1 Comment 1 Commentby Jenny Ruth
ASB's latest financial results showed it effectively shut up shop on mortgage lending in the six months ended December.
Its half-yearly disclosure statement showed its on-balance-sheet mortgage book shrank by $518 million between June 30 and Dec 31 last year after growing by $674 million in the previous six months.
Year-on-year, the on-balance-sheet book was $156 million higher at $75.51 billion at Dec 31.
Shortt told TMMOnline that banking-system-wide mortgages grew 2% in the period. (Shortt was rounding the data because RBNZ data shows net new mortgage lending grew $5.18 billion, or 1.5%, in the six months ended December.)
“You would have to describe that has a very low-growth environment,” Shortt said.
“We've been quite clear about where we want to sit. Our pricing - It's been a fairly competitive market and that's in essence what the big change has been,” she said.
“Mortgage brokers – the feedback we're getting from brokers is that they love the ASB service.”
But they also want fast turn-around times and “very competitive” pricing, and that hasn't changed, “that's a feature of the broker market,” she said.
“Over the last six months, they would've liked us to be more competitive on pricing.”
But ASB also had to deal with higher funding costs, with offshore funding costs rising more than the cost of domestic deposits, but that's also risen, Shortt said.
“We're chosing to manage our business in a way that we think is appropriate. It's a really competitive market and, in particular, it's low growth.”
Slides published by ASB's parent, Commonwealth showed ASB's deposits grew 6.6% between December 2022 and December 2023 while deposits in the banking system as a whole were up 2.8% and that while home lending in the banking system as a whole was up 3% over that year, ASB's home lending rose just 0.2%.
ASB remains the only one of the big four Australian-owned banks that doesn't publish any information about how much of its mortgage book is originated by advisers.
Both ANZ Bank New Zealand and National Australia Bank-owned Bank of New Zealand publish the percentage of their total book originated by advisers and how much of new mortgages written in their reporting periods were written by brokers, while Westpac publishes only the former.
“We provide so much information. We just have to draw a line underneath it somewhere,” Shortt said.
However, Shortt did admit that the proportion of ASB's loans written by brokers has fallen but said “it's not that much of a material change.”
Every adviser wants the best interest rates. “I know that they haven't been happy with where we've been in terms of price, but it's a competitive market.”
Shortt isn't promising ASB's pricing will change. “We're always making adjustments and we've made some in the new year. But we've got to think about this business for the long term,” she said.
“We don't run our business on market share, you're right. Over the long term, we absolutely want to grow,” but market share may vary from month to month or in any given period.
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Roll out the old ASB service proposition when all else fails. Unfortunately, what the ASB chief executive fails to understand is that ASB’s service levels to mortgage advisers (we aren’t called brokers anymore) and its customers were just the “icing on the cake” back when ASB were still actually competitive on both their home loan policy and pricing. Having a 35 day refix policy for your customers now on their home loan is far from competitive.
ASB turnaround times to advisers might be good but this is because they clearly aren’t getting much business from the adviser channel. This should be a real concern to ASB when it’s acknowledged 50%+ of new home loans now originate from mortgage advisers. As a lender if you aren’t focussed on such an important acquisition channel and ignore what advisers are trying to tell you about your policy and pricing don’t be surprised if your profit then drops.