ASB's mortgage book shrinks for a second successive quarter
ASB Bank's mortgage book shrank for the second successive quarter in the three months ended September but its profitability surged as charges for bad loans disappeared.
Friday, November 19th 2010, 3:11PM 
8 Comments
by Jenny Ruth
ASB's June quarter general disclosure statement (GDS) shows its mortgage book shrank by $187 million to $37.66 billion in the September quarter after shrinking $65 million in the June quarter.
Reserve Bank figures on registered banks show mortgages written by registered banks increased $804 million in the September quarter.
Using those figures as a proxy for the mortgage market (the aggregate figures from the banks' GDSs can vary significantly but ASB's is the only GDS so far available for the September quarter), that means ASB's market share shrank to 22.64% from 22.86% in June.
Actual GDS figures show ASB has been steadily losing market share in the mortgage market since September 30, 2008 when it was 24.77%.
ASB had a further $4.44 billion in mortgages off-balance sheet at September 30, generally loans approved but not drawn down, compared with $4.46 billion three months earlier.
Only 3.8% of ASB's mortgage book had loan-to-valuation ratios (LVRs) above 90%, down slightly from 3.9% three months earlier. Another 9.6% of the book had LVRs between 80% and 90%, down from 9.8% at June 30.
ASB reported a $150 million net profit for the three months compared with a $124 million net loss for the same three months last year which included one-off tax charges for its structured finance transactions.
Before tax, profit jumped 79.2% to $215 million as $1 million of recoveries from bad loans was added to profit compared with the $77 million in charges against profit in the September quarter last year.
Charges for bad mortgages were $3 million while the bank recovered $4 million from other retail loans in the three months.
ASB's net interest income rose 15.8% to $300 million in the latest quarter compared with the September quarter last year as interest income fell 3.2% but interest expense fell a much greater 9.8%.
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Comments from our readers
Maybe they should be the first to bring this back to gain market share again.
Give brokers a choice of either a high up front with no trail or a low upfront with trail.
Most brokers that took the high upfront with no trail have now exited this Profession as they were only in it for the money.
Regularly servicing a client takes time and a Mortgage Broker should be rewarded for this on a regular basis other wise it is a cost to the Broker.
There are still lenders out there that have similar rates to ASB and also have zero application and account fees, they also give Brokers a choice of upfront and trail structure.
Most good brokers when given the choice will choose the trail option as in the long term it this option will benefit their brokerage
If these lenders are better for the client and give brokers a choice on commission structure then its a win-win for both of them.
I stand corrected
However it still shows the importance of why banks need to think about bringing back options on commission structures for Mortgage Brokers
Make sure you disclose the Trails as well as the upfront fee to the client. While trails are important to the brokers business it is the clients best interest we take into account when placing a loan - not the commission amount or trail
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