and meet that competition,” he said.
[Related: Heritage CEO to step down]
James Mitchell has over eight years’ experience as a financial reporter and is the editor of Wealth and Wellness at Momentum Media.
He has a sound pedigree to cover the business of mortgages and the converging financial services sector having reported for leading finance titles InvestorDaily, InvestorWeekly, Accountants Daily, ifa, Mortgage Business, Residential Property Manager, Real Estate Business, SMSF Adviser, Smart Property Investment, and The Adviser.
He has also been published in The Daily Telegraph and contributed online to FST Media and Mergermarket, part of the Financial Times Group.
James holds a BA (Hons) in English Literature and an MA in Journalism.
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