Narev on branch-originated home loans

Investor concerns over the Commonwealth Bank of Australia’s capacity to originate home loans - as opposed to relying on mortgage brokers - were assuaged yesterday as the bank revealed that proprietary lending had increased in the last six months.

A disappointing element of the lender’s $9.45 billion final profit for the year to June 2016, for some analysts, was that the bank was using too many mortgage brokers and this had led to a loss of market share.

But at an analysts briefing yesterday, CBA chief executive, Ian Narev, said the last six months had seen a reversal of that trend. While the banking industry’s share of propriety lending has dropped, CBA's proprietary loans went up, according to figures shown at the presentation.

The briefing followed the release of the CBA's interim results where Australia's biggest bank logged cash earnings of $4.91 billion.

Proprietary lending now accounts for 57 per cent of CBA's home loan book - up from 54 per six months ago. Conversely, industry figures dropped 2 percentage points to 46 per cent over the same period.

Branch applications for home loans was up 13 per cent on the half while smarter analytics had resulted in a 10 per cent increase in branch leads.

“Branch technology will remain a critical part of our future," said Narev.

Strong value proposition

One analyst suggested it was high time management cut broker commissions - given the spike in branch-originated mortgages.

But Narev said: "While our preference is to service our own customers as much as we can, the broker network provides a strong value proposition, customers like it a lot, so we don’t see it going away.”

The lender said it wrote $109 billion of new loans over the half and 140,000 new home loans. CBA now holds 25.4 per cent of Australian mortgage market, up from 25.1 per cent a year ago.

During the presentation, the CBA boss voiced confidence on the local economy but noted the risk of volatility given potential geopolitical hotspots.

“The combination of geopolitical volatility and weak economic recovery in parts of the world means the risk of market volatility, and indeed economic shock, remains heightened,” he said.

“At the same time, recent trends in the Australian economy are more positive. Our job as a major financial institution is to maintain a focus on the long term, whilst ensuring that we can withstand nearer-term shocks."

CBA, mortgage, result
Elizabeth Fry,
Article Posted:
February 16, 2017

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