The JP Morgan Australian Mortgage Industry report found that despite being the smallest of the four majors in the domestic mortgage market, ANZ has been successful in achieving the same dollar growth in mortgage balances since 2010.
“We believe a key driver of this result has been the success ANZ has had with the broker channel, with originations rising from ~40 per cent of flow to ~50 per cent of flow since 2010,” the report said.
The report also found that ANZ has been steadily reducing its branch presence since 2011.
“ANZ is in the unique position where it has consistently grown its loan book above market for the last [few] years at the same time as it is actively reducing its branch presence and increasing its broker presence,” JP Morgan banking analyst Scott Manning said.
“That is acting as a bit of a business case potentially for other banks to follow,” he said.
“We have previously highlighted our concern for Westpac in particular where they have quite a duplication of their branch presence across different brands.”
Mr Manning said he expects to see more branch closures in the next five years.
Meanwhile, as the driving forces behind mortgage lending shift from investors to owner-occupied refinancers, JP Morgan believes ANZ’s strength in the third-party channel places it at a significant advantage to capture more volume going forward.
“The major banks will need to capture the refinancing tailwind by targeting the right customers through the right channels,” Mr Manning said.
“Banks have a strong opportunity off the back of the impact of laggard house price appreciation to target young, growing families through the broker channel, shifting away from wealthy seniors and down traders who, from an investor lending perspective, may be the most unattractive segment,” he said.
The report highlighted that the broker channel may be key to capturing greater market share as approximately 75 per cent of refinancers expect to use brokers.
ANZ’s success through the broker channel is interesting given that it is the only major lender among the big four to avoid a vertically integrated strategy of acquiring broker distribution.
In comparison, NAB owns broker aggregation business FAST, Choice and PLAN, Westpac owns mortgage manager RAMS and CBA is the majority shareholder of Aussie Home Loans.
“Considering CBA retains the largest market share amongst major banks for domestic mortgages, it has a relatively underweight presence in broker, accounting currently for ~40 per cent of flow, versus WBC and ANZ at ~45 per cent to ~50 per cent,” the report noted.
JP Morgan highlighted that Westpac’s relationship with the broker channel has been mixed since the GFC, with recent re-engagement following a period of lower activity, with St George undertaking a concerted effort to rebalance flow being gained through the third-party channel.
The report found that NAB has the smallest share of broker-originated loans, sitting below 35 per cent.