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The major bank’s broker-originated loans have dropped to its lowest level in recent years.
The Commonwealth Bank of Australia’s (CBA) financial results for 1HFY24 have revealed a decline in the major bank’s broker-originated loans, which dropped to 33 per cent as of 31 December 2023. This figure represents broker flows for CBA only and excludes its subsidiaries Bankwest and ASB.
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CBA’s broker-originated loans have been steadily falling from 42 per cent in December 2022 and 39 per cent in the first six months to June 2023.
This has now marked the lowest proportion of broker-originated loans for the major bank in recent years (the lowest proportion previously was in the six months to June 2023, tied with FY2021).
When including Bankwest, the banking group’s broker-originated loans still recorded a drop, down to 43 per cent in the six months to December 2023, down from 47 per cent in the six months to June 2023 and 49 per cent recorded in the same period in 2022.
CBA making ‘very deliberate choices about where to compete’ and focus on proprietary distribution
When inquired about the drop in broker flows during CBA’s market briefing webcast on 14 February, chief executive Matt Comyn said the major bank has made “very deliberate choices about where to compete”.
“During COVID, a big basis of competition was turnaround times. That is no longer a factor. Clearly, it has been a very price-sensitive and competitive market, which is what you expect in a very high refinance market.
“We are here to serve our customers. We can make, and we have made, very deliberate choices about where to compete and how best to.”
He continued: “We have sought to optimise as best we can for some of those pricing decisions. But ultimately, we are in that competitive market.”
“And we have certainly stepped closer to the market … It is clear we are not contributing or leading any of that pricing activity.”
In CBA’s results for the first quarter of the 2024 financial year, the banking group (CBA and Bankwest) stated it has shifted its focus onto proprietary distribution. Prior to that, CBA had begun investing in broker services for Bankwest following branch closures in the Perth metro area.
Reacting to the major bank’s shift in focus at the time, Finance Brokers Association of Australasia (FBAA) managing director Peter White AM said CBA had “turned its back on brokers”.
Further results and outlook
Meanwhile, CBA’s home loan balances as of December 2023 increased by $11 billion to $650 billion (2 per cent increase on the prior comparative period). According to CBA, the increase was driven by retail banking services and business banking.
This comes as the major bank has been experiencing a recent recovery in its total loan book.
According to the most recent statistics released by the Australian Prudential Regulation Authority (APRA) on the nation’s authorised deposit-taking institutions (ADIs), CBA’s total mortgage book (including investor and owner-occupier) grew for the second consecutive month in December 2023.
This followed a string of total mortgage book decreases occurring between July and September 2023.
Furthermore, the major bank’s 90-plus day consumer arrears have increased over recent months; however, they remain at historical lows. Arrears for home loan customers increased to 0.52 per cent during this period, up from 0.47 per cent in the six months to June 2023.
Commenting on the outlook for the major bank, Mr Comyn said that 2023 was “increasingly challenging” for CBA customers, who are finding it “harder to absorb cost-of-living pressures”.
“The economy has been fairly resilient, supported by a strong labour market, savings and repayment buffers, population growth and relatively high commodity prices.
“However, downside risks are building as slowing demand and persistent inflation impact Australian businesses.
“As cash rate increases have a lagged impact on households and business customers, we expect financial strain to continue in 2024, with an uptick in our arrears and impairments,” Mr Comyn stated.
[RELATED: CBA ‘focused on proprietary distribution’]
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