CBA’s latest annual results show that it’s starting to reduce its dependence on mortgage brokers.
UBS banking analysts Jon Mott and Rachel Bentvelzen have highlighted the trend in their latest research note.
According to Mott and Bentvelzen, the changes have been a long time coming.
This chart shows how the pattern of steadily increasing mortgage broker sales is now starting to reverse:
The bank’s use of mortgage brokers rose from 31% in 2012 to 50% in the second half of 2016.
“While this was in line with industry trends, we saw this as disappointing given CBA’s large customer base, strong distribution network and customer analytics,” the analysts wrote.
They added that during that period, virtually all of CBA’s sales growth was coming through the broker channel, while sales from its in-house proprietary network were more or less flat.
However, the recent changes are evidence that CBA has made a concerted effort to gain market share and reduce mortgage brokers’ slice of the property pie.
Not only have mortgage broker fees decreased, but propriety sales have been steadily climbing.
This chart shows the opposing moves (note there’s a seasonal trend for higher sales in the first half of each year):
“We see this as a very important development for CBA,” Mott and Bentvelzen said.
Not only has the mortgage-broking industry been gaining market share, mortgage broker fees have stayed constant while banks face higher margin pressure on interest rates.
Mott and Bentvelzen said in addition to reduced market share, the sizable fees that mortgage brokers have typically enjoyed may also soon be a thing of the past.
“Following the recent ASIC and Sedgwick Reviews we expect the banks to negotiate materially lower broker commissions, with CBA stating today that an announcement on this is likely ‘relatively soon'”, they said.
“Although old trail commissions will take some time to roll off, we see a reduction in excessive broker commissions as an area of upside for CBA and the broader banking industry.”