SBS grows and adjusts commission levels

SBS Bank has reported a 49% increase in its net profit, for the first six months of the year and that has been helped by its move in the mortgage broker market.

Tuesday, November 29th 2016, 2:14PM

Shaun Drylie took over as the bank’s chief executive in August after the sudden death of the previous CEO, Wayne Evans, at the start of the year.

Drylie says Evans set a good strategy for the bank, which included a rebrand, and he hasn’t had to make many changes.

The bank’s move into third party distribution with mortgage advisers has been one of the factors behind its lending growth.

While 30-40% of home loans in New Zealand are written through advisers, SBS used to be well below that figure.

Drylie says “we are now at that level if not above it.”

When SBS went into the broker space it set up a virtual branch in Invercargill to handle loan processing.

Recently it has decentralised that process and if there is an SBS branch in the region that is where the lending decision is being made.

Drylie says it is a better solution as the branch understands the local conditions.

Also it can be “quite challenging” from the client’s perspective when decisions are being made in a central place.

SBS doesn’t have a branch in Auckland however it is considering establishing one. At this stage no decision has been made.

While former chief executive Wayne Evans had entertained the idea of introducing trail commissions, Drylie isn’t going down that route.

“I don’t believe trail is essential to maintaining a good relationship with brokers,” he says.

SBS’s proposition is around its story its service and support levels.

While trail isn’t on the cards at present, it hasn’t been totally ruled at some stage in the future.

SBS has, though, adjusted its upfront commission to 70 basis points plus bonus 20 basis points for volume.

Drylie says the change is because it wants to deal with advisers who understand the SBS story and write continuous business, rather than someone who only puts a small number of deals with the bank.

He added that being a New Zealand bank owned by its customers also resonated strongly with the public who responded to their bank profits staying in the country and being invested into highly competitive mortgage and investment rates.

Highlights

The highlights from the bank’s six month report to September 30 are:

Net profit rose 49% from $9.9 million to $14.7 million
SBS grew its mortgage book by $157.7 million to $2.37 billion. This was well above system growth.
Loan impairments were down 21% due to good credit management and a focus on quality lending. It is also a good time in the credit cycle.
Finance Now, SBS’s personal lending business, has grown strongly and hasn’t been subject to the same margin pressure as home loans. Drylie says “the quality of Finance Now’s asset book is exceptional,” and that this business was a “natural hedge” to the bank’s other businesses.
Expenditure management has been good.
Drylie says he has had great support from his management team and the board.

Tags: SBS