NAB shifts focus to increase proprietary lending

In its full-year results for FY24, NAB said that it would focus on “improved performance in deposits and proprietary lending”, including by investing in its banker sales force to “grow share of proprietary lending” and continue to “increase utilisation of banker tools such as leads generation and virtual meetings”.

The bank said it would also place continued investment in a simplified mortgage process to deliver fast home loan decisions, including its Simple Home Loans platform.

In an investor webinar on Thursday morning, NAB CEO Andrew Irvine said: “We will continue to make deliberate choices about where to invest and where to grow to optimise our returns. This includes an ongoing focus on growing our leading SME franchise, improving our performance in proprietary lending and deposit gathering.

“Home lending is an important product for our customers and for NAB. Our home lending strategy is based on delivering a seamless customer, banker and broker experience supported by investment in digital, data and technology.

“Australian home lending returns have gradually improved reflecting more stable pricing and lower cost of funding. However, as you can see in the data published by the Reserve Bank, front-book pricing remains well below historical levels. This market remains dynamic, and we will continue to adopt a disciplined approach to manage our long-term returns.

“As part of this approach, a key priority for me is to improve our share of lending through proprietary channels. Actions we are taking include investing in our banker sales force and driving greater banker productivity through digital and data tools, such as lead generation and virtual meetings.

“Over four years, we have progressively been rolling out digital mortgage platform which has helped deliver better customer experiences and faster turnaround times. Completing this roll-out will also support our simplification and technology modernisation ambition and remains a key priority.

“Over the next 12 months, we will reinforce our execution disciplines to support delivery of leading customer advocacy, while at the same time becoming a simpler and faster organisation.

“Driving continued momentum in business banking and improving performance and proprietary home lending and deposits will enable us to deliver stronger returns to shareholders safety remains a core pillar of our strategy in retaining prudent balance sheet.”

Proprietary lending already rising

The major bank has been focusing on its proprietary channel in the past year, with new CEO Irvine having said in May that returns on broker loans were “below the cost of capital” and that NAB had chosen to adopt a “selective” approach to mortgage growth over the 12 months to March 2024.

Indeed, earlier this year, NAB rolled out a new service – Meet Now – that links customers with one of its 600 home loan bankers via a virtual meeting within 15 minutes.

According to FY24 results, by using data and AI (through NAB’s intelligence tool ‘The Brain’), the major bank has driven an increase in customer appointments booked with proprietary home lenders by 59 per cent in the year.

When looking across both its personal banking and business/private banking divisions, NAB reportedly saw an 18 per cent increase in proprietary applications in the final quarter of FY24 when compared to the same quarter in FY23.

Broker flows have also fallen at the major bank.

While the broker channel is responsible for having originated 53.2 per cent of the major bank’s $353 billion Australian mortgage portfolio – a new record high – the results showed that brokers were responsible for a smaller proportion of new Australian mortgage loans than last year.

According to the results, brokers wrote 61.1 per cent of the bank’s $77 billion new Australian mortgages (excluding limit increases and redraws) in the six months to September (2H24), down from 64.3 per cent in the same period in 2023 (2H23).

Moreover, broker flows were down by around 5 per cent from the 64.9 per cent recorded in 1H24 – with the proprietary channel increasing to 38.9 per cent – the highest figure recorded for two years.

This is despite nearly three-quarters of borrowers using the broker channel for their home lending needs.

How do the other majors compare?

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.

Nearly 66 per cent of CBA’s new mortgage business came through the direct channel in FY24, an increase on 61 per cent in June 2023, with more than $35.75 billion of the $55 billion new CBA-branded mortgages lodged through that channel in the six-month period ending June 2024.

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).

However, ANZ and Westpac continue to see increased broker flows.

Westpac revealed last week that almost two-thirds (63.6 per cent) of new Australian mortgages in 2H24 were written by brokers (having increased in the six months to September from 61.4 per cent in the first half), equating to $35.1 billion of the $55.2 billion settled by the bank over the half. In tandem, its proprietary channel’s share of new loan originations continued to dwindle, dropping down to 36.4 per cent.

ANZ will release its full-year results on Friday (8 November), but its half-year results said that brokers were writing 65 per cent of its new mortgage business.

Other lenders that have made changes to their home lending distribution strategies include BOQ, who 'paused' broker loans through tis retail banking arm earlier this year (however, it is still able to write mortgages through brokers via BOQ Specialist).

[Related: Nearly 2/3 of NAB’s mortgage flows come from brokers]