Brokers originate $102.8bn for major bank

Home loans lodged by brokers now make up 34.6 per cent of NAB’s mortgage portfolio, up by 2.1 per cent from 32.5 per cent in the previous corresponding period (pcp).

The share of drawdowns attributed to brokers also increased, rising by 3.4 per cent, from 38.2 per cent in HY17, to 41.6 per cent in HY18.

The number of brokers operating under NAB-owned aggregators PLAN, FAST and Choice also grew over the same period, rising by 4.5 per cent, from 4,446 in HY17, to 4,646 in HY18.

Following NAB’s HY18 presentation, CEO Andrew Thorburn was asked what share of mortgages submitted by brokers working for the bank’s aggregator subsidiaries were lodged for NAB-funded products.

In response, the CEO said: “That’s broadly in line with our system level, so it’s not much in the way of greater or less, it’s there or thereabouts, so that flow is fairly consistent [when you compare NAB] to the rest of the market.”

In light of recent scrutiny from the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, and the Productivity Commission (PC) regarding the income and expense verification of loans submitted through the third-party channel, NAB noted:

• NAB Broker applications [are] assessed centrally — verification and credit decisioning
• All brokers are licensed and subject to accreditation requirements
• NAB conducts broker-level monitoring using specific review triggers such as delinquency thresholds

Mr Thorburn added: “I believe we’ve got a good approach to mortgage lending in terms of income verification and the approach we take there and expenditure — the 12 different categories we have. We always use the higher of HEM or stated expenses. I think we do lending right, and I think we will continue to lend to our clients where it is appropriate to lend.”

Loan portfolio rises as profits fall

NAB’s HY18 results also revealed that the bank’s total loan portfolio grew by $2.7 billion, from $295.1 billion in 2HY17, to $297.8 billion in HY18. However, its total net profit fell from $2.74 billion to $2.58 billion over the same period.

The CEO claimed that high capital requirements affected NAB’s consumer banking returns, and he attributed the profit loss to an uplift in investment spend and a “significant” reduction in treasury income.

The big four bank’s share of owner-occupied mortgages grew from 58.0 per cent in 2HY17 to 58.6 per cent in HY18, while investor loans fell by the same margin, from 42.0 per cent to 41.4 per cent.

The share of interest-only (IO) loans also fell, dropping by 2.8 per cent, from 29.8 per cent in 2HY17, to 27.0 per cent.

The proportion of fixed rate mortgages rose by 1.7 per cent, from 18.8 per cent in 2H17, to 20.5 per cent in HY18, with the proportion of variable rate home loans falling by 1.2 per cent, from 73.3 per cent, to 72.1 per cent in the same period.

Royal commission to cost NAB $40 million

In his presentation, Mr Thorburn also disclosed the cost incurred by the Hayne royal commission. The CEO revealed that in HY18, the commission cost NAB $10 million. The inquiry is excepted to cost the bank a further $30 million in the second half of the year.

Reflecting on the current banking environment, Mr Thorburn said: “[I] think this presents a real burning platform for us, and an opportunity for generational change. I think we can really face into some things here and make our bank and our profession really strong and respected again. And that will happen when we own issues, and we fix them, and we develop our culture, and we act.”

NAB offloads wealth subsidiary

NAB has also announced its decision to sell its wealth subsidiary, MLC.

Mr Thorburn claimed that NAB’s decision to sell MLC was not influenced by the revelations of misconduct in financial advice identified by the royal commission, insisting that the bank was not exiting wealth management.

However, the CEO said that the sale was influenced by NAB’s desire to simplify its operations, stating that complexities were “killing” the bank.

“We need to simplify the bank. The complexity in the bank is just killing us. We need to simplify. And so what MLC divestment will do is enable us to have a simpler bank — and there’s huge opportunities in the bank,” the CEO said.

Speaking to The Adviser following the announcement of ANZ’s HY18 results, ANZ CEO Shayne Elliott also noted that the big four bank plans to simplify its operations in order to navigate through increasingly challenging market conditions.

“Our strategy is about doing a few things and doing them well,” Mr Elliott said.

“In those areas where we have a natural competitive advantage, we want to do those things extraordinarily well — helping people buy and own a home; helping people start, run and grow a small business; and helping institutional customers move goods and money around the region.

“That’s what we want to do and we want to have the right network, people, products and platforms that allow us to do that.

“[We question why anything else would be] part of the ANZ family and that’s why we’ve been selling businesses, shrinking businesses and exiting segments.”

[Related: Mortgage broking needs to reform]