BNK settlements drop as it pivots to SME lending

The ASX-listed lender, which bills itself as “the brokers’ bank with over 40 years of experience”, settled a total of $174 million in 2Q23, down 44 per cent on the previous quarter and down 35 per cent from $268 million in the same period last year.

The largest drop was from on-balance sheet settlements, which were down from $175 million in the first quarter to $59 million.

This was followed by a fall in settlements in its specialist warehouse (funded via its alliance with Goldman Sachs), which were down from $103 million to $67 million over the quarter and represented a decrease of 30 per cent from $96 million in Q2 FY22.

However, BNK’s prime warehouse (funded through Bendigo and Adelaide Bank) grew to $48 million in settlements, up from $27 million the quarter before. The prime warehouse also fared better than it did in Q2 FY2022 when it settled $42 million.

According to the group, the overall drop in loan settlements was “broadly in line with the wider residential housing market” as rates continued to rise and reflects a change in strategy to its focus on higher-margin SME lending.

BNK chief executive Allan Savins commented: “Our total lending portfolio continues to grow, reaching $2.8 billion at the end of the quarter. However, our trading results for the second quarter reflect the impact of RBA cash rate rises on buyer sentiment as well as tough competition in the mortgage market with settlements down on Q2 FY2022.”

Looking forward, the bank said it would continue its pivot to “higher margin” commercial lending.

Mr Savins said: “This quarter’s results also reflect our strategy to pivot to higher margin SME lending, preserving capital for higher margin assets. 

“We launched this strategy in Q1 FY23 with an aim of achieving 15–20 per cent in commercial property settlements this financial year and thanks to the strong pipeline, we are well on track to achieve this goal.”

BNK’s on-balance sheet portfolio grew to $1.16 billion in the second quarter, up 3 per cent on the prior quarter and a 58 per cent increase year-on-year.

“Our loan book has continued to grow, reaching $1.2 billion at the end of the quarter, reflecting a 58 per cent year-on-year increase and brokers continue to value the diverse range of products offered through the BNK Better Choice brand,” Mr Savins said. 

‘“We also experienced robust growth in deposits during the quarter with term deposits contributing 43 per cent of total deposits, reducing risk in the loan book.

“We remain focused on our long-term strategy of achieving a cash NPAT in FY24.”

[Related: BNK launches into SME lending]