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The FBAA MD has suggested brokers cast their net wide with lender choices, after several banks announced a new focus on proprietary lending.
The managing director of the Finance Brokers Association of Australasia (FBAA), Peter White AM, has been left unimpressed by some banks – including major banks CBA and NAB – moving to re-prioritise their proprietary channels for home loan growth in order to improve shareholder returns.
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Speaking to The Adviser, White said: “These moves appear to be more about eroding competition in the marketplace, competition, which is driven purely by brokers, not lenders.
“The ongoing rhetoric that the broker channel is not profitable is completely false, and I’d challenge any bank that makes such claims to show me the math that supports this. They won’t because they can’t.”
Indeed, ANZ recently revealed that the marginal returns on both proprietary and broker “are at, or above, the cost of capital”.
As such, the FBAA MD is now advising brokers to ensure they’re not “placing all their eggs in one basket”.
White said: “Banks will do what they feel is best commercially for their own self-interests and shareholders, however often this is not in the best interests of their customers. This is unfortunate because brokers will always act in the best interests of their customer, and the message we should send to banks is that we will support lenders who do likewise.
“I believe any bank that turns away from the broker channel will regret it.”
The FBAA MD said he believed NAB was attempting to ‘turn its back’ on the broker channel.
He said that NAB has been a strong supporter of the broker channel, having bought several broker groups in the past (for example, former aggregation groups PLAN, Choice, and FAST) and had “benefited significantly from this through an increase in customers, and then profited with its on-sale”.
White said: “To now attempt to turn their backs on the channel is disgraceful.
"My challenge to brokers is to act in customers’ best interests but to equally support lenders who support competition and who share our customer-focused values.”
According to the monthly Broker Pulse survey from Agile Market Intelligence, brokers use an average of four lenders each month. NAB is one of the most popular lenders utilised by brokers. According to the Broker Pulse survey for the month of September 2024, for example, NAB was the fifth most commonly used lender by brokers (behind Macquarie and the other three major banks).
What has triggered this call to action?
Last week, The Adviser reported that National Australia Bank (NAB) said that it would be focusing on “improved performance in deposits and proprietary lending” this financial year.
Speaking on Thursday (7 November), NAB CEO Andrew Irvine said that a key priority for him moving forward was “to improve [NAB’s] share of lending through proprietary channels”, including by investing in the banker sales force and driving greater banker productivity through digital and data tools, such as lead generation and virtual meetings.
NAB’s move to focus on proprietary lending to improve returns follows a similar tack taken by the Commonwealth Bank of Australia (CBA), which recently revealed that the proprietary channel is writing two-thirds of its new mortgage flows as broker flows continue to shrink.
Brokers have voiced surprise and dismay at NAB’s move, particularly given its strapline ‘the bank behind the broker’ and that more than 61 per cent of its new mortgage lending comes from the third-party channel.
While NAB and CBA have both recently seen a drop in broker flows amid their renewed focus on proprietary lending, ANZ and Westpac both continue to see broker flows increase.
ANZ revealed last week that broker flows hit a new record high of 53.2 per cent in the year to September 2024, while almost two-thirds (63.6 per cent) of Westpac’s new Australian mortgages in 2H24 were written by brokers.
The Commonwealth Bank of Australia trails behind at 35 per cent of new CBA flows (for the six months to June 2024) or 39 per cent when including Bankwest.
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