Service and tech drive interest in small banks

by AB07 Aug 2018

New industry data has confirmed that large numbers of mortgage-seeking homeowners are requesting product details from small banks.

Surveying its national broker network in the last week of July, MyState Bank found that 70% of brokers had noticed an increase in the number of clients asking for loan options from a smaller bank. Of those who confirmed the trend, 36% said they had noticed a “significant” or “reasonable” increase, while the remaining 34% reported a smaller increase.

Further, the bank says the trend is a result of technology innovations.

Commenting on the findings, MyState Bank’s group executive of broker distribution, Huw Bough, said, “What is clear is that technology has really opened up the mortgage market to smaller banks in recent years. Smaller lenders like MyState Bank do not need a large bricks and mortar network to service the needs of customers.”

Highlighting the shift in mentality, the survey also found that brokers themselves are ready to follow suit over the next year, by turning to smaller and regional banks when arranging home loans.

On this point, 83% said they would ‘definitely’ or ‘probably’ broker more loans from smaller and regional banks in the next 12 months while 16% said ‘maybe’. A mere 2% were confident they would make no change.

When asked why, 46% of respondents said smaller banks had their interests aligned to brokers and were more committed to providing a high level of service.

Just over 28% reasoned that smaller banks are now “just as competitive as larger banks”, while 17% said larger banks needed to be kept on their toes and that using smaller banks, as well as large ones, helped to achieve this.

Only 4% of surveyed brokers said broking more loans from smaller banks was a risk management move, in case larger banks moved away from the broker channel.

Maintaining the results demonstrate a dynamic and competitive market, Bough added, “The results are encouraging for smaller regional banks like MyState Bank, which have historically operated at a funding disadvantage to larger banks. We will be monitoring this closely to see if a clear trend emerges.”

A previous survey published by the lender in May concluded that 46% of brokers would ‘definitely’ use a smaller bank, compared to 23% who said it was ‘probable’. In this survey, only 4% said they doubted they would go to smaller lenders and less than 1% said they would broker fewer loans from small and regional banks.


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