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Broker-introduced lending has started to grow at the non-major banking group as it continues its transformation journey and improves returns through its new lending platform.
Speaking at an Investor Day on Thursday (23 May), several C-level executives at Bendigo and Adelaide Bank revealed how the bank’s new strategic direction and digital transformation have been resulting in strong growth, with more growth expected to come, particularly in broker-originated lending.
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The banking group has been overhauling its core banking and lending systems over the past five years and recently made the move to mothball its Adelaide Bank brand (with no new business to be written on the Adelaide Bank origination and servicing platform from the end of June this year).
All mortgages now written by the broker channel go through Bendigo Bank Broker, which has been rolling out to a growing number of aggregation groups in recent months.
During the investor update, CEO and managing director Marnie Baker suggested that the bank was “the only credible challenger to the major banks”, highlighting its strong balance sheet, capital levels, and funding levels.
Baker outlined that as the banking group has been transforming over the past five years – including by simplifying the bank, brands, systems, and processes – the group has been particularly focusing on driving mortgage lending through its new lending origination system and would push further into business banking and both broker and direct channels moving forward.
She said: “Our new Bendigo Lending platform will deliver a one-way, same-way process for residential lending across the bank [regardless of channel] while deepening our relationships with our broker-sourced customers.
“The platform is in market today and is delivering equal-to-industry-best turnaround times,” she said, with the bank stating that the median time to conditional approval had dropped from five days to six minutes.
Its median time to unconditional approval is now 22 per cent faster, with a 60 per cent uplift in the volume of applications processed per day.
The bank said it was now focusing on its next phase of its banking journey, with the motto of ‘Digital by design, human when it matters”. Indeed, it has digitised 200-plus credit policy rules to support automation and has seen a 44 per cent uplift in loans passing automatic checks.
The banking group is aiming to reach 80 per cent automated assessment of credit decisioning and workflow in the future, with manual reviews by exception only.
While it has finished most of the build for its broker partners, Bendigo’s chief financial officer Andrew Morgan said that the balance of the program will be completed “into the next year”.
“The introduction of our new Bendigo Lending Platform for brokers will bring both revenue and cost benefits,” Morgan said.
“We expect to deepen our relationships with broker-introduced customers, who today have 1.7 products with us. We believe we can lift this to two to three over time.
“And with a largely automated assessment process, we expect to see meaningful reductions in the cost of manufacturing mortgages in the next few years. This will provide us with significant scale benefits.”
Returns on broker loans making channel ‘more attractive’
Indeed, in a Q&A with investors following the presentations, the CFO acknowledged that the banking group “hasn’t really grown introduced lending for some time now” as the “economics hadn’t made sense”.
However, Morgan added this had started to change as a result of the investments in broker technology and the lending origination changes.
“I think we’d all concur that the economics in certain channels is now improving,” the CFO said.
“We have been putting our capital to work using digital mortgages of late but now we’re starting to see that economics across a number of channels are starting to improve.
“We’ve done a lot of work to understand the economics of all of our channels, in particular understanding of the cost to produce a mortgage through our various channels. We’ve been consistent in saying that our digital mortgages are our strongest returning channel and that’s why we’ve been putting our capital to work.
“As we’ve seen, the economics improved somewhat in broker-introduced lending. That’s a channel that’s starting to become more attractive and it’s pretty close to the sort of returns that we are interested in.”
He added that the proprietary network was “somewhere between those two”.
The CFO told investors: “We’ll continue our disciplined approach to deploying capital into those home lending channels where returns are most attractive and where growth opportunities exist. This means deploying capital into digital mortgages via our proprietary brands Up and BenExpress and through our partnerships with Tiimely..
“It also means utilising our new Bendigo lending platform where we’ve started to grow again in this large and important channel of broker-introduced lending and we look forward very much to updating you with further financial detail in August.”
You can find out more about Bendigo Bank Broker and its plans for the broker channel in this Q&A and podcast with the bank’s head of broker distribution Natalie Sheehan:
[Related: Bendigo Bank opens up to broker]
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