Australia's CBA, big offshore banks grow home lending business

[SYDNEY] Commonwealth Bank of Australia grew its home lending business in the second half of last year, the only one to do so of the four major banks, data showed on Friday, as offshore lenders lured customers with quick approvals and cheap money.

Australian home buyers flocked to big offshore players such as HSBC, ING, and Citigroup, following a period of heightened regulatory scrutiny and customer backlash at the big domestic institutions. Those banks grew by 6.6 per cent, 5 per cent and 2.3 per cent respectively, over the same period.

The loss of market share for the Big Four points to a challenging revenue growth environment at a time when their dependency on home loans has increased after selling scandal-hit businesses such as insurance and financial advice.

A string of scandals in the last two years has seen regulators pressuring the major banks to tighten their conduct and lending processes, thereby slowing down credit approvals.

Meanwhile, HSBC and Citi have invested in their relationships with brokers and sped up their loan approval processes. HSBC has also opened new branches.

"The big overseas banks have been less impacted by the Royal Commission," said Steve Mickenbecker, financial services executive at rate comparison site Canstar.

"Those institutions have been able to get the loan approvals through more quickly when they have been traffic jams at some of the bigger organisations, plus those banks have also been pricing aggressively in the last 12 to 18 months."

Commonwealth Bank, already Australia's largest, with one fifth of the mortgage market grew its home lending books by 1.2 per cent in the six months to Dec 31 to A$444.8 billion (S$406.7 billion), according to Australian Prudential Regulation Authority (APRA) statistics.

The rest of its smaller domestic rivals - Westpac Banking, National Australia Bank (NAB), and Australia and New Zealand Banking Group (ANZ) - shrunk their books by up to 1.6 per cent each over the same period.

"The extent of ANZ, and now (Westpac), housing share losses are unprecedented," said Brian Johnson, a banking analyst at Jefferies in Sydney.

Due to the scandals and scathing revelations at a sector-wide misconduct inquiry, all but one of the Big Four have been forced to overhaul their management teams.

Commonwealth Bank, which reports first-half earnings on Feb 12, was the first to see the early retirement of its CEO following a money-laundering scandal.

NAB, the third largest, lost its top executives after an industry inquiry into misconduct accused them of being unwilling to accept responsibility for the bank's misconduct.

Westpac, the second largest with a 23 per cent share of the mortgage market, is searching for a new chief executive following the resignation of its CEO over a child exploitation payments scandal.

Investment conglomerate Macquarie Group, which was largely unscathed by the inquiry, grew its mortgage book at a dramatic rate of 14 per cent over the same period - albeit from a much lower base of about 2.5 per cent market share.

REUTERS