Australia’s non-major lenders have a firm eye on the third-party channel
In this year’s Broker’s Guide to Non-Major Lenders, we’ve provided you with an overview of the current position of the non-majors in terms of broker market share, highlighted the niche areas that these smaller players are targeting, and included an overview of the mutual lenders, who are increasingly becoming a valuable alternative for brokers and their customers.
The non-majors are a critical segment of the Australian lending industry and provide much-needed competition to a market that remains dominated by the big four banks.
The reality is that the broker channel is where the war for market share is now being fought.
Challenger banks appreciate the value brokers provide to their business. Many non-major lenders are starting to direct more energy into the third-party channel as they foresee a future where brokers will continue to be the preferred choice for Australian borrowers.
Here’s a quick look at what some of the non-majors have been doing for the third-party channel in the last few months…
When Bank of Queensland (BOQ) announced its full-year results in October, the group said that its presence in the broker channel is already increasing, with BDMs supporting more than 2,500 accredited brokers in Australia.
While broker volumes generated the bulk of the growth in BOQ’s retail bank and represented 15 per cent of housing settlements in 2015, growth momentum in the third-party channel was lower than the first half. However, brokers originated 23 per cent of the bank’s total mortgage settlements in August this year.
BOQ is looking to increase its third- party presence to an anticipated 4,000 brokers by the end of the 2016 financial year – a 60 per cent growth target.
Its broker channel expansion accelerated in 2015, with the total accredited more than doubling to 2,506. The majority of these are based outside of Queensland (83 per cent), which goes to show how important brokers are for regional lenders looking to grow their national footprint. BOQ also broadened its reach through new aggregator partnerships with the inclusion of Finsure, Loan Market and Beagle Finance over the 2015 financial year.
Meanwhile, Tasmanian lender MyState Bank is consciously building its business around the third-party channel, which now accounts for 70 per cent of the group’s total settlements.
Speaking at MyState’s annual general meeting in Hobart in October, MyState chairman Miles Hampton outlined the significance of the third- party channel to the group’s mortgage distribution strategy.
ING Direct was the top ranked non-major bank in The Adviser’s 2015 Third-Party Banking Report – Non-Major Banks. The bank has a reputation for delivering competitive products and quality service, and is seen as a leader in the Australian lending sector for delivering innovative solutions.
In an effort to address the growing convergence of the mortgage and advice industries, ING Direct recently announced the appointment of Tim Hewson as national partnership manager, residential lending and wealth.
Mark Woolnough, head of third- party distribution at ING Direct, says Mr Hewson’s appointment was a logical step for the bank as “the line between these two increasingly aligned industries continues to blur”.
ING Direct is a forward-thinking non-major lender that sees big things for the broker channel. In addition to driving the convergence of mortgage broking and financial planning, the bank has recently recognised the value brokers can deliver in the commercial lending space.
Beyond home loans
Mr Woolnough believes the growing investor appetite for commercial property is a great opportunity for brokers looking to build a sustainable and diversified business.
“With investors increasingly turning to commercial property, there will likely be a complementary surge in demand for professional support to help navigate the market and negotiate on commercial loans,” Mr Woolnough says.
“There is huge scope for brokers to meet this demand – they have relationships with lenders, access to market insights and are knowledgeable about the nuances of commercial loans.”
To support brokers to capitalise on this growing opportunity, the non-major lender has established a specialist commercial property team.
Leading the team as national partnership manager is John Kolyvas, who has more than 25 years’ experience in the lending space with Bank of Queensland and as a broker with Aussie Home Loans.
“In the past 12 months, our commercial business has grown strongly through supporting residential brokers who have been actively looking for opportunities to diversify,” Mr Woolnough says.
“By building a specialist team, we are confident that we will be able to support not only residential brokers looking to diversify, but also those brokers who focus more of their business on commercial deals, accelerating the growth of the commercial aspect of our business.
“The experience of John and the team will be invaluable in providing tailored and specialist support to brokers and their clients, helping them to capitalise on the growing opportunities presented by commercial,” he adds.
While the bigger players like ING Direct are getting in on the action, other lenders are also educating brokers about new areas of lending.
IMB Bank actively targets brokers looking to add new revenue streams and has a dedicated team of BDMs who specialise in assisting brokers with commercial property lending.
“Our focus is on assisting those residential focused brokers who wish to diversify and enter the commercial lending space,” IMB Bank CEO Robert Ryan says.
The mutual lender works with selected broker groups and educates brokers on how they can add commercial to their offering, suggesting ways they can use their referral networks to get commercial business opportunities.
“As part of our accreditation process, we spend time going through the process, risk appetite and highlight the things we do well on a consistent basis,” says Mr Ryan.
“We also understand that we can’t be everything to everyone. We focus on the smaller size deals and do them well.
“Our business development managers have strong credit skills and can quickly tell the brokers if it fits within our risk appetite. We understand that a quick ‘no’ is also important to busy brokers.”
Frank Ganis, Macquarie Bank’s head of personal banking – intermediaries, is a firm believer that strong businesses are built around mutual respect, integrity and trust, and strategic arrangements with trusted and well-respected brands.
This, Mr Ganis says, will help mortgage brokers across Australia compete in the current marketplace, as well as support continued growth.
“But it’s important to pick your partners well,” he explains.
“Brokers need to identify and choose industry participants that are focused on supporting their business needs and add to each brokers’ value proposition with new ideas, resources and expertise.”
As regulatory changes create growing uncertainty for the mortgage industry, the non-major lenders appear to be making all the right moves to ensure they provide competitive offerings and innovative solutions for the third-party channel.
Within these pages, we hope to provide you with a holistic guide to the non-major lenders and outline how they can become your business partners now and into the future.
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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