A fresh report into an ASX-listed bank has concluded that its efforts to utilise the broker channel have failed to deliver adequate loan growth.
A Morningstar report by analyst David Ellis, released on 12 January, noted that competitive advantages continue to weigh on Tasmanian lender MyState.
Mr Ellis pointed to recent APRA banking statistics for November 2017 which show that MyState’s mortgage portfolio has grown by less than 1 per cent in the five months since 30 June, significantly below system growth of 2.2 per cent.
“With its lending portfolio heavily skewed towards owner-occupied home loans, MyState is susceptible to pricing competition and underwriting risks in the market,” Mr Ellis said.
“Disappointingly, MyState’s strategy of diversifying its loan book outside Tasmania and utilising the broker channel has not supported loan growth as much as it expected,” the analyst said. “We expect intense competition in the residential home loan market to persist.”
Morningstar believes that MyState is facing strong competition from other small lenders and non-major banks, who “normally offer attractive pricing” and allow “easier lending criteria” for borrowers.
Last year, the lender launched a new, simplified mortgage offering following feedback from brokers. MyState Limited Group executive – broker distribution Huw Bough said that the new loan was designed for “no-nonsense borrowers who wanted a simple and transparent bank loan product with a highly attractive rate, fast approval and great ongoing service levels”.
“The market is cluttered with a wide range of loans with different features, options, annual deductions, time restrictions and rates from alternative lenders. We want to give our broker partners the option of offering a highly competitive loan that is simply what it says, with no hidden surprises,” Mr Bough said.
Competition among the non-majors has intensified in recent months and more broker-originated home loans are flowing to Australia’s smaller lenders.
The latest AFG Competition Index found that the big four market share of broker-originated mortgages fell to a post-GFC low of 62.6 per cent in the final quarter of 2017. The non-majors now enjoy a market share of 37.4 per cent.
“The non-majors picking up market share were Macquarie, with an increase from 2.91 per cent to 4.70 per cent, and AFG Home Loans, with a lift from 8.88 per cent to 10.15 per cent,” AFG’s Mark Hewitt said.
AMP Bank, ING and Suncorp also enjoyed a significant share of broker-originated home loans over the final quarter of 2017.
In November 2017, MyState saw just 0.25 per cent of all loans written by AFG brokers, down from 0.4 per cent in October.
[Related: MyState Bank launches new home loan]
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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.