The global bank’s return to the third-party channel was based on 12 months of due diligence. HSBC’s Alice Del Vecchio explains how the group plans to gain a foothold in an “untapped market”.
Rumours of HSBC’s return to third-party distribution started as far back as 2014. In October last year, the bank confirmed to The Adviser that it would be making a play in the broker market, but gave no information about its strategy.
This week the group revealed that it has officially re-entered the channel through an exclusive partnership with Aussie Home Loans.
HSBC’s head of mortgages and third-party distribution, Alice Del Vecchio, told The Adviser about the bank’s journey back into broking.
“We have been absent for around 10 years and I think we’ve made the call that this is the perfect opportunity to enter the market,” Ms Del Vecchio said.
“It would be naïve to think that we don’t understand what’s going on in the market and clearly with 54 per cent of consumers going through brokers it is really an untapped market for us. We know our products are really strong, we know that we have grown well above system over the last couple of years so we think there is a real opportunity for us,” she said.
HSBC plans to partner with “a limited number of groups”, Ms Del Vecchio said, and is taking a measured approach to its broker strategy. For now, Aussie Home Loans will be its sole distribution partner. The bank's full suite of mortgage products will be available to Aussie brokers.
“Aussie is an iconic brand and we really love their distribution model, we love their retail network and the fact that they have a mobile salesforce that is really well-managed. Their compliance and training is strong. That sits well with our branding and our values. We are going into this having thoroughly thought through what we want to do. We are not here for the short-term. This is a long-term partnership,” said Ms Del Vecchio, who was head of mortgages and operations at Aussie from 2003 to 2009.
HSBC’s residential mortgage book is currently valued at $11.2 billion (as at 31 March), up 15 per cent from $9.7 billion in March last year. Most of that growth has come from owner-occupiers.
“We are well known in the market because we do tend to cater to affluent customers. That’s what we do well. We can deal with complex customers and we are known for that,” Ms Del Vecchio said, adding that, contrary to popular belief, non-resident lending is a small component of the bank’s loan book.
Aussie Home Loans CEO James Symond said the brokerage has been working with HSBC for the last 12 months, and says the bank researched the broker market thoroughly before launching.
“HSBC have been very cognisant to enter the market in absolutely the right way. We have seen the way that they have been building their systems, processes and people behind the scenes. It is not a shotgun approach. It is a clear and very focused agenda,” Mr Symond said.
“I think this is a really positive sign for mortgage broking. The industry goes through challenges and changes, but the mortgage broking proposition in the Australian marketplace is so compelling that very senior banks like HSBC realise the opportunity and want to take part.”
Part of HSBC’s due diligence prior to launch involved working with brokers. The bank held a number of sessions with mortgage professionals to uncover what they value and how the bank could cater to the needs of mortgage brokers and their customers.
“We’ve never seen such a thoughtful and thorough approach from an organisation before they jump into the industry,” Mr Symond said. “While HSBC’s re-entry into the industry has been rumoured for a while, it has been impressive to see them get all their ducks in a row before launching. They don’t want to use brokers as test pilots,” he said.
The bank also leveraged its global powers to gain insights into broker markets across the globe.
“One of the benefits of being a global bank is that we have looked at what our other sites are doing in terms of broking. We’ve learnt a lot from overseas HSBC sites and have brought that into Australia,” Ms Del Vecchio said.