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Third-Party Banking Report 2015 – Non-Major Lenders
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Third-Party Banking Report 2015 – Non-Major Lenders

Friday, 04 September 2015 Comments 0
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The non-banksThis year’s survey attracted a massive 1,017 responses from brokers Australia-wide, generating a wealth of data on the performance of non-banks from the perspective of those most in the know. Who is the most improved? And who’s gone backwards? Read on to find out …

The relationship between finance brokers and non-major banks is undeniably two-way. Brokers rely heavily on the diversity of lenders and loan products as the essence of their business, while a sizeable portion of the loans written by non-major banks are introduced by brokers, helping them to compete against the large branch networks of the big four.

Indeed, when releasing its end-of-year profit results in August, Heritage Bank CEO John Minz told The Adviser that the bank originated around 46 per cent of all its approved loans last financial year, and the bank is aiming to increase that to around 50 per cent this year.

The annual ranking of the non-majors has become a key source of intelligence data for brokers and lenders alike. The former can see how their experience with various banks compares with that of their peers, while lenders can use the feedback from brokers to recognise their core strengths and identify areas in need of improvement, as well as where they sit among their competitors.

This point is particularly significant given that around 58 per cent of respondents said they have been in the mortgage industry for a decade or more, highlighting the high level of experience and weight of their opinions.
As with previous years, the Likert Rating Scale was used to compile this year’s results across four main categories – products, support, technology and the all-important commissions.

For each question, brokers were asked to rate each lender out of five, with one being very poor, and five being very good. The numbers were then tallied to create the overall category ranking. It’s important to remember that, as the name suggests, this is a scale – meaning that lenders can all potentially be excelling (or failing) in a particular area, regardless of their ranking.

As a guide, any score above 3.5 means that brokers consider the lender to be competent in that area, while a score of 4.0 or more is a sign of excellence.
So, with that said, let’s kick things off as we put the non-major banks under the microscope.

Where the loans go

Before we get into the actual rankings of the banks based on their products and services, it’s interesting to take a look at just where brokers are writing their loans.

Across the non-majors and the big four combined, there are some surprises in terms of who attracts the most loan referrals from brokers.

Despite being the largest holder of residential loans in the country, CBA came in second (albeit a fairly close second) in terms of broker-fed loans. Brokers reported ANZ received the bulk of their business over the past year, with 77.35 per cent of respondents writing loans with the bank.

The remaining big four banks were beaten down the list as ING Direct took out the third most popular loan writer overall, with 70.26 per cent of respondents writing loans with the international lender.

NAB Broker was fourth, with loans coming from 65.07 per cent of brokers, while Westpac and Suncorp virtually tied for fifth with 58.18 per cent and 58.08 per cent respectively.

Interestingly, nearly 10 per cent (9.94 per cent) of brokers are bypassing the bigger banks when writing the majority of their loans. Regional banks, credit unions and franchise brokerage’s in-house products are among the array of alternate lenders receiving business from brokers. Among these were Liberty, Choicelend, BOQ, Teachers Mutual Bank and Resimac.

Product Ranking

Overall there was not a great deal of movement in the product rankings since last year’s survey, with the majority staying in the same, or a very similar, ranking on the table. Adelaide Bank was the most improved over the period, climbing three spaces from tenth to seventh, while Suncorp Bank rose to second on the list from fourth in 2014.

Save for those two, the scores for 2015 are sadly a disappointing read when compared to last year’s results. Most of the banks saw their scores go backwards. It was the same when looking at the longer-term performances across each of the product-specific questions, with survey respondents putting most lenders below their longer-term average.

Those with the biggest room for improvement in product offering are AMP, which dropped two spots to ninth place on the list for overall product satisfaction, and Heritage Bank, which fell from ninth to tenth.

Product range

“Most lenders have a niche product and offer a good product style that suits a solid part of the market. Some lack the broad product range and have limited or difficult processes to manage client expectations during their loan term,” suggests one broker. ING Direct retained its number one ranking in the space, but comments were decidedly mixed about its products, helping to explain why its score slipped below four for the first time. “ING and ME Bank – excellent turnaround, BDM access and features… and ING has great banking facilities,” says one respondent. “We have found that ING’s product range is a little clunky,” complains another.

Market share

Product pricing

When it comes to product pricing, ING Direct is yet again the clear winner, respondents say. The bank was the only lender to receive a score above four (indicating excellence), and has consistently done so since 2013. However Suncorp came within a whisker of achieving that level, scoring 3.99 – its best result in the category, which helped lift it into second place. “ING Direct – best pricing in the market,” one respondent declares. Yet pricing isn’t the be all and end all. “Being cheap is one thing, however being cheap and flexible is another. Clients are wanting a great flexible product at an equally cheap rate,” explains another.

Product policy

St George Banking Group and Adelaide Bank saw the biggest improvements in perception of their product policies, both increasing three places to second and seventh respectively, and both setting new personal best scores in the process. Meanwhile the ‘try harder’ scorecard was handed down to Bankwest (which fell three spots to fifth), Citibank (down two spots to ninth) and Heritage Bank, which fell one place to collect the wooden spoon. “The banks [I] rated ‘poor’… are the banks that are willing to take our ‘vanilla’ deals but are very difficult to deal with when we have a scenario outside the box. Diversity and difference with policy is key to become a chosen lender,” comments one broker.

Product cross-sell

Interestingly, movement among the rankings in this category was almost exclusively confined to the top four. ING Direct gave up its lead thanks to a strong performance by the St George Banking Group, while Suncorp Bank climbed one spot into third at the expense of Bankwest, which dropped two spots to fourth. Despite the rankings, many brokers reported not seeing the point of cross-selling opportunities. “Why cross-sell if we get nothing for it? Often the bank stuffs up the account and creates further issues and we don’t get a cent for doing it,” says one.

Technology

Just 0.03 points separated ING Direct and the St George Group at one and two respectively in the technology ranking. Both banks benefited from falling satisfaction with Macquarie Bank’s technology offering, which saw it slide from the top spot down to third place.

Despite the ever-increasing reliance on technology in modern day business, many brokers suggested the technology offerings of banks are not as critical as other aspects of the loan application procedure – in no small part due to the often sophisticated technology offering provided by aggregators.

Web presence

When it comes to web presence, just two of the banks (St George Group and ING Direct) scored above the 3.5 mark indicating a satisfactory performance in the field. Yet as poor as this result sounds, it is double the number of banks that achieved this status in 2014. St George, together with AMP Bank and ME, were the only banks to see an improved score over the last 12 months, with all others going backwards. Irregular web updates and information that is difficult to find or missing altogether were the biggest gripes cited by respondents.

Online tracking

Regardless of the rankings, when it comes to online tracking of loan progress, all of the banks failed to make a great impression. Every lender received an “average” rating from the majority of respondents, and not one bank surpassed the 3.5 score level. ME and Heritage Bank received the worst reviews, with more than 11 per cent for both describing their offering as “very poor”. “The tracking system is a waste of time as it is never updated,” one broker quips, which sums up a number of comments from frustrated brokers.

Online lodgements

Virtually all the lenders maintained the same rankings for online lodgements as last year, with the main exceptions being a surge by St George Group (up three places to second) and a fall by Bankwest (down from third to fifth). Nevertheless, Bankwest still notched up a score higher than its multi-year average, as did St George Group, Macquarie, AMP Bank, Adelaide Bank and ME. Many brokers reported using their aggregator’s CRM to lodge loan applications rather than the bank’s own site, making this service offering redundant. However a surprising number expressed frustrations at “clunky” websites and, in a couple of cases, the insistence of banks to submit documents via fax – a complaint The Adviser previously raised with several lenders following our tech survey.

Online resources

In a relatively stable rating, it was once again St George Group and AMP Bank that delivered the sole improvements on their 2014 performances when it came to online resources. Several brokers highlight discharge forms as one online resource in need of improvement across the board, with forms being either outdated or inaccessible altogether.

Valuation ordering

For the second year running it was Macquarie Bank that was rated highest for functionality and efficiency of valuation ordering, sitting comfortably ahead of next best performers ING Direct and AMP Bank. ING Direct was ranked fourth for its valuation offering in 2014, but managed to improve on this to take out second spot this year. “Upfront valuations are a must these days,” declares one respondent, while another complains of inconsistencies and an over-emphasis on valuations by many banks.

Mobile device interface

It the results of this survey are anything to go by, none of the banks are placing much significance on their interface for mobile devices. Brokers were asked about the ease of use of software and interfaces for both tablets and smartphones. Less than half a point separated the top ranked bank (St George Group) from the bottom (Heritage Bank), and none came close to achieving the desired 3.5 level indicating competence. Yet as the FBAA’s Peter White recently told The Adviser, take-up of mobile technologies for loan processing is still a way off given the gaps in processing and document submission. As such, this poor showing could reflect as much about demand for mobile interfaces as it does lenders’ offerings.

Support

Support an ongoing source of frustration for brokers, and one area in which banks clearly still have work to do to satisfy third-party needs.

A number of brokers commended banks on their loan products, but complained that service standards let down the overall experience for both them and their clients. For example, one broker says: “Suncorp offer great rates, but their approval time is terrible.”

Yet there is one standout performer among this year’s rankings which deserves recognition for a significant turnaround in its support offering to brokers and customers. St George Group was at the bottom of the ladder in 2014, but has this year soared up to fourth place, missing out on third place by a slender margin.

AMP Bank was also recognised for improved broker support, climbing two places to round out the top five.

Credit assessment staff

Proving that size isn’t everything, Adelaide Bank showed it can match the credit assessment standards of larger players by taking out the number four spot – one place higher than in 2014. “The only issue with the credit assessment staff is the difference between good and poor is very big: whilst some are exceptional, one wonders how the others even got their jobs!” concludes one respondent.

BDM support

Sadly, BDM support is one of the greatest failings among the banks. As one broker says: “Communication with any bank’s BDMs is so important as to how I feel about their products. If the BDM shows no smart interest in communications, then I put them in a group of non-communicators. Doesn’t matter how good their products or interest rates are, there is always another lender close by in most fields.” Despite this, another complains that it has “been years” since they had heard from their BDM with one of the bigger banks. Just three out of 10 banks scored above their multi-year average (Macquarie Bank, AMP Bank and St George Banking Group), and only two (Macquarie Bank and ING Direct) scored above the 3.5 point mark that distinguishes a lender as being competent.

Aggregator and broker support

Turnaround times

Broker are clearly not impressed with the turnaround times of the non-major banks either, with just two (St George Group and AMP Bank) increasing their scores from last year, and even then only by the most slender of margins. “10 days to two weeks to pick up files is just not acceptable,” says one broker. “I don’t think anyone is very good these days,” adds another. Just one lender – Macquarie Bank – recorded a score above the 3.5 competency threshold, and even its score was well down on what it recorded in both 2013 and 2014.

Channel conflict

An important consideration for brokers is how banks approach the third-party channel compared with their own branch network. ING Direct topped the list for the third consecutive year, maintaining its status with a rating of 4.0. Several brokers expressed dismay at banks poaching clients off brokers, but this was far from a universal complaint. “AMP will notify me if any existing client contacts them,” explains one broker, demonstrating one of many examples provided of a commitment to long-term broker-lender relations.

Broker communication

The biggest mover in broker communication this year was Citibank, and sadly it wasn’t in a positive direction. Having been ranked third for broker communication in 2014, this year it came in well outside of the top five. The big winner by a mile was St George/Bank of Melbourne/Bank SA, which soared from last place on last year’s ranking into fourth in 2015.

Call centre support

This year’s average across all the banks slipped, with just three (Adelaide Bank, AMP Bank and St George Group) improving on their scores from 2014. Adelaide Bank took it to its bigger rivals ranking third in the category, while the latter two saw huge improvements rising from ninth to fifth and tenth to sixth respectively.

Location Experience level Loans settled

Client support

Only two of the banks (ING Direct and Macquarie Bank) scored above the 3.5 satisfaction level, indicating a lot more room to improve when it comes to client support. Again, it was St George and AMP Bank which saw the biggest improvements (up from seventh to fourth and tenth to seventh respectively). ME Bank slipped noticeably down the rankings, falling from fifth to ninth this year.

Commitment to brokers

Interestingly 2015 has seen a marked improvement by most banks in terms of their commitment to brokers, demonstrating the importance of the third-party channel to the overall mortgage market. Most of the lenders improved their scores this year, although there were two notable exceptions – Bankwest fell from fourth to eighth, while Citibank plummeted from third to ninth. Heritage Bank also dipped slightly, taking out tenth spot compared to ninth in 2014.

Broker interaction

ING Direct and Macquarie Bank were clear standouts for their interaction with brokers, with all other banks scoring within just 0.40 points of each other. There has been an undeniable upswing over the years in the scores brokers afford the non-major banks for broker interaction, and this year marked the first time that all 10 banks scored above 3.00. The long-term averages make for appalling reading though, ranging from as little as 0.99 to 2.49 – bearing in mind that a score of 4.00 is needed to be considered excellent. This demonstrates just how far the banks have come in terms of interacting with brokers in the space of just a few short years.

Training and education

In an unusual turn of events, three banks (ING Direct, Macquarie Bank and the St George Group) all tied for first in this category. Sadly though, the raw scores didn’t make for enjoyable reading. Brokers were highly critical of the training and education offering of all of the banks, with none of the lenders reaching the 3.5 point level. Some banks saw their scores fall by considerable amounts from just 12 months earlier, and four of the lenders failed to achieve a score above 3.00.

Business support

Business support was even grimmer for the banks. St George was the only lender to have improved on its 2014 score, which helped it jump in the rankings from seventh to third (with ING Direct and Macquarie Bank tied for first). Its score was head and shoulders above its long-term average. All other banks, meanwhile, fought in a race to the bottom, with their 2015 scores falling below those of both the previous year and their long-term averages. With an average score in 2015 of just 2.95, all 10 banks have a long way to go to show brokers they are committed to business support.

Commission

While virtually everyone operating in the third-party channel enjoys the people-facing aspect of their job, at the end of the day it is still a job and brokers, just like everyone else, deserve to be paid for their efforts.

It was a tight contest between all of the lenders in terms of commissions. As with other categories, it was again the St George Banking Group that excelled in this space, moving into third place following last year’s ninth-place ranking. Heading backwards in the commission stakes were Citibank, falling from third to seventh, and Bankwest, from fourth to eighth.

It will be interesting to see the results next year as competition for owner-occupier loans intensifies on the back of investor lending restrictions, and whether this competition feeds into better remunerations and higher commissions for loan introducers.

Commission structure

As you would expect, commission structure was a hotly contested aspect of the rankings. Making an impressive jump into the top five this year were Suncorp Bank and the St George Group, which tied for third. In 2014, Suncorp Bank was in sixth position, while St George occupied ninth place. Less than impressive though were Citibank, which fell from third to seventh, and Bankwest, sliding from fifth to eighth. Heritage Bank retained its place at the bottom of the rankings. “0.15 per cent trail doesn’t cut the mustard,” argues one broker. Many others, however, say they are less interested in commissions than they are in the repeat business generated from finding the right loan for their client, regardless of the financial rewards for themselves. “I don’t worry about the commission structures, as it is about looking after my clients first and foremost. The remuneration will look after itself, so for this section I have scored everyone average,” says one broker typifying the arguments for clients over commissions.

Remuneration

Brokers were also decidedly fired up about remuneration. “We are doing so much more work for little reward. We are now doing the banks’ job,” laments one. “The GFC is over, trail needs to head back to 0.25 per cent, not the standard 0.15 per cent. If a lender [wants] to increase market share, offer good service (pick up a file within 48 hours), clear and sensible credit standards consistently applied by ‘can do’ credit assessors, good pricing applied ethically, and good remuneration to brokers (0.60 per cent upfront and 0.25 per cent trail),” says another. Lenders such as ING and Suncorp were praised for their use of a ramped trail. Meanwhile Bankwest, in particular, was savaged for its decision not to offer a trail commission during the first year, which helps explain its significant decline in the rankings this year. Citibank also fell in the popularity stakes. Most banks were rated ‘average’ by the overwhelming majority of respondents.

Overall ranking

This year’s rankings, perhaps more than any other before it, demonstrate the two-tier nature of mortgage lending within Australia’s non-major banking sector.

The larger banks – comprising ING Direct, Macquarie Bank, the St George Banking Group and Suncorp Bank – clearly stand out grouped together at the top of the rankings, while the smaller banks, for the most part, form a second grouping together slightly lower down the scale.

There can be no doubt, though, that the big winner in this year’s rankings is the St George Banking Group. While it didn’t take out the top spot, the group is by far the most improved, having jumped from sixth place in 2014 to third overall this year, on the back of huge improvements across three of the four survey categories. ING Direct and Macquarie Bank maintained their domination of the rankings in first and second place respectively. Yet while their rankings remain unchanged, both recorded slightly lower scores this year than last.

Suncorp takes out the award for consistency, maintaining an identical ranking (fourth) and overall score two years running. Bankwest rounded out the top five rankings in 2015, having slipped into fifth place this year from third in 2014.

Comparison overview

Click here for the complete category breakdowns.

Third-Party Banking Report 2015 – Non-Major Lenders
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