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July 2024
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COVER STORY

Major transformation

The metamorphosis of the big 4 banks

Change is afoot in the lending landscape, with majors falling from favour for broker clients as they focus on digital direct channels. We take a look at how the market share of the big four banks has been changing and what brokers think about them
Written by Annie Kane
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It’s an unusual environment when brokers aren’t sending a large volume of business to the major banks, but that’s exactly what’s been happening in recent months. While the refinancing boom had seen a groundswell of business going to the majors in the financial year 2022 and 2023 (partly driven by generous cashbacks and super-low interest rates), things in the last financial year show a different trend emerging.

For Australia and New Zealand Banking Group (ANZ), the Commonwealth Bank of Australia (CBA), National Australia Bank (NAB), and Westpac Banking Corporation (Westpac), the pressure is really on to stay competitive. But the way several of the big four banks aim to stay competitive is not through product, policy, or pricing but technology.

All four major banks have been talking about digital transformation recently. For ANZ, it’s by focusing on its ANZ Plus digital home loan (available to borrowers on iOS and Android), an end-to-end digital home lending process that can be completed by borrowers within the ANZ Plus mobile app. Currently, it is only available to eligible owner-occupier applicants in metro NSW and Victoria for refinancing, but the expectation is that this will expand out in the near future.

Over at CBA, the launch of a new, digital home loan offering for new-to-bank mortgagors that can only be accessed online sent shocks through the broker channel, with many frustrated that the rates offered cannot be accessed through the third-party (or even direct) channel.

NAB has also been on the direct digital bandwagon, having launched a new service that can reportedly link customers with one of its 600 home loan bankers via a virtual meeting within 15 minutes.

" 93 per cent of NAB transactions are now happening online

NAB has also been on the direct digital bandwagon, having launched a new service that can reportedly link customers with one of its 600 home loan bankers via a virtual meeting within 15 minutes.

The bank said the service, called Meet Now, responds to the increasing popularity of digital banking, given that 93 per cent of NAB transactions are now happening online.

Westpac has largely been the laggard in embarking on a digital transformation journey though it, too, recently announced it would invest $2 billion a year to rebuild its tech platforms and reduce the number of systems by more than half.

As outlined by Westpac CEO Peter King, nearly all of the majors have been investing heavily in technology to deliver direct users a better experience, simplify and update systems, and improve shareholder returns/net interest margin.

But given all the focus on the direct digital channels, are broker flows falling? The answer to that depends on which lender you look at.

Three of the four major banks – ANZ, Westpac, and NAB – have seen a growing volume of mortgages being written through the broker channel recently. The most recent half-year results for these three lenders show that brokers settled 65 per cent of ANZ mortgages in the six months to March, 64.9 per cent of NAB’s and 61.4 per cent of Westpac home loans. All of these were up on the prior half.

CBA meanwhile (which operates on a different financial calendar) has seen its broker originations going backwards. According to CBA’s 1H24 results (ended December 2023), broker loans were down to 33 per cent (excluding subsidiary Bankwest) – one of the lowest proportions in recent years.

Like its push to offer its cheapest rate through its direct digital channel, the move marked part of CBA’s “very deliberate choices about where to compete”. Indeed CBA CEO Matt Comyn said in November last year that the bank was “focused on proprietary distribution”, noting that broker-funded loans were generally lower margin.

" All four major banks received lower scores this year than in the 2023 ranking
- Annie Kane, The Adviser

What do brokers think of the major banks?

So, what do brokers think about all of this? Agile Market Intelligence canvassed brokers for its annual Third-Party Lending Report to find out what they think about the offerings from the lenders they are using.

According to the Third-Party Lending Report 2024, the major banks have been falling out of favour. All four major banks received lower scores this year than in the 2023 ranking and only one of them (CBA) made it into the top 10 lenders for 2024.

CBA was once again ranked first among the big four banks this year, receiving a rating of 78 per cent of the maximum score, down from its record-high rating of 82 per cent in 2023.

In fact, CBA ranked ninth-highest of all lenders in this year’s Third-Party Lending Report, having been in third place last year. While the yellow bank comes up top for its technology offering for brokers (ranking first of all lenders for its upfront valuations and broker website/portal), its pricing was among the worst of the lenders for 2024. Unsurprisingly, given its unabashed preference for its proprietary and direct channels recently, it also came dead last for channel conflict and commitment to the broker channel.

NAB was the second-highest rated major bank this year but was only 13th of all 42 lenders included in the full ranking this year, after losing points from brokers. While it received a strong rating of 76, it didn’t rank first for any of the 17 attributes brokers were asked about. NAB’s leading factor is its broker website/portal and digital tools/online resources, but its product pricing remains in the doldrums compared to the non-majors.

Westpac climbed back up the rankings for 2024, pipping ANZ into third spot for the major banks. After having been in dismal positions over 2022 and 2023 (when it was ranked 35th and 27th, respectively), Westpac shot up the rankings to be 19th overall this year. It improved its rating in all five major segments this year (product, personnel, speed, support, and technology), with technology upgrades having won a lot of support. Indeed, its upfront valuations were the leading attraction for brokers who used Westpac in the previous 12 months, followed by broker website/portal and digital tools. Moreover, the major bank had the best product policy and pricing of the big four banks, with a score of around 77 per cent.

ANZ suffered larger falls in this year’s Third-Party Lending Report. After having sat in the middle of the table last year, ANZ slipped down to 31st place this year and was the worst rated lender of the major banks. ANZ’s leading factor was its product policy – with many brokers highlighting its strong niches and cashback offerings – but its personnel, settlement times, and lack of online application status let it down when compared to the other big four banks. Despite this, the monthly Broker Pulse survey from Agile Market Intelligence consistently shows ANZ among the most commonly used lenders by brokers.

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The full Third-Party Lending Report 2024 can be accessed via Momentum Intelligence

The methodology

Now in its 15th year of publication, the Third-Party Lending Report helps track lender performance over time to show industry trends and changes in the competitive landscape.

The survey for the Third-Party Lending Report 2024 was conducted online between 1 March and 3 May 2024.

The survey encouraged mortgage brokers across Australia to participate in a self-assessed evaluation of lender performance from their experiences over the last 12 months. Participants were invited to complete this survey by email through The Adviser and Mortgage Business. Lenders were also encouraged to invite their affiliated brokers to contribute to the survey

The survey received a total of 1,238 responses. After an extensive data validation process including the removal of invalid, duplicate, or incomplete responses, the usable sample size for this report was 1,001 brokers.

The 17 attributes brokers were asked to rate banks on:

Products:

  • 1. Product range: Overall quality and comprehensiveness of residential mortgage products.
  • 2. Product pricing: Competitiveness of pricing of products across key market segments.
  • 3. Product policy: Comprehensiveness and clarity of product policies across key market segments.

Personnel:

  • 4. BDMs: Overall quality of BDMs (access to BDMs, BDM proactivity, and effectiveness in solving problems).
  • 5. Credit assessment staff: Access to and ease in dealing/communicating with credit assessment staff including their consistency of credit decisions.
  • 6. Call centre support: Overall service quality, including staff technical knowledge, responsiveness, and helpfulness.

Speed:

  • 7. Turnaround times: Overall end-to-end turnaround speed, including application processing, loan approval, and mortgage contract timeliness.
  • 8. Client support: Effectiveness in servicing your clients post-settlement.
  • 9. Broker communication: Effectiveness of communication with brokers (verbal, written, or otherwise) when dealing with queries, issues, product price/policy changes, or servicing times.
  • 10. Channel conflict: Overall approach to the third-party channel compared with its branch network. This considers the availability of certain products, promotion of the third-party channel, and preferential treatment regarding rates and LVRs.
  • 11. Commitment to the broker channel: Lender’s ongoing commitment and loyalty to the channel, enhancing services and support to brokers and their businesses.
  • 12. Settlement: Settlement timeliness alongside ease of signing and understanding of documents.
  • 13. Online lodgements: Overall efficiencies, usability, and functionality of the system.
  • 14. Online application status tracking: The system’s features, overall efficiency, and user experience.
  • 15. Digital tools and online resources: Comprehensiveness of resources, such as latest forms, new products, and policy information.
  • 16. Upfront valuations: Overall functionality, user experience, and effectiveness of the system and whether it provides greater consistency and rigour in the valuation ordering process.
  • 17. Broker website/portal: Effectiveness of broker website/portal, considering product and servicing information available and ease of navigation.
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