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The MFAA and FBAA have responded to the possibility of more major banks shifting focus away from the broker channel.
The association heads have responded to the recent commentary from some major banks that has suggested a shift away from focusing on third-party distribution in favour of the proprietary channel.
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Last year, the Commonwealth Bank of Australia (CBA), stated that it has shifted its focus to the direct channel for its home loans during the release of its financial results for the first quarter of the 2024 financial year (1Q24).
An analysis from Agile Market Intelligence’s Broker Pulse survey (between 1 and 15 February 2024) found that 32 per cent of the 267 broker respondents said they had submitted applications to CBA for their clients in January 2024 – the third-lowest level since the survey began.
More recently, CEO of NAB, Andrew Irvine, said during the release of the bank’s half-year results that competitive dynamics in the Australian home lending market have challenged the lender, with its returns on broker loans being “below the cost of capital” due to “price premiums in the channel”.
When asked about how this would impact NAB’s broker strategy, Irvine said to our sister brand Mortgage Business that one of the things the bank does in the broker channel is have “price premiums versus competitors.”
Speaking to The Adviser, chief executive of the Mortgage & Finance Association of Australia (MFAA), Anja Pannek, said that the recent bank commentary has “highlighted a number of margin challenges that have played out in lender results”.
“I think the thing that everyone needs to recognise is that banks are still making enormous amounts of money. I think that’s fantastic, they’re very important to the financial services system,” Pannek said.
While Pannek said that the competition among the major banks has been for the benefit of the consumer, it’s important to acknowledge the role that brokers have played in supporting their clients over the last 12–18 months.
“That’s just critical,” Pannek said.
“Let’s also focus on the great work that brokers are doing and not this, ‘smoke and mirrors’ around margin compression.
“We need to remember the great role that brokers are doing around bringing choice and competition for their clients.”
The Finance Brokers Association of Australasia (FBAA) managing director Peter White AM told The Adviser that the association’s position is always going to be that the major banks have leaned on third-party distribution to build their businesses.
“We’d find it highly inappropriate for them to turn their backs on our industry that’s built and supported them for the last 30–35 years,” White said.
Speaking on the NIM constraints from NAB, White said he’d be “very surprised that the mortgage broking sector was putting pressure on the NIM... side of things”.
“Their rates through their branches are the same as their rates through the broker channel, and the broker channel is a more cost-effective way to distribute products,” White said.
White said that there needs to be “greater clarity” as to what the commentary from NAB’s CEO meant.
[RELATED: Nearly 2/3 of NAB’s mortgage flows come from brokers]
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