ANZ happy with broker remuneration model
ANZ New Zealand chief executive David Hisco talks about the bank's latest results, the role mortgage brokers play in the business and what he thinks of new competition and remuneration models for advisers
Tuesday, May 3rd 2016, 6:22PM 
1 Comment
ANZ has seen growth in its business however it’s seen an 11% decline in cash profit in the six month period to March 31.
Cash profit, which measures earnings less non –core items, fell in the period from $841 million to $751 million.
However, lending was up 8% and customer deposits grew by 12%.
The main drivers of the result were a change to accounting policies which resulted in a charge of $87 million. Also the bank’s Markets business had a particularly strong result in the previous six month period.
ANZ New Zealand chief executive David Hisco said once those items are stripped out the performance doesn’t look so bad.
“The core bank is actually trending along nicely there’s a couple of outlying things affecting us. I wouldn’t draw the conclusion the whole world is changing for banks.”
“Interest margins have contracted due to strong lending competition and a customer preference for fixed rate mortgages.”
Banks are coming under increasing margin pressure at the moment and reviewing their businesses which are likely so see changes in customer pricing.
Margin compression has come about because banks have to pay higher rates on offshore money when it is rolled over.
Some of this pressure will find its way through to customer pricing.
One example of this was the most recent OCR cut where ANZ, like other banks, chose not to pass on the full 25 basis point rate cut to customers.
The Reserve Bank is likely to make further cuts, however Hisco said it would be inappropriate to say whether or not it would pass on the full reduction to customers.
“We will have to cross that bridge when we come to it,” Hisco said.
Currently 74% of ANZ’s home loan book is on fixed rates and the balance on floating.
One interesting statistic is that 19% of owner-occupied loans are on variable rates, compared to only 6% for property investors.
ANZ grew its lending by 8% in the reporting period. In this half the bank’s market share growth fell back in line with the market compared to the second half last year. In this period its growth was 4.10% compared to system growth of 4.00%.
In the second half last year the bank recorded growth of 5.37% compared to system growth of 3.97%.
Mortgage advisers continue to be a significant contributor to ANZ’s home loan business accounting for 39% of flows, up one percent on the previous half. Branches account of 51% of flows and mobile mortgage managers the balance.
“Brokers play a necessary role out there,” Hisco says.
“We are not everywhere and they help us cover the parts of New Zealand we may not be. They’re a nice little additive to our business.”
When asked what impact the entry of other banks to third party distribution, such has BNZ, have had he said: “Nothing really.”
He doesn’t expect they will have much impact in the future. “We’re a big supplier and I think most people realise that if you’ve got a big supplier you know you need to keep your big supplier happy.”
“We’ve got deep relationships with (brokers) and they’re not going to chop and change because someone else has decided to play.”
ANZ has no place to change its remuneration model from upfront commission to trail commission.
“We are happy with the (model) we’ve got,” he said.
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Good grief. 39% of their business and all we get is this comment!