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‘Pro-broker’ big four bank dominating third-party flows

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James Mitchell 4 minute read

One major lender has explained the secret to its success in the third-party channel after a leading aggregator revealed the bank’s dominance in the commercial lending space.

ANZ took the lion’s share of Vow Financial commercial lending settlements in 2015, achieving $220 million in flows from the Yellow Brick Road-owned aggregator.

In comparison, Westpac came in second with $132.5 million, followed by CBA with $60 million in settlements.

Speaking at the Vow Financial Commercial Conference on the Gold Coast on Friday, ANZ senior manager – commercial origination, Jim Ahern, said the major bank has been a big supporter of the broker channel for the last 10 to 15 years.

“We have invested a lot into [the broker channel] over that time. Culturally, compared to the other banks, ANZ is very pro-broker,” Mr Ahern said.

“We do induction sessions with our bankers; we call it a ‘circle of influence’ internally. Basically you need referrals. If you don’t have people referring business, you will not survive at ANZ. It is very important for our people to go out there and build their networks and get to know brokers.”

Mr Ahern said significant percentage of ANZ’s commercial lending business comes through its third-party network.

“It’s part of our growth strategy. We are invested in the broker business,” he said.

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ANZ has continued to deliver a competitive proposition for small business borrowers and has traditionally offered different commercial products than its big four counterparts.

“We are still in the property space but have become a bit more conservative. We are very picky about who we deal with. The developer and builder have to have experience delivering a similar product on time and on budget. So we are still open for business in that space.”

Mr Ahern said a large portion of ANZ’s small business lending volumes come through intermediaries including brokers.

However, the bank’s reliance on the broker channel extends beyond the commercial lending space. ANZ chief executive Shayne Elliott told The Adviser last month that brokers traditionally provide far bigger residential mortgages than the bank’s proprietary channels.

“Our customer base in Australia feel brokers are a good way to look at the market overall and make the best decision, so there is demand for it,” Mr Elliott said.

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“For ANZ what we find is that brokers are a terrific way to acquire new customers. Somebody who is not already an existing customer of ANZ is unlikely just to wander into a branch or call up the call centre and ask about a mortgage. But they do talk to brokers.”

Mr Elliott said the broker channel typically delivers larger mortgages for ANZ.

“If I’m going to get a mortgage for $1 million, I’m much more likely to want to get that validated by price shopping, looking at terms and conditions and validating my decision through a broker,” he said.

“If it’s a smaller $200,000 mortgage, I may be less inclined to do so. So it tends to skew to a higher value as well, which is not a bad thing from the bank’s perspective, as long as it is not too large.”

The 2016 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.

[Related: ANZ closing branches with firm eye on broker channel]

‘Pro-broker’ big four bank dominating third-party flows
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James Mitchell

James Mitchell

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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