Building society to take on big bank segmentation

by Calida Smylie21 Feb 2014
One of Australia's largest building societies has vowed to take a new approach to the broker channel, avoiding the 'big pit' of the major bank processes.

Wide Bay Australia’s solid half yearly profit rise is due to a repositioning of the business with a clear strategy and focus on brokers, its managing director said.

The ASX reported Australia’s only listed building society had a consolidated profit for the six months to the 31 December 2013 of $7.190 million, up from $5.557 million for the corresponding period to 31 December 2012.

The consolidated results are made up of an after tax profit from Wide Bay Australia, the chief entity, of $6.191 million (in 2012 it was $6.447 million) and Mortgage Risk Management (MRM) of $0.841 million (in 2012 it was $0.994 million).
Over the last year Wide Bay has been repositioning its business with a clear strategy, managing director Martin Barrett told Australian Broker.

The front end of that strategy is a dedicated and differentiated offer to brokers – “I’d like our volumes to increase significantly from brokers” – and it also includes a revitalised branch network and a new business banking channel.

“Ours is a determined model that avoids the big pit of centralised processing and BDM’s that have no control over processes or engagement in credit. We want to build this business over this year with strong partners that will enjoy our approach,” he said.

“Those brokers that qualify as platinum or flame or any other name generally get priority with the majors. The rest fall in priority order.

“For us, those feeling frustrated by the big banks care and attention of their deals and want to be able to talk to someone that is connected to the full process, we offer a good solution…We believe a ‘high care’ factor in working with brokers.”

While in the past Wide Bay Australia operated its own LMI business (MRM), this – for a variety of reasons – stopped creating new business during 2012. The company’s intention is to continue to wind this down and "if possible" fold it into Wide Bay, Barrett said.

Wide Bay has $20.4 million invested in capital in MRM and, subject to actuarial calculations and regulatory approval, the company expects that capital to be returned to the chief entity as the wind-down continues.
Increased profit has been helped by an improvement in the company’s arrears numbers and some mark to market values in some investments held, Barrett said.

“Costs have been managed strongly and we have invested savings into new origination capability. We have put significant focus on this over the last six months.

“Overall I think we are in a good position, we have thrown our old broker proposition in the bin and rebuilt it with a firm commitment to the future…I know the big banks have big mouths to feed – we only need a little of their action!”

Chairman John Humphrey reported that during the past six months, Wide Bay’s loan book decreased by $36 million – from $2.229 billion to $2.193 billion – however lending volumes showed a slight increase.

Approvals increased from $160 million for the six months to 31 December 2012 to $176 million to 31 December 2013.

“While the core residential lending book remained strong and demonstrated annualised growth of 1.7%, the retreat in the overall loan book relates to the rundown of a portfolio of loans originally generated by the finance broking arm of a financial planning business, in which Wide Bay’s investment was written down to nil at 30 June 2013,” Humphrey said.

Wide Bay's capital position is strong, with a consolidated capital adequacy ratio of 14.21% at 31 December 2013 – more than the Board's target, said Humphrey.

The Board has declared a fully franked dividend of $0.13 per share which will be payable on 28 March 2014. “We have also resolved to reinstate the Dividend Reinvestment Plan for this interim dividend,” Humphrey said.