The chief executive of an Australian bank has revealed how important — and profitable — mortgage brokers are to the group’s mortgage strategy.
MyState Bank yesterday posted a full-year underlying net profit of $31.1 million, up 4.5 per cent. The Tasmania-based lender grew its loan book by 8.7 per cent to $3.9 billion over the year to 30 June, more than 1.4 times system.
Speaking to The Adviser, MyState managing director and CEO Melos Sulicich said the group has maintained steady flows from third-party over the years and brokers now account for approximately 90 per cent of the bank’s loan book growth. Nearly 60 per cent of MyState’s home loans are originated through third-party.
“Outside of Tasmania and outside to central Queensland where our branch networks are, our only distribution for home loans is via brokers,” Mr Sulicich said.
“We are relatively small in the big scheme of things but for those brokers who try us and continue to try us they are getting a good service. More importantly, their customers are getting a good outcome,” he said.
Brokers have been instrumental in MyState’s strategy of geographic diversification. Customers from NSW and Victoria now account for almost a quarter of the bank’s home loan book.
While the some lenders have opened their doors generously to brokers, accrediting them willingly in an increasingly competitive mortgage market, Mr Sulicich says MyState has taken a different approach.
“We are probably a bit more selective. Our BDMs talk to brokers on the ground and accredit those who they think could work for us and believe we could work for them. It’s a bit of a two-way street. We work for them and they work for us. We are relatively small and our aim is to actually work hard to provide the best service we can,” he said.
With funding costs on the rise and margins being squeezed, some industry commentators have questioned the cost of distribution. MyState saw its net interest margin decline from 2.28 per cent to 2.13 per cent during the year. However, this remains higher than its peers and Mr Sulicich says the costs of distributing through the broker network are “no different” to distributing through branches.
“We are very happy with the loan quality that we get through our broker partners and the type of loans we get through. We are also very happy about the profitability of our broker business,” he said. “We want more brokers to look at us as an alternative to the major banks.”
During the year MyState continued to improve services to mortgage brokers by introducing a new automated loan origination system, replicating the service standards of its retail business.
“Our strategy of simplifying services and products and supporting them with more efficient technology is transforming our business and ensuring that we are easy to do business with,” Mr Sulicich said.
The ASX-listed lender has been busy modernising its systems over the last 12 months, including significant investment spends in new CRM and data warehouse technology.
Mr Sulicich confirmed that the bank will launch its new mobile and internet banking system in the coming weeks, an important milestone in its business transformation program.
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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