An integrated approach to branch, online and mobile lending has seen the Commonwealth Bank of Australia (
CBA) bring in a lower percentage of homes loans through the broker channel.
The lender’s annual financial results released yesterday (9 August) reported that 62% of CBA customers took out a home loan through its proprietary channels as of June 2017 – an increase from the 54% recorded the year before.
This was far higher than the market average in which only 46% of home loans originate through these proprietary channels.
Within Australia, only 43% of new home loans at CBA were brought in through the broker channel as of June 2017 – a decrease from 50% recorded a year before.
Despite these trends, CBA CEO
Ian Narev stressed the importance of brokers to the bank.
“We remain believers in the broker channel. We remain committed to the broker channel,” he said during yesterday’s investor briefing.
Over the last 12 months CBA had made a number of enhancements to simplify and streamline its broker processes, a bank spokesperson told
Australian Broker after the briefing.
“We’ve also continued to invest in our strong broker relationship management teams and our online tools and calculators to ensure brokers have the right support from Commbank to meet their customers’ needs.”
“We are absolutely committed to the broking channel and recognise the important role that brokers play in helping to meet our customers’ home buying needs. We continue to invest in both our proprietary and broking businesses to deliver customers with the best home buying experience.”
In the Q&A session, Narev also fielded a question from UBS analyst
Jonathan Mott who congratulated CBA on improving its proprietary sales before asking whether the bank would be reviewing broker commissions in light of the ASIC and Sedgwick reviews.
“In terms of the Sedgwick Review, as with all the ABA initiatives, we’ve been deeply involved. I think that Sedgwick’s been a very high quality piece of work,” Narev said.
“What we have said and are doing in terms of broker commissions is that there are obviously other parties involved here. We are working with the broker community and are engaging very deeply with the broker community – and I know the ABA is doing work on this as well – to find out what is the best way for the spirit behind the Sedgwick recommendations to be reflected in broker commissions.”
It was too early to tell how this would manifest, he said.
Within the presentation, Narev also highlighted the acquisition of
Aussie Home Loans – due to be completed later this month – as an example of the bank’s commitment to the broker channel. The acquisition was kick-started on 4 August when John Symond exercised his put option, requiring CBA to buy up the remaining 20% share in the company.
While the purchase price for the remaining portion of Aussie has not been disclosed, it will be determined in accordance with the terms agreed to in 2012 and will be paid in the issue of CBA shares.
Home loan growth
Throughout the 2017 financial year, the CBA group brought in $197bn of new lending, including around 330,000 new home loans. This includes the following state-by-state breakdown within Australia:
| State |
Number of new home loans |
| NSW (incl ACT) |
92,000 |
| Victoria |
78,000 |
| Queensland |
53,000 |
| Western Australia |
36,000 |
| South Australia |
15,000 |
| Tasmania |
5,600 |
| Northern Territory |
1,600 |
The overall market share for CBA within the home loan space decreased slightly by 10 basis points, dropping from 25.3% to 25.2% in the 12 months prior to 30 June 2017.
The bank’s home loan balance sheet experienced annual growth across all divisions.
| |
Balance sheet
(30 June 17) |
Balance sheet
(30 June 16) |
Change |
| Retail banking |
$335.3bn |
$325.8bn |
+7% |
| Business & private banking |
$33.7bn |
$32.7bn |
+5% |
| Bankwest |
$67.9bn |
$65.4bn |
+5% |
A further breakdown of the types of loans reported at CBA during the last financial year and the comparisons with the year before are as follows:
| |
June 2017 |
June 2016 |
| Variable rate |
84% |
85% |
| Owner-occupied |
63% |
62% |
| Investor |
33% |
33% |
| Interest-only |
39% |
39% |
| Lenders’ mortgage insurance |
22% |
24% |
Mortgage trouble in the west
Mortgage arrears have also increased at the bank, although most of the impact is due to difficult conditions in Western Australia where arrears sit at 1.23%. Nationally, arrears for CBA have trended upwards from 0.50% in June 2014 to 0.54% in June 2016 and now 0.60% in June 2017. This latter figure drops to 0.49% however when Western Australia is excluded.
Within Western Australia, the bank is conducting more rigorous stress testing for new home loan customers with increased credit policy tightening such as LVR caps and insurance requirements.
By state, NSW and the ACT accounted for the largest proportion of 90+ arrears at CBA with the state breakdown below.
| |
Per cent of portfolio |
| NSW/ACT |
34% |
| VIC/TAS |
26% |
| QLD |
18% |
| WA |
16% |
| SA/NT |
6% |
Bank levy: CBA faces the costs
The bank also revealed that the Federal Government’s bank levy will cost $369m before tax (and $258m post-tax). This figure is based on 0.06% per annum of CBA’s adjusted liabilities of $614.8bn.
The Treasury has called for the first report on the bank levy in February 2018 with the first payment occurring a month later in March.
CBA reported a statutory NPAT of $9.9bn in the 2017 financial year, growing this figure by 7.6% from the year before.
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