CBA CEO acknowledges brokers following mortgage growth

Its home lending book was up $36.4 billion, while business lending grew by 13.6 per cent, to $15.4 billion.

CBA’s mortgage book totalled $556 billion by the end of June 2022, up from $516 billion, of which 71 per cent were owner-occupied loans, 28 per cent were investment home loans and 2 per cent were lines of credit. 

New loans written by brokers increased to 46 per cent as at June 2022 (up from 44 per cent the year prior), however it dropped from the 49 per cent recorded in the six months to December.

Overall, brokers continue to be responsible for around 46 per cent of all mortgages on CBA’s books (including Bankwest). 

When excluding Bankwest, brokers wrote 40 per cent of new loans over the six months to June 2022 (and are responsible for 40 per cent of the overall book).

CBA CEO Matt Comyn noted the importance the third-party channel has played and will continue to play during the uncertain economic climate.

“We recognise that the broker channel is an important partnership [channel] for us to continue to work closely with,” Mr Comyn said.

The bank's priorities going forward are to continue growth in all three channels (proprietary, broker and online).

However, he also outlined that the branch network (which is the largest in Australia) "continues to be an incredibly important part of [the] business".

Mr Comyn told analysts: "Over the course of a year, a few million customers will visit us in one of our branches. That compares to our digital experience, where we see, on average, nearly nine million logins per day.

"And so the digital distribution advantage as a complement to physical, drives that increasing returns to scale. When combined with a better overall digital proposition, this creates even more points of difference that customers can experience every day."

The major bank suggested said that around 85 per cent of applications were manually decisioned within five business days for brokers (for May for both simple and complex loans), with 62 per cent of proprietary loans auto-decisioned.

Mr Comyn said: "The operational performance of our home buying business remains strong. We decision 85 per cent of our home loan applications within a day and 62 per cent of proprietary applications are auto decisions in less than 10 minutes."

"Through our strategy, we remain focused on building the best overall customer experience in a digital era. And making sure we deliver a superior sand distinctive proposition, one that is more convenient, more integrated and brings more value for our customers," he said.

Future outlook

Given the cash rate has lifted four consecutive times since May, taking it to 1.85 per cent, he said that the dip in home loan growth in the latter half of the year was expected, which reflected the uptick in refinances and business lending. 

“We’ve seen a marked shift from owner-occupier and first home buyers towards refinances and investors, some of which has been driven by the increase in the cash rate,” Mr Comyn said.

He added that the bank expects more refinances in the near future and increased focus was on customers with fixed-rate mortgages. 

"We've also seen intense competition and an escalation in price-based offers," he said, adding that the bank had "taken a disciplined approach to managing volume, margin and risk and are conscious of the underlying funding market and heightened risk environment".

“Given that 40 per cent of mortgages are fixed, and the majority will mature in the next two years, the impact of rising rates will continue to grow,” Mr Comyn said.

Fixed rate loans marked 25 per cent of home lending, down from 44 per cent, while variable loans accounted for 75 per cent up from 56 per cent in June 2021. 

With inflation running hot, Mr Comyn noted “heightened uncertainty” and consumer confidence had fallen below levels seen in the GFC, which had contributed to a shift towards variable.

The report also noted loan impairment expenses dropped by $911 million to a “benefit” of $357 million, driven by reduced COVID-19 overlays, which were partly offset by increased “forward-looking adjustments” for emerging risks such as inflation, supply chain disruptions and interest rate rises.

Consumer arrears, which include home loans, credit cards and personal loans, all remained low as a result of “good origination quality, low unemployment, and significant household savings buffers”, the bank reported.

Mr Comyn said overall the mortgage performance over the course of the year was “just below system” although performed better in the first half, compared to the second. 

He concluded: “It is a challenging time but we remain optimistic that a path can be found to navigate through these economic conditions.

“We remain of the view that the medium term outlook for Australia is a positive one. Our purpose, to build a brighter future for all, reflects the role we play in supporting our customers and the domestic economy during periods of uncertainty,” Mr Comyn said.

[Related: CBA chasing brokers as flows slow]