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Third Party Banking Report 2011 - Second Tier Banks

Staff Reporter 17 minute read

Third Party Banking Report – Second Tier Lenders 2011

BROKERS HAVE always had a strong affinity with the second tier banks.

They provide much needed competition to the mortgage space and in turn keep the broker proposition valid and important.

Bankwest, Citibank and Adelaide Bank were among the first supporters of the broker channel a couple of decades ago.


Since then, branchless banks such as ING DIRECT have popped up, highlighting how important and strong the third party distribution channel is.

This is the second year The Adviser has analysed and ranked Australia’s second tier lenders, and the results were surprising.

Unlike last year when ING DIRECT dominated the field, taking home first place in 11 of the 17 categories, this year’s results were more even.

ING DIRECT still did exceptionally well, ranking first in five of the 17 categories, but Suncorp and Bankwest were also standout performers.

Suncorp has certainly come a long way in the last 12 months.


This time last year the lender was ranked fifth by the third party distribution channel.

However, through vast improvements to its broker service proposition, products, policy and technology platforms, the lender has rocketed up the ranking to be number one in The Adviser’s second annual Third Party Banking Report –Second Tier Lenders.

What is perhaps even more interesting than Suncorp’s success is the collective success of all the second tier lenders.

Every single lender managed to improve on its overall score from last year.

More importantly, all of the lenders managed to beat the marks obtained by two of the majors in The Adviser’s Third Party Bank Ranking – Major Lenders, conducted earlier this year.

More than 300 brokers completed the comprehensive survey, the results of which were analysed by independent research house RFi.

I’d like to once again thank our readers for their outstanding support in participating in this groundbreaking report.

The results not only reveal the leading lending institutions, they also highlight where banks can improve their offering if they are to curry favour with the third party distribution channel.

Jim Hall, Publisher, The Adviser




The Adviser’s Third Party Banking Report – Second Tier Lenders has revealed there is little to separate the nation’s smaller banks

AUSTRALIA’S MAJOR lenders dominate the mortgage market, with the big five currently accounting for the lion’s share of all new mortgages written. Second tier lenders, however, play a critical role in the third party distribution channel.

Importantly, Australia’s second tier lenders help keep the big five honest, ensuring competition remains in the mortgage space.

While frequently they cannot match the majors on price, the second tier more than makes up for it in terms of service, innovation and speed.

Without a second tier committed to third party distribution, the broker proposition would be seriously diluted – and their commitment to the market should not be underestimated.

The second tier currently holds a market share of 13.75 per cent, according to APRA’s August 2011 monthly banking statistics – slightly higher than the 13.6 per cent recorded this time last year.

This amounts to a total residential loan book volume of $144.095 billion, up from $132.073 billion last year.

The following report from The Adviser includes broker perceptions of the seven second tier banks that distribute funds via the broker channel:

  • AMP
  • Adelaide Bank
  • Bankwest
  • Citibank
  • Macquarie Bank
  • Suncorp

This is the first time The Adviser has included Macquarie Bank in the report because at the time of last year’s report, the bank had only just re-entered the market following a GFC-fuelled hiatus.


While Australia’s second tier lenders lack the volumes of the majors, they still managed to outperform the big five across a number of key areas, including client service, broker interaction and channel conflict.

In channel conflict, only CBA obtained a score above 3.34, receiving a mark of 3.61 out of 5.

By contrast, all the second tier lenders managed to record a mark equal to or above 3.34 in the area of channel conflict, suggesting second tier lenders not only understand but also respect the role of the broker in driving business to the bank.

A similar result was obtained for commissions, with all second tier lenders performing well in terms of remuneration, while the majors struggled to make brokers happy.

All the second tier lenders, bar Suncorp, beat the majors in remuneration.

NAB/Homeside scored the highest of the majors, at 2.98, while Suncorp was the only second tier lender to achieve a mark under 3.0.

In commission structure, the second tier was once again stronger, with an average score of around 3.3, compared to the majors’ average of 2.95.

It is worth noting however, that while Australia’s second tier lenders managed to outperform the majors in several key areas, there was a barely discernible difference between how brokers perceived the products, technology platforms and turnaround times of the second tier and those of the big five.


This year’s rankings were very close, with Suncorp just pipping Bankwest at the post to claim the top spot in The Adviser’s Third Party Banking Report – Second Tier Lenders.

Suncorp managed to rocket up the rankings, from fifth place in 2010 to first in 2011.

The lender’s strength in terms of broker service was what propelled Suncorp to top position, with the bank achieving an outstanding six first rankings across the 17 categories.

Suncorp managed to top its competitors in BDM support, broker interaction, education and training, credit assessment, client support and business support.

The results are very different from last year’s, when ING DIRECT dominated the pack, topping 11 categories.

Results in 2011 were more evenly spread: ING DIRECT won five categories, Bankwest topped four and Adelaide Bank and Citibank each took out first place in one category.

Interestingly, each of the lenders ranked in this year’s Third Party Banking Report – Second Tier Lenders managed to improve on its 2010 broker ranking, with Suncorp and Bankwest making the greatest improvement to their broker propositions.

The Adviser applied the following process in compiling this year’s report:

  • In August 2011, brokers who subscribe to The Adviser BULLETIN, the daily email from www.theadviser.com.au, were invited to participate in the survey
  • The seven lenders covered were also given the opportunity to offer brokers who write their products the chance to participate in the survey
  • The survey was promoted twice and remained open for two weeks
  • Survey data was then assessed and analysed by business research house RFi




The pricing and policy of a lender’s product suite can significantly impact where a broker places their business

LENDERS CAN use their products to quickly manipulate market share in particular segments, simply by pushing pricing or tweaking credit criteria so their products align with market demand.

For example, earlier this year, ING DIRECT became one of the first lenders to re-introduce lending up to 95 per cent LVR.

Other lenders preferred to tread with caution, but the move paid off and ING DIRECT recorded solid business volumes over the preceding months.

In The Adviser’s Third Party Banking Report – Second Tier Lenders, brokers were asked to rank lenders on product range, pricing, policy and cross sell.


Regarding the comprehensiveness and quality of a lender’s residential mortgage suite, Bankwest was deemed to have the best products, up from the bank’s second position last year.

The lender managed to achieve a very respectable 3.97 – well ahead of its nearest competitor, ING DIRECT, which scored 3.85.

Meanwhile, Citibank’s Matt Wood told The Adviser recently that the bank was hungry for business and would do whatever it could to ensure its products remain competitively priced.

The effects of Citibank’s aggressive attitude towards pricing will no doubt be reflected in next year’s results.


Lenders have plenty of control in this area. They can open up their policy in a bid to attract more business, or make their policy tighter as a way to refuse business – and with almost immediate effect.

With robust communication channels to broker networks, lenders can move swiftly to promote product enhancements.

On pricing, brokers recognised Bankwest as the best in the business, with a majority of brokers flagging the bank as ‘very good’. Bankwest’s pricing obviously struck a chord, with the lender recording an outstanding 4.11.


Cross sell has grown in popularity over the past couple of years – indeed, ‘diversification’ is now a key industry buzz word. This is in part because of an aggressive push by the major lenders to reward brokers for originating the sale of these products.

But while Bankwest topped the pack, none of the lenders really impressed the third party distribution channel, with a majority of brokers ranking the lenders as ‘average’ or ‘slightly below average’.




The support a broker receives will influence how much business they write with a particular bank and, fortunately, brokers are more than happy with the service they receive from their second tier lender partners

SUPPORT IS incredibly important to brokers and by and large, the results of The Adviser’s Third Party Banking Report – Second Tier Lenders show Australia’s non-majors offer a stronger service proposition than the big five.

The second tier lenders are often seen to be more broker-friendly and to offer faster turnaround times, better access to credit assessment staff and more efficient back-end processes.

In the report, brokers were asked to rank the seven lenders on their credit assessment staff, client support, broker communication, broker interaction, BDMs, training and education, business support, turnaround times and channel conflict.


Suncorp was the standout in terms of broker service, with the lender taking out six of the nine categories in this area.

BDMs was one of the categories topped by Suncorp, which beat the lender’s nearest rival, Bankwest, by 0.13 points.

Suncorp scored a very impressive 3.89, meaning a majority of brokers judged its BDMs to be ‘good’.

More importantly, the lender managed to drag itself up from last place in 2010 to first this year, suggesting Suncorp has done a lot to improve its service offering in the past 12 months – a fact highlighted in the other service category areas.

Bankwest took out second place, with a mark of 3.76.

Again, it is interesting to note that all of the lenders managed to improve their broker ranking compared to last year.

Macquarie was the lowest ranked lender with a score of 3.29, failing to meet broker expectations across any of the service areas. Again, this may not be surprising, given that Macquarie left the broker channel following the GFC.


These unsung heroes are a key touch point for brokers.

Working in unison with a lender’s BDM team can significantly increase the speed with which a deal is turned around, significantly influencing a broker’s servicing capabilities.

Once again, brokers ranked Suncorp as the best lender in this key service area, with a score of 3.48.

Adelaide Bank was hot on Suncorp’s heels, with a mark of 3.44, while all of the lenders bar Citibank managed to improve their broker rankings on last year.

ING DIRECT was actually ranked last overall this year, with a score of 3.09.

This result came as somewhat of a surprise as ING DIRECT last year ranked third in this particular category, behind Citibank and Adelaide Bank.


Brokers have control over the service they offer their clients, but not over the service provided by their lender partners.

The quality of client support provided by the lender therefore becomes very important to the broker as the lender will influence significantly how a borrower feels about their mortgage and their capacity to service it.

Last year, brokers viewed ING DIRECT’s post-settlement support as the best, with 52 per cent describing it as ‘good’ or ‘very good’.

This year the story was a little different.

While ING DIRECT improved its broker ranking from 3.50 in 2010 to 3.55 this year, it was pipped at the post by Suncorp.

Suncorp has come into its own this year, with the lender making considerable inroads on its broker service proposition.

The lender took out first place, with a very commendable 3.64.

Citibank was seen by brokers as providing the least amount of client support and scored 3.13. The lender also placed last in this category in 2010.


Effective and regular communication is key to remaining abreast of lenders’ policy and pricing changes as well as other developments.

With increased levels of competition and constant changes to lenders’ policies, their interaction with brokers can significantly impact the amount of business generated through the third party distribution channel.

As in 2010, ING DIRECT, Suncorp and Bankwest were all seen as effective communicators.

Interestingly, while brokers deemed ING DIRECT to have the weakest credit assessment team, the lender was judged to offer the best broker communication.

A majority of brokers said the lender had ‘very good’ broker communication skills, giving ING DIRECT a mark of 3.74.

Suncorp was not far behind with 3.71.

Adelaide Bank and Macquarie Bank were seen to be the least effective in their broker communications, with both receiving scores of 3.21.


How lenders communicate with their brokers when problems or delays arise can greatly influence the way they are perceived in the third party distribution space.

Lenders that are quick to notify brokers of any potential concerns were ultimately ranked higher in this particular category.

Overall, Suncorp was seen to interact most effectively with brokers and received a score of 3.61, easily beating its nearest rival, Bankwest, which scored 3.46.

Last year, Bankwest fared worst in this area, suggesting the lender has made significant improvements to its broker service proposition over the past 12 months.

AMP Bank was considered to have the weakest interaction with brokers and scored 3.24.


Helping brokers grow their business is a key component of most lenders’ training and education programs.

But while lenders consider business support to be important, few met brokers’ expectations this year, with a majority of brokers considering the lenders’ business support to be ‘average’.

Suncorp was considered best in the area, with a mark of 3.32. The lender easily beat its nearest competitor, Bankwest, which scored 3.09.

Overall, Adelaide Bank was seen as providing the least amount of business support.

The lender, which scored 2.89, failed to make any significant improvement on last year’s performance, having scored only 3.0 in 2010.


Channel conflict is always ‘top of mind’. When the market is flat and competition is fierce, brokers often worry that lenders will look to churn their clients in a bid to drive their own market share.

Generally speaking, banks without a branch presence outperformed lenders that do have a strong physical footprint.

It is therefore not surprising that for the second consecutive year, brokers felt ING DIRECT takes the best approach to the broker channel when compared with a branch network, with the bulk of its distribution via the third party channel.

Bankwest, however, failed to impress brokers in this category, with the lender ranking last overall with a score of 3.34 in this category, slightly above last year’s mark of 2.97.


Ongoing training and education is crucial to both brokers and lenders.

To ensure that brokers continue to promote the respective lenders’ products, these lenders need to ensure their broker partners are well educated and up-to-date with all the latest policy enhancements.

Moreover, with NCCP now in full swing, training and education has undeniably grown in importance in line with the increased compliance demands.

Overall, Suncorp was once again considered to be the standout lender in this particular category, with the bank achieving a mark of 3.46 – suggesting a majority of brokers considers its approach to training and education to be ‘good’ to ‘very good’.

Australia’s other second tier lenders didn’t perform as well as Suncorp, with the average mark sitting at just 3.20.

Several lenders hovered around the 3.20 mark, including ING DIRECT on 3.19, Citibank on 3.16 and AMP Bank on 3.10.

Overall, Adelaide Bank was considered to offer the least amount of broker training and education and scored just 3.04.


When brokers refer to the service levels of a bank or non-bank lender, they are often referring to turnaround times.

A majority of brokers want a deal to be accepted, approved and settled in under a week.

Poor turnaround times were a major issue for brokers a couple of years’ ago, particularly when it came to major banks inundated with applications.

The second tier fared much better, though there were occasions when turnaround times blew out.

Those days seem to be well and truly behind Australia’s second tier lenders, with a majority of brokers saying the lenders’ turnaround times were ‘good’.

Suncorp’s turnaround times were rated best, with the lender scoring 3.38, while Citibank was considered to be the weakest, with a mark of just 3.10.




Australia’s second tier lenders have made great improvements to their technology platforms in the past 12 months, according to the third party distribution channel

WHILE NOT too long ago, brokers were submitting all their loan applications by fax, the story today is very different.

Some brokers run a paperless office, doing everything online, including loan lodgements and lender interaction.

The shift to online lodgements has no doubt increased efficiency across the board; some lenders’ technology platforms are, however, more friendly than those of their competitors.

In this section, brokers ranked the second tier lenders’ online lodgement capacity and web presence.


None of the second tier lenders overawed the third party distribution channel with their online lodgements.

Three of the seven recorded ‘good’ marks, while the remainder were deemed to have ‘average’ efficiency, usability and functionality.

Bankwest pipped Suncorp and ING DIRECT to the post, taking first place and stepping up from last year’s second.

Bankwest and Suncorp were the only two lenders to improve their broker perception in 2011.


As in 2010, ING DIRECT was perceived to have the most effective web portal, with a majority of brokers finding it ‘good’ or ‘very good’.

Bankwest was just 0.1 behind the lender, taking second place with an average broker score of 3.45.

Suncorp also performed well, taking out third position with 3.39.

Macquarie Bank was ranked last, with brokers scoring the lender 2.99.




Broker commissions come in all manner of different structures these days but brokers are certainly more satisfied with the remuneration package offered by second tier banks than that of the majors

COMMISSIONS HAVE frequently been a sore point for brokers and as the cuts began to smart, so brokers have been forced to rethink their service proposition, considering diversification into other product areas.

However, thanks to increased commission payments this year from lenders such as Bankwest, the second tier did not fair too badly when it came to broker perception in this area.

In fact, not only did every second tier lender see an improvement in overall broker perception this year, but also they managed to beat the results achieved by the big banks in The Adviser’s Third Party Banking Report – Major Lenders.


Citibank was the standout performer in terms of commission structure, indicating a solid return to form for the lender.

According to the results, Citibank’s commission structure is considered to be ‘very good’, with a simple model that appealed to brokers.

ING DIRECT and AMP were both nipping at Citibank’s heels, with a majority of brokers ranking their structures as ‘good’ to ‘very good’, while Suncorp, as last year, was perceived to have the weakest structure, scoring 3.02.

Suncorp nevertheless improved on last year’s score of 2.89 in this area.


ING DIRECT managed to pip Citibank at the post when it came to commission remuneration, with the lender scoring 3.24.

All the second tier lenders managed to beat the majors on remuneration with the exception of Suncorp which, in line with the lender’s commission structure, was perceived to have the weakest broker offering in terms of overall commission paid.

Suncorp achieved a score of 2.88, with a majority of brokers considering the lender’s remuneration ‘poor’ to ‘average’.

Third Party Banking Report 2011 - Second Tier Banks
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