The major bank has said that it is committed to providing “greater certainty” on turnaround times and “greater clarity” to brokers around lending policies following a period of mortgage softening.
Speaking following the release of Pillar 3 data for the June quarter, ANZ’s head of Australian retail and commercial banking, Mark Hand, noted the weakness in the mortgage book (as reported in the first quarter and half year results).
As previously announced, ANZ failed to report portfolio growth in June, with its overall book contracting $1.9 billion to $253.6 billion, taking the cumulative contraction in its portfolio in the 2019 calendar year to $5.1 billion.
Despite driving the overall increase in competitors’ mortgage books, the owner-occupied portfolio was primarily responsible for ANZ’s contraction in June, slipping by $1.2 billion to $176.9 billion.
As indicated at ANZ’s first half result presentation, expectation was for home loan volumes in Australia to decline during the June quarter, with owner-occupier loans down 0.2 per cent and investor down 1.8 per cent (June 2019 compared with March 2019).
ANZ’s investment portfolio also declined, decreasing by $700 million to $76.7 billion.
Following the release of the bank’s half year 2019 financial results (1H19), CEO Shayne Elliott told Mortgage Business that ANZ’s weakened position in the mortgage market was attributable to a “conscious” decision to revise its home lending strategy.
This was echoed by Mr Hand following the release of the Pillar 3 data, when he noted that while it “takes a long time to right the ship”, the bank was focused on providing greater clarity to brokers, customers and mobile lenders alike.
Mr Hand said: “We’re doing a lot. And one of the things we made the point at the time is it takes a long time to right the ship. And so it will take some time before we start to see that in our settlements. But the main focus for us has been clarifying for our own people, for the brokers and mobile lenders what the policy is, how we approve a customer, how we think about a customer’s ability to borrow. And applying those principles consistently.”
He continued: “I think it’s fair to say that we had made it difficult for our people and the brokers to be certain that they’re going to get a response and that could be a ‘yes’ that could be a ‘no’. But a certainty of response was what they were looking for and we hadn’t provided that for some time. So, most of our efforts have been about: How do we make sure everybody clearly understands what our policies are? How do we make sure that we get back to the broker or the customer in a reasonable timeframe? And we said at the half that the time to say ‘yes’ to a customer was too long, we’d lost our way a little bit in that space.
“We’ve done a lot of work about getting that back to, what we consider, back to market, so that a customer can say with certainty, or a broker can say with certainty, ANZ will likely do this deal and they’ll come back to me within a certain timeline.”
According to the major bank, its work on improving transparency and clarity had already resulted in a shift in home loan applications, which reportedly improved in July 2019 (although no official figures have been released yet).
Mr Hand explained: “It takes a while (even if we had a really successful period) before loans start to settle and you start to see it on your balance sheet. But we’ve absolutely seen it over the application numbers…
“We’ve absolutely seen that in the marketplace that applications have started coming to us again.
“We’re seeing volumes that we’re happy with. The next stage is to sustain that, certainly beyond the end of the campaign and see that transfer into settlements over the coming months.”
The head of Australia retail and commercial banking went on to outline that while the bank had previously said it would have a renewed focus on owner-occupiers (as they are “one of the best customers that we want to deal with because they typically have a lot more of their other banking with us as well”), Mr Hand added that the bank had “probably overcorrected and ignored the investor to an extent”.
“We’ve seen investor come back in recent applications to be about 25 to 30 per cent of our volumes,” Mr Hand explained.
“It had fallen way behind that number. So what we have done, rather than move away from owner-occupiers, is sharpen our focus on investor, and we’ll continue to do that going forward.”
In conclusion, Mr Hand said that the bank would continue to provide more clarity and consistency around its risk appetite and credit policy moving forward.
“[It] all comes back to that clarity and that consistency of approach, and the reason we lost our way because it was unclear whether we would do a deal and we certainly didn’t come back to customers and brokers quick enough.
“So, all our focus has been on improving that process, improving that consistency, re-teaching an assessor what a loan looks like, improving the input quality in the front lines – they know exactly what to put forward to get to an answer much quicker – and that’s been our absolute focus.”
In the Pillar 3 disclosure statement for the quarter ending 30 June 2019, ANZ revealed that its total provision charge of $209 million for the June quarter remained “broadly flat” compared with the 1H19 quarterly average, while the individual provision increased by $68 million to $258 million.
[Related: Major bank suffers blow in broker space]