Non-major lenders: niche or not?

A perfect example is AMP Bank. In response to the prudential regulator’s crackdown on investor lending, the bank announced on 29 July that it would no longer accept or assess existing or new investor home loan applications, with the policy expected to last “until later in 2015, depending on market conditions”.

There’s no doubt that APRA’s investor crackdown has caught many lenders off-guard, with a plethora of changes to product pricing and policy being introduced by them as a result. This has caused headaches for brokers and borrowers – loans can be harder to come by, turnaround times have blown out, and the million-dollar question is: for how long will this crackdown last?

So, to make things a little clearer for brokers, The Adviser sat down with a few of the non-major banks to determine which types of borrower they now want to deal with, and why it can be worth a broker’s time to help them in achieving it.

Adelaide Bank

Adelaide Bank doesn’t consider itself a niche lender, according to its national manager of broker sales and distribution, Fons Caminiti.

“Our niche if you like is as providers of easy-to-understand, great value home loans combined with great service,” he says.

Mr Caminiti says property in some markets has been going up by thousands of dollars a week, and accordingly, brokers are coming to Adelaide Bank with a range of clients who need a bit of ‘hand-holding’, straight talk and value.

“We don’t really target or discriminate – we’re keen for everyone to have a realistic shot at owning their own home. From time to time, circumstances (and, occasionally, regulators) require you to change emphasis, but we actively try to support home buyers in the broadest sense possible,” he says.

“We don’t want to be fair-weather friends who opportunistically come and go from the market depending on conditions. We’re here for the long haul and brokers know that.”

Mr Caminiti noted that the bank doesn’t have an appetite for foreign buyers or SMSFs but adds that this has been the case for some time.

Macquarie Bank

Macquarie’s head of sales and distribution (intermediaries), Doug Lee, says the bank’s approach has always been about supporting all segments of the market, with a focus on maintaining a balanced portfolio in line with its strategic priorities.

“We support all market segments, focusing on maintaining a balanced portfolio. Our new core banking platform will help to deliver new products to the market and enable us to offer customers improved functionality, an enhanced client and intermediary experience,” he says.

Mr Lee says Macquarie has a balanced portfolio which will remain consistent in its approach, and will extend and diversify its offering to respond to changing demands from clients.

“Key to our ongoing success has been to work with strategic distribution partners with recognised, trusted and well-established national retail brands and intermediaries,” he explains.

“With no branch network, the vast majority of our work is in the third-party distribution space, so it’s important that we provide solutions that really make a difference to intermediaries and their clients.”

BOQ

BOQ considers itself to be one of the few independent banks remaining in the market and offers a genuine choice to brokers and their customers who are looking for an alternative to the majors, according to its head of retail banking, Matt Baxby.

“As a challenger bank, one of our key points of difference is the priority we place on developing long-lasting relationships with brokers and customers,” he says.

Mr Baxby says that while BOQ is not interested in growth for growth’s sake, the bank is very much open for business that meets its risk requirements.

“Like all banks, we’re constantly adjusting our approach to ensure we get the right balance between growth, risk and margin in changing market conditions,” he explains.

“One of the pleasing trends we reported at our full-year results recently was the increased diversity of our lending book, both geographically and by borrower type.

“Our increasing proportion of broker-originated loans, which now account for 15 per cent of all retail bank settlements – up from 5.0 per cent in the year prior – has helped drive that outcome."

Citi

Deirdre Wroth, head of bank solutions and wealth management at Citi, says the bank’s offer has always been clearly articulated around emerging affluent and globally-minded consumers.

“We are very clear on what our target market looks like, and to that end we provide a holistic service to this segment,” she says. According to Ms Wroth, Citi has maintained a strong risk control culture which has enabled it to stay focused on its target market.

“We can lend up to 90 per cent with LMI and up to 85 per cent without LMI, and we continually review our lending practices as part of actively managing risk,” she explains. “Currently we don’t provide lending services to the SMSF market, but this is something which we regularly review. We do not offer low-doc loans or reverse mortgages [either].”

Ms Wroth says Citi recognises that there is some overlap with the majors in competing for market share.

“However, our differentiated offering as a global provider appeals to our target market customers,” she adds.

ME

ME’s general manager of broking, Lino Pelaccia, says the bank has a broad target market, having opened up access to its discounted home loan rates to all Australians last year and removed the requirement to be a member of a union or industry super fund for exclusive discounts.

ME is aiming for a substantial increase in settlements through brokers this year, which represent 55 per cent of the mortgage business for the industry super fund-owned bank.

“We plan to achieve that growth through a combination of new products, improved broker services, a new brand and marketing campaign and by expanding our broker network,” he explains.

As a result, ME announced changes to its variable and fixed home loan interest rates for investor and selected owner-occupied loans in late August.

“The decision to increase investment rates was a difficult one, but after careful consideration we believe that, combined with rate cuts across selected owner-occupied home loans, it strikes the right balance across our portfolio,” Mr Pelaccia says.

ING Direct

“We don’t view ourselves as a niche lender,” says Mark Woolnough, ING Direct’s head of third-party distribution.

“We offer great products and service for everyday Australians, whether our customer is a first home buyer, an investor, upgrader, renovator or refinancer.”

ING Direct does, however, focus on customers with an LVR of less than 80 per cent, which Mr Woolnough says is reflected in the attractive rates it offers to these customers.

“The majority of our new business is in this less-than-80 per cent LVR band and we expect this to continue into the future,” he says.

“However, we still have a very competitive proposition for customers with an LVR of more than 80 per cent.”

Mr Woolnough says ING Direct is a retail bank, and sees itself as a challenger to the majors, with everything it does centred on helping its customers get ahead.

“We’re about helping Australians into their homes and we focus on having a great product and service proposition, not only being competitive in terms of price, but also focused on making it easy for our customers to bank with us."

Auswide

Auswide Bank considers itself a mainstream lender that targets owner-occupiers, investors, first home owners, and upgraders and professionals nationwide, and supports all types of LVR bands.

“These settings will continue to apply into the foreseeable future,” says Auswide’s general manager of third-party and business banking, Charlton Nevis.

“We are positioned for growth in every aspect. As a listed bank, we have a very strong, well-capitalised balance sheet. We have a strong credit appetite for quality business and a broker team that is scaled up and ready to handle growing volumes of loan processing.

“We are committed to the broker channel and partnering with individual brokers to offer superior customer experience.”

Mr Nevis says Auswide is not currently active in non-residential lending via the broker channel or in SMSF lending.

“This does not mean that we are not in favour of these markets; rather, we have not developed offerings for these segments as we are focused on growing our current proposition,” he said.

Bankwest

Calling Bankwest a ‘niche’ lender wouldn’t be accurate, according to its general manager, broker sales, retail, Stewart Saunders.

“We are a lender that provides banking and finance solutions across the board for our brokers and customers. The perspective of different brokers varies based on their business and how we can support them and their customers,” he explains.

“Bankwest is a significant competitor in our home state of WA and we’re viewed as a challenger brand across the other states. As such, we have some products and policies in place to help us stand out from our competitors.

“However, this is not our sole focus – our focus and energy is centred on delivering value to brokers and their customers across the board.”

Along with many other lenders, Bankwest is focused on driving owner-occupier lending in light of “well documented” regulatory measures, according to Mr Saunders.

Bankwest targets certain segments by ensuring that the home loan offerings are structured across product, price and credit policy.

Suncorp’s strength and size allows it to focus on satisfying customer needs through a full suite of products, says Steven Degetto, the bank’s head of intermediaries.

“Suncorp Bank is committed to helping customers achieve their financial goals, whether it be to purchase or upgrade their home or expand their business,” he says.

“We’ve recently improved our broker proposition by strengthening our teams across both residential and business lending. We now have a highly experienced and dedicated national team of business development managers in this space to support brokers looking to diversify their business, and have also introduced highly competitive rates, particularly for small-business lending.”

Mr Degetto says Suncorp takes its responsible lending obligations seriously and has taken a leadership role in ensuring its customers fully understand their financial situation and commitments.

“Combined with our moderate risk appetite, this means we are recognised throughout the market as a prudent and responsible lender,” he says.

MyState

Sandi Sims, MyState’s head of broking, says that while MyState has product and policy niches, it doesn’t consider itself purely a niche lender.

“We appeal to all aspects of the market,” she says.

“We’re large enough to offer a range of products and prices, and being small, we’re nimble and provide personal service. We’re also rolling out a new electronic loan system so we are easy to do business with.”

Ms Sims says MyState has traditionally targeted owner-occupier and investor lending, but the recent APRA restrictions have constrained its lending in the latter.

“The next 12 months will see us concentrate again in the owner-occupier space,” she says. “We’re passionate about seeing our customers fulfils their dreams by buying their first property, upgrading to their dream home or building a new property and growing their wealth.”

Ms Sims says brokers and customers are constantly looking for choice, and MyState is a great alternative to the majors, with its competitive pricing and personalised service offering a compelling reason to do business with the bank.