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Australia’s largest lender continues to see broker flows drop, with its proprietary channel now writing around 66 per cent of its new mortgage business.
The Commonwealth Bank of Australia (CBA) has released its full-year results for the financial year ended June 2024, revealing that the major bank continues to grow its proprietary home loan mix.
While a record proportion of borrowers use a mortgage broker to access home loans, the major bank has continued to buck market trends by pushing business through its direct channels and launching new digital home loan offerings online only (a move met with frustration by the broker channel).
In its FY24 results – released on Wednesday (14 August) – the major bank revealed that it had grown the group’s mortgage book by $12 billion between June 2023 and June 2024. This represented a 2 per cent increase in total balances.
According to the bank, the growth reflected its “continued focus on retaining existing customers in a highly competitive market” coupled with “strong growth” in its proprietary channel and its new digital-only offerings.
Indeed, the FY24 results showed that the proprietary channel is writing two-thirds of its new mortgage flows as broker flows continue to shrink.
Looking at the loan book for CBA (excluding its subsidiaries Bankwest, ASB, and Residential Mortgage Group), nearly 66 per cent of all new mortgage business came through the direct channel, an increase on 61 per cent in June 2023.
As such, more than $35.75 billion of the $55 billion new CBA-branded mortgages were lodged through the direct channel in the six-month period ending June 2024.
Instead, the major bank is looking to make Bankwest its primary broker brand. For example, its annual report said: “We can now offer two distinct banking options to support customers – a full‑service banking experience through CBA, and a simpler, digital, broker‑led experience through Bankwest.”
But even when including Bankwest, the direct channel was responsible for 54 per cent of the $69 billion of new mortgage business in the six months to June 2024, with broker flows falling to 46 per cent.
The overall mix of broker-originated loans in the total CBA portfolio now sits around 39 per cent, down from 40 per cent in June 2023.
Speaking to investors while releasing the financial results, CBA CEO Matt Comyn said: “Strategically, we continue to build direct, primary relationships through a differentiated proposition,” noting that proprietary new lending increased to 66 per cent “compared with only 28 per cent for the overall market” (based on MFAA figures).
However, he told mainstream media that “the broker channel clearly is an important distribution channel and will remain so into perpetuity.”
Speaking to The Adviser, a CBA spokesperson added: "The broking channel remains an integral part of our business. As Australia’s largest lender, we remain committed to this channel – which is evident from the ongoing investments we have made and continue to make.
"At CommBank, we have continued to invest in innovative technology to provide our brokers and their customers with a better and more simplified home lending experience. Recent examples include the launch of Your Applications and enhancements to Your Loans, as well as our commitment to ongoing learning and development opportunities through our Broker Training Hub.
"We have also made enhancements to our accreditation criteria to make it easier for new brokers to become accredited with us. We continue to make operational improvements, including the recent upgrade of our Home Loan Pricing Tool as well as the implementation of a self-employed deal desk. And, we are continuously reviewing and streamlining our lending policies.
"We will shortly be launching further tech enhancements that we hope will deliver greater business efficiencies for our broker partners," they said.
Net interest margin in focus
The falling broker flows come as CBA continues to prioritise direct lending for its yellow brand, as it focuses on improving margins on mortgage lending and generating returns on investment for its digital upgrades in recent years.
The CBA CEO said the bank had been “disciplined on volume margin management in home loans where [it] led a number of changes and increased net interest income share across the market”.
However, net interest margin continues to be pressured. Chief financial officer Alan Docherty revealed that net interest margin was 1.99 per cent, down 8 bps on FY23 and up 1 bp on 1H24.
Margins decreased year on year largely due to the impact of competition and deposit switching, partly offset by higher earnings on replicating portfolio and equity hedges.
Home lending margins were down 1 bp while pricing and mix of term deposit and savings products drove 6 of the 7-bp funding costs increases.
Margins stabilised during the second half of the financial year, however.
“Net interest income turned from a headwind over the year to a tailwind over the most recent half as net interest margins stabilised over recent months,” Docherty said.
Overall, CBA’s financial results showed that it had 1.9 million home loan accounts across the group, with a spot balance of $596 billion in June 2024, up from $584 billion in June 2023.
Around 70 per cent of its book is owner-occupier, 28 per cent is investor loans, and the remaining 1 per cent is for lines of credit.
It posted an annual cash net profit after tax of $9.8 billion in the 2024 financial year.
[Related: CBA reassures brokers about digital home loan play]
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