The chairman of a listed Australian bank to which brokers contribute over 50 per cent of total loans says there is “no doubt” that the use of the third-party channel to generate growth involves an element of increased risk.
In its annual report to shareholders, released last Friday, Tasmania-based lender MyState provided a summary of its financial performance for the year to 30 June.
“There is no doubt that greater use of the broker channel to generate growth and increased exposure to non-traditional markets involves an element of increased risk,” MyState chairman Miles Hampton said.
“However, loan quality remains strong, and we have made changes in our product offerings specifically targeted at minimising risk.”
Brokers are essential to the bank's loan growth. The same report highlighted that mortgage broker business exceeded 50 per cent of total loans for the group over the year.
Announcing the bank’s full-year profit results last month, MyState CEO and managing director Melos Sulicich emphasised the important contribution brokers made to the group’s 16.3 per cent loan growth, which brought its total loan book up to $3.6 billion.
"Importantly, our mortgage broker strategy has succeeded in generating growth in our loan book, which increased by 16.3 per cent, compared with a 0.4 per cent increase in the previous year,” Mr Sulicich said.
“We ended the 2014-15 financial year with considerable momentum; in June 2015 we achieved monthly settlements of $110 million, a record for the group.”
Mr Sulicich said the foundation of MyState's strategy was to replicate its high-quality retail customer service for mortgage brokers on the mainland.
"We appointed experienced business development managers nationally to raise our profile and improve relationships, and established a dedicated, experienced origination team to speed up loan decisions," he said. "Increased communication helped secure business in a highly competitive market."
Over the next 12 months Mr Sulicich said the group's banking division will continue to build upon the sales momentum through broker and aggregator distribution networks, in conjunction with improved sales management in the direct channel.
Approximately 87 per cent of the bank’s home loans are to owner-occupiers. Investor lending remains a small proportion of overall loans.
In Friday’s trading update, Mr Hampton noted that competitive pressures in terms of both loan and deposit products resulted in the group’s net interest margin falling from 2.43 per cent to 2.28 per cent.
“It would be pleasing if we were able to say that this trend is not expected to continue, but the reality is different,” he said.
“The era of high net interest margins is unlikely to return, and we are focused on being efficient and developing other revenue sources to ensure that lower margins do not reduce returns to shareholders.”
[Related: MyState cuts rates below 4%]