Look back just three months, as winter was coming, and the major banks were handing out high cashbacks in a bid to wrest mortgage flows from their competitors. But now, as the stark reality of writing loans below the cost of capital bites, the game of thrones has been shifting. We take a look at how the market share of the big four banks has been changing, and what brokers think about them
There’s been a remarkable turnabout in the fortunes of the major banks recently. While the big four bank’s market share had been dwindling over the past few years amid stronger competition from non-majors and non-banks, the refinance boom has been the golden ticket for Australia and New Zealand Banking Group (ANZ), the Commonwealth Bank of Australia (CBA), National Australia Bank (NAB), and Westpac Banking Corporation (Westpac).
When borrowers rolled off their super-low fixed rates and slipped off the fixed-rate cliff, the major banks were there with a safety net. Home owners grappling with substantial interest rate changes sought comfort in the fact that the majors were offering substantial cashbacks to help ease the burden. Like it was in 2020 when the pandemic first hit, cashbacks have led to a spike in major bank market share.
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As of June 2023, CBA’s total mortgage book grew to approximately $546 billion by the end of June, increasing over $2 billion in the month.
CBA’s owner-occupied book grew 6 per cent over the year to June, ending the financial year at $366 billion, Westpac went up 5 per cent to $293 billion, NAB increased 4.5 per cent to $201 billion, while ANZ (the smallest of the majors) made the most growth in its owner-occupier book, growing by more than 7 per cent in the year to June, finishing the financial year with an owner-occupied book of $186.5 billion. For ANZ, it’s likely that the fact it remains the only major bank to have a cashback offer in market will help continue to bolster its market share.
Broker clients are also flocking back to the majors. In March 2023, Momentum Intelligence’s Broker Pulse survey found that 81 per cent of brokers had used a major bank for their clients; the second-largest proportion recorded by the survey series.
The figure was up from 74 per cent in February and was just shy of the record high of 82 per cent in September 2022.
The primary reason brokers cited for choosing a major bank was ‘client circumstances’, while product pricing placed second at 43 per cent.
Moreover, according to Australia Finance Group’s Mortgage Index, the major lenders’ market share was back up over 60 per cent for the first six months of the calendar year – levels not seen in 2017 (excluding a blip in 2020 when the pandemic first hit).
According to AFG, the majors have been able to dominate recently given they had access to a deeper pool of deposits and therefore have a significant advantage over their smaller competitors through a ratings uplift, thus enhancing a lower capital costs structure.
AFG chief executive David Bailey commented: “This tilts the playing field in favour of the major lenders with their funding advantages and higher interest rates for existing customers creating an arbitrage that has enabled them to offer discounts and ‘cashback’ deals to lure new customers.”
But the majors have also been tweaking their offerings, policies, and personnel for the third-party channel. Both CBA and Westpac updated their clawback policies recently following broker feedback (see page 6 for more) and NAB CEO Ross McEwan recently acknowledged the role that brokers play in saving borrowers’ money – flagging that they have been busy at work refinancing customers.
Brokers have been responding positively to the offerings from these four giants. When Momentum Intelligence surveyed brokers for its Third-Party Lending Report earlier this year (see box out for methodology), the major banks had all improved their scores on previous years.
Who’s on the throne?
| Rank | Bank | Score | Rank Last Year | Score Last Year |
| 1 | CBA | 82 | 1 | 79 |
| 2 | NAB | 79 | 2 | 76 |
| 3 | ANZ | 74 | 4 | 68 |
| 4 | WBC | 71 | 3 | 71 |
CBA was once again ranked first among the big four banks this year, receiving a rating of 82 per cent of the maximum score – up another 3 percentage points on last year and its highest-ever rating.
In fact, CBA ranked third-highest of all lenders in the 2023 Third-Party Lending Report, behind only its own subsidiary Bankwest and first place holder Macquarie Bank (which ranked first is quickly establishing itself as a major bank in its own right).
Of all the 38 lenders rated by brokers, CBA actually was particularly well-rated for its broker tech, product pricing, and speed. Its loan monitoring tech was flagged as being a great innovation for the channel and the online valuation tool was also called out for being helpful. However, the lender still has some issues with channel conflict, with brokers lamenting that the branch network seems to actively compete with the broker arm.
NAB also made it into the top 10 lenders this year, placing fifth in the overall ranking, the only other major bank to make the top 10. Its score this year was also the highest it had ever achieved in the Third-Party Lending Report. Technology was also the leading attribute that brokers liked at NAB and its product range was also well-rated. Some did suggest that BDM access could be improved, however.
ANZ managed to climb up the scores this year, ranking 22nd of all 38 lenders, and improving its average rating to a positive 74 per cent; its highest score in five years. Its highest score was for technology (79 per cent), with brokers saying the portals were informative and fast. Room for improvement though was access and speed in which brokers can talk to credit assessors and call centre support.
While Westpac also improved its placement (rising from 35th place to 27th this year), its score of 71 per cent meant it slipped down the major bank ranking, coming fourth. While its products were the leading attribute, Westpac’s speed ratings brought its overall score down.
Overall, the updates that the big four banks have been implementing for the broker channel have been very well-received in the past year. With more market share having headed their way over the last few months and lenders actively listening to brokers to review their clawback policies and product offerings, chances are that 2023 may be the year that the majors win back the broker channel.
The full Third-Party Lending Report 2023 can be accessed here:
www.momentumintelligence.com.au/research/third-party-lending-report
The methodology
Now in its 14th year of publication, the Third-Party Lending Report helps track lender performance over time to show industry trends and changes in the competitive landscape.
The 2023 Third-Party Lending survey was conducted online between 1 March and 30 April 2023.
The survey encouraged mortgage brokers across Australia to participate in a self-assessed evaluation of lender performance from their experiences over the last 12 months. Participants were invited to complete this survey by email through The Adviser and Mortgage Business. Lenders were also encouraged to invite their affiliated brokers to contribute to the survey.
The survey received a total of 1,456 responses. After an extensive data validation process including the removal of invalid, duplicate, or incomplete responses, the usable sample size for this report was 1,004 brokers.
The 17 attributes brokers were asked to rate banks on
Products:
1. Product range: Overall quality and comprehensiveness of residential mortgage products
2. Product pricing: Competitiveness of pricing of products across key market segments
3. Product policy: Comprehensiveness and clarity of product policies across key market segments
Personnel:
4. BDMs: Overall quality of BDMs (access to BDMs, BDM proactivity, and effectiveness in solving problems)
5. Credit assessment staff: Access to and ease in dealing/communicating with credit assessment staff including their consistency of credit decisions
6. Call centre support: Overall service quality, including staff technical knowledge, responsiveness, and helpfulness
Speed:
7. Turnaround times: Overall end-to-end turnaround speed, including application processing, loan approval, and mortgage contract timeliness
Support:
8. Client support: Effectiveness in servicing your clients post-settlement
9. Broker communication: Effectiveness of communication with brokers (verbal, written, or otherwise) when dealing with queries, issues, product price/policy changes, or servicing times
10. Channel conflict: Overall approach to the third-party channel compared with their branch network. This considers the availability of certain products, promotion of the third-party channel, preferential treatment regarding rates, and LVRs
11. Commitment to the broker channel: Lender’s ongoing commitment and loyalty to the channel, enhancing services and support to brokers and their businesses
12. Settlement: Settlement timeliness alongside ease of signing and understanding of documents
Technology:
13. Online lodgements: Overall efficiencies, usability, and functionality of the system
14. Online application status tracking: The system’s features, overall efficiency, and user experience
15. Digital tools and online resources: Comprehensiveness of resources, such as latest forms, new products, and policy information
16. Upfront valuations: Overall functionality, user experience, and effectiveness of the system and whether it provides greater consistency and rigour in the valuation ordering process
17. Broker website/portal: Effectiveness of broker website/portal, considering product and servicing information available and ease of navigation
