Australia’s fifth largest retail bank, ING DIRECT, has said it plans to go head-to-head with the big four this year in a bid to snag a larger share of the mortgage market.
The lender’s chief executive Don Koch told The Australian Financial Review that the bank plans to draw on its billion dollar global savings pool in order to challenge the stranglehold the majors currently have over the mortgage market.
Mr Koch said the bank has the capacity to write more than $11 billion of mortgages each year, up from the $7.3 billion gross it posted last year.
“We are looking at a couple of alternate options to fund growth, such as covered bonds or the ability to tap our $487 billion in savings around the world and bring that in without withholding tax to fund mortgage growth,” Mr Koch said.
“We have given the leader of our mortgage business a 70 per cent growth target this year. We are already competing with the major banks and we want to go further.”
Last week, the bank posted a record increase in net profit after tax for the six months to 31 December.
The second tier lender recorded a net profit of $263.7 million, and while major banks wrote almost 90 per cent of all new mortgages it recorded $1.3 billion growth in home loans on its $36 billion portfolio.
Moreover, the bank’s regulatory capital ratio increased from 12.8 per cent at the end of 2008 to 13.1 per cent in 2009 and its tier 1 ratio increased to 8.7 per cent.
Mr Koch said while the bank is unable to compete with the majors on price at the moment, it can compete on innovation.
The lender plans to launch a term deposit product later this year, and a small business product in the longer term.
Several months ago, the lender launched an offset product in response to broker demand.
Speaking exclusively to The Adviser, ING DIRECT’s executive director of mortgages Lisa Claes said brokers had been crying out for an effective offset product.
“We listen to our brokers. They are our most important channel, so we are determined to provide them with the best products available,” Ms Claes said.
“The offset market accounts for 15 per cent of the entire market, so we have developed an offset product that can cater to this sector.”