CBA broker flows continue to fall

According to its 1H25 results – released on Wednesday (12 February) – new broker flows for the major bank (excluding its subsidiaries Bankwest and Residential Mortgage Group) fell over the six months to December 2024, dropping to 34 per cent.

This is 1 percentage point down from the 35 per cent recorded in the six months to June 2024, but slightly up from the 33 per cent recorded in the same period in FY24.

Looking at the loan book for CBA, 66 per cent of all new mortgage business came through the direct channel, an increase on the 65 per cent in June 2024 but inching down from 67 per cent a year earlier.

As such, around $44.9 billion of the $68 billion new CBA-branded mortgages were lodged through the direct channel in the six-month period ending December 2024, up from $35.8 billion in the prior six-month period.

In its results, the lender noted that even though brokers write a record number of new home loans, broker-originated home loans were 20 per cent to 30 per cent less profitable than proprietary lending.

This is based on an average home loan return based on a $600,000 loan size (adjusted for upfront and trail commissions and lower operating expenses, with the upper end of range driven by those banks that continue to offer a standard $2,000 cashback offer).

The bank has, therefore, made a concerted push to focus on direct channels. It has a “focus on sustainable returns” and has moved to fundings weighted towards proprietary distribution, with increased investor lending.

The results also show that the overall proportion of broker-originated loans continued to drop in CBA’s total loan book – dropping 1 percentage point to 38 per cent in 1H25.

CBA accounts for more than 45 per cent of the total market share of proprietary flows.

When looking at the total group (i.e. including Bankwest), broker flows for new mortgages held steady at 46 per cent (the same as recorded in 2H24). However, this was up from the 43 per cent recorded in the same period last year.

Of CBA’s total home loan portfolio, 46 per cent was made up of broker business, unchanged from the prior six-month period and compared to a year earlier.

Responding to The Adviser, CBA executive general manager home buying Michael Baumann said: “We are pleased to have maintained our strength in the home loan market over the six months to 31 December 2024, and know that much of what we have achieved in this space can be attributed to our clear multi-brand home lending strategy."

Commenting on brokers, he added: “When it comes to the third-party distribution channel, we understand how complex buying a home can be and know many customers appreciate the face-to-face guidance and support they get from a mortgage broker.

“It is for this reason the broking industry continues to play an integral role in our business and why we have been supporting brokers for more than 30 years.”

When asked how CBA was supporting brokers, Baumann said the bank had begun upgrading its CommBroker portal, grown its sales team and bolstered the number of strategic relationship managers to help provide brokers with better support.

The lender has also launched the CommBank Business Owner segment to provide broker partners with best practice guides and information on how they can grow their businesses, Baumann explained.

Margins stabilise

Chief financial officer Alan Docherty told investors that net interest margins remained stable, “with the impact of competition for deposits and home loans offset by higher earnings on our capital and replicating portfolio hedges”.

The major bank revealed that it had 1.9 million home loan accounts across the group, with a spot balance of $616 billion in December 2024, up from $596 billion in June 2024.

Investment property lending made up 30 per cent of the portfolio, up 1 per cent year on year, while owner-occupied loans accounted for 69 per cent of the total balance.

Arrears have continued to rise, ticking up to 0.66 per cent (from 0.65 per cent in June 2024), now above the historical average for 90+-day arrears (0.65 per cent).

However, these were supported by seasonal tax refunds and changes to tax rates and thresholds.

When including New Zealand, home loan balances increased $35 billion to $685 billion, a 5 per cent increase on the prior comparative period.

Commenting on the results, CBA CEO Matt Comyn said: “This half, we maintained our focus on engaging with our customers on a range of support options and provided more than 65,000 tailored payment arrangements for those most in need of support.”

Speaking about wider market forces, Comyn added that “the Australian economy has slowed considerably, with cost-of-living pressures continuing to weigh on consumer demand and younger customers in particular making real sacrifices”.

Looking ahead, he struck a more optimistic tone: “However, underlying inflation is now moderating towards the target range, and we expect Australia will follow offshore economies with an easing cycle starting in 2025.”

CBA posted a cash net profit after tax of $5.1 billion for the six-month period to December 2024, up 2 per cent on the prior comparative period. The bank attributed growth to volume growth in its core business and a lower loan impairment expense.

The major will pay shareholders an interim dividend of $2.25 per share, up 5 per cent from a year ago.

Speaking to analysts and investors about mortgage competition, Comyn said: “Over the last six or nine months, margins have stabilised but are still very competitive … Our base case is that level of competitive intensity will probably stay around the same levels. There are risks to that as well. Some of the funding spreads are almost at record levels in terms of the tightness of those credit spreads we see.

“It’ll continue to be something that we’re watching closely. That stabilisation is obviously at substantially lower levels than it was a few years ago in terms of the margins that are available. And that’s putting pressure, particularly, I think, on some of the smaller financial institutions, which have an even larger concentration to home lending.”

[Related: ’Any bank that turns away from the broker channel will regret it’: FBAA]