Strong broking industry ‘fundamental’ to competition: Bank CEO

“The mortgage broker industry is fundamental to competition in the home lending market in Australia,” the CEO said.  

Mr Sulicich’s remarks were in response to a question regarding the Productivity Commission’s proposed recommendations concerning remuneration and disclosure reform in the broking industry.

“While the Productivity Commission recommended some changes to the way mortgage brokers are remunerated, the industry itself is working through increased transparency and some changes to the way that commissions are paid to brokers,” Mr Sulicich continued.

“The government is fully aware that the mortgage broker industry is fundamental to competition, in the home lending market, and whatever changes they think about making, they will make, I’m sure, in the background of ensuring that the industry continues to thrive.

“It’s incredibly critical for us, it’s incredibly critical for all of the smaller banks to have a strong mortgage broker industry, and I think it’s incredibly critical for the Australian public and the Australian [economy].”

However, the CEO expressed support for measures that would increase transparency and disclosure across vertically integrated third-party businesses.

“What we’ve asked for is increased transparency and disclosure on vertically integrated mortgage broker businesses so that it’s clear for customers if they’re getting a loan from a broker, what balance sheet that loan is going to, if the aggregator is owned by a bank,” Mr Sulicich said.

In its final report, the PC urged the federal government to appoint a “principal integrity officer” (PIO), charged with “monitoring and reporting on all commissions paid for wealth and credit products” within a vertically integrated financial entity.

Additionally, when asked if he supported the PC’s recommendation to remove trail commission in the broking industry, the CEO added: “I don’t hold a particular view on it. I’d rather not comment or speculate on it. I’d just say that any changes to commissions that are instigated by the government would have to be done against the backdrop of ensuring that the industry continues to grow and thrive; it’s very important to the Australian economy that this industry continues to grow and thrive.”

Further, Mr Sulicich stated that the bank plans to continue investing in its third-party network, noting that brokers originate over 70 per cent of the lender’s home loan applications.

“We’ve invested more in our mortgage broker distribution [network] over the last 12 months, and we’ll continue to invest in that channel; it’s important to us and it’s a growing channel for us,” the CEO said.

“Over 70 per cent of our applications currently come through our mortgage broker network and we anticipate that it will continue to grow overtime.”

MyState’s FY18 results

Moreover, the bank has revealed that, over the 2018 financial year, its home loan portfolio grew by 7 per cent, from $4 billion in FY17 to $4.4 billion. The bank noted that growth in its mortgage settlements were 1.2 times bigger than system.

“Increasingly, we are benefitting from more targeted marketing, supported by our innovation in technology which enables us to increase scale and compete more effectively,” Mr Sulicich said.

“Over the last two years, our loan book has grown at an annualised rate of nearly 9 per cent while maintaining very high-quality lending.”

Despite reporting above-system home lending growth, its total lending flows dropped year-on-year. The overall value of the bank’s home loan settlements were $8 million lower than in the previous corresponding period, with flows falling from an overall value of $1.19 billion in FY17 to $1.1 billion in FY18.

However, on the whole, MyState’s overall funds under management (FUM) increased by 6 per cent to $1.15 billion, with its net profit after tax (NPAT) also rising, increasing by 4.6 per cent to $31.5 million.

“This was a strong result with increased profit, supported by productivity gains and cost management,” the CEO added.

“Revenue increased and underlying costs were steady, delivering positive jaws with the cost-to-income ratio improving by 190 basis points.

“Improving customer services was also recognised by an increase in the group’s net promoter score to +27 at the end of the financial year.”

Mr Sulicich added: “We made significant progress, continuing to build and refine our digital proposition which positions MyState as a modern customer-centric bank.

“We are committed to creating the best customer experience and have improved our online platform, which offers customers personal loan, transaction account and term deposit products.”

[Related: Expenses probed as regional bank takes loans from majors]