Broker loans crack $90bn at NAB

by Miklos Bolza05 May 2017
National Australia Bank (NAB) has shown some strong growth in its most recent half yearly financial results released yesterday (4 May).

Underlying profit rose by 2.6% from $4.95bn to $5.08bn between March 2016 and March 2017, while cash earnings increased by 2.3% from $3.22bn to $3.29bn in the same time period.

Volumes of loans originated through the broker channel rose from $84.8bn to $92.5bn from March 2016 to March 2017 – an increase of 9% – which included white-label products issued through Advantedge.

The number of brokers under the NAB-owned aggregators of Choice, FAST and PLAN also increased although at a slower rate. In the six months prior to 31 March 2017, broker numbers in these channels rose by 147 (or 3%) from 4,299 to 4,446.

A full NAB product suite was launched to brokers in September 2016. Additionally, the bank said it was providing an improved on-boarding experience for broker customers.

The Australian market share for housing lending at NAB was 15.6% as of March 2017.

Responsible lending

Describing its responsible house lending practices, NAB said it placed a maximum 70% loan to valuation ration (LVR) on certain ‘high risk’ postcodes while using a differentiated pricing structure based on both loan purpose and repayment type.

NAB applies a 7.25% floor interest rate plus a 2.25% serviceability buffer.

For non-residents, the bank had restricted lending to less than 3% of its total housing portfolio while applying a maximum LVR of 60%.

Regarding interest-only lending, NAB expected to meet the 30% limit imposed by the Australian Prudential Regulation Authority (APRA) within the agreed-to timeframe. However, 41% of all new lending at NAB was interest only in the March 2017 quarter.

Interest only loans with NAB automatically convert to principal and interest with the bank giving a maximum time limit of five years to owner occupiers and 10 years for investors. Loan serviceability for interest-only loans is also assessed on a principal and interest basis, the bank said.

Mortgage breakdown

In total, 57.7% of all home loans at NAB were owner occupier with the remaining 42.3% going to investors. This can be broken up further as follows:
  • Owner occupier principal and interest (44.9%)
  • Owner occupier interest only (12.8%)
  • Investor principal and interest (17.0%)
  • Investor interest only (25.3%)
Investor and owner-occupier loans both increased by 6% on a year-on-year basis.

Looking at each state, NAB wrote 37% of its mortgages in NSW/ACT, 31% in Victoria, 17% in Queensland, 10% in Western Australia and 5% combined in South Australia and the Northern Territory.

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