australian mortgage report q1 2010

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Australian Mortgage Report: Quarter 1 2010 – Brief CoreData bm

For further information contact:

CoreData-brandmanagement(02) 9376 9600

Australian Mortgage Report

Quarter 1 2010

‘Year in Review’

A quarterly detailed analysis of the Australian mortgage industry




About The StudyThe Australian mortgage industry continues to undergo unparalleled change, with

much of the impact caused by the confusion continuing to unfold from the global

financial crisis.

The lack of economically viable wholesale funding and ‘difficult’ securitisation

markets has caused, and continues to do so, many lenders such as non-banks to

cease lending altogether, with many tier 2 Australian banks also struggling to

compete.

The Australian Mortgage Report has been developed to unlock the confusion

surrounding residential lending market share in Australia, with quantitative analysis

extending back five years from December 2009.

What’s in the report?

The Australian Mortgage Report, which is released quarterly, compiles, analyses

and comments on the developments, trends and market activity with a different

mortgage theme per quarter.

The aim is to provide benchmark analysis on the Australian mortgage industry,

along with information in line with the quarterly theme.

The theme for Quarter 1 2010 is ‘Year in Review’, as CoreData-

brandmanagement highlights mortgage market share changes during 2009.

Pending any major market changes, the quarterly themes for 2010 will remain;

Quarter one; Year in Review; released mid-February

Quarter two; Mortgage products; released mid-May

Quarter three; Customer acquisition; released mid-August

Quarter four: Sales channels / mortgage brokers; released mid-November




Report Extracts Below:Executive Summary

1.1 St George and Bankwest perform strongly

The St George and Bankwest brands were the surprise success stories during

2009, when many considered there would be a customer exodus post the

respective Westpac and Commonwealth Bank takeovers.

The St George mortgage book increased 14.7% for the year ending December

2009, with Bankwest up 29.4%.

1.2 Tier 2 banks lending continues to struggle

During 2009 the Tier 2 banking sector continued to lose mortgage market share

to the big four banks, with restricted lending volumes due to lack of funding.

The big four banks can access cheaper lines of wholesale funding compared to

Tier 2 banks, due to higher credit ratings.

1.3 ‘Big two’ now have 50% market share

The ‘big two’, Commonwealth Bank and Westpac by the end of 2009 hold 50.0%

of all outstanding mortgages in Australia, with market share continuing to

increase each quarter.

ANZ and National Australia Bank market share was unchanged for the year,

with the biggest losers the non-bank lenders whose share fell to 4.8% from

8.5%.

1.4 Commonwealth Bank hits $280 billion

The 25.9% market share ranks the Commonwealth Bank as the largest

mortgage lender in Australia, with a 21.6% book jump to $280 billion for year

ending December 2009.

1.5 Westpac reaches $260 billion

Westpac attracted very negative media attention in December when the bank

boosted the standard mortgage variable by 45 points, after the official cash rate

increase of 25 points. With a mortgage book of $260 billion and mortgage

market share of 24.1%, Westpac can potentially afford to have weaker customer

acquisition in the short term, as the bank increases margins on the book grownduring the Global Financial Crisis.




1.6 National has renewed mortgage focus

At the end of 2009 National gave a clear indication of a renewed focus on the

mortgage market with the Challenger broker network purchase, along with the

December 2009 decision to increase mortgage rates inline with official cash.

A 4.9% book gain was recorded for the December quarter, increasing the annual

growth rate to an above system 9.2% for the year to December 2009.

1.7 ING Direct funding struggle impacts mortgage book

The bank’s retail deposits increased just $1.4 billion to $17.8 billion for the year

to December 2009, which had a direct impact on the mortgage book which could

only increase 3.5% to $35 billion for the period.

A more cautious approach to residential lending has prevented the bank from

growing the mortgage book by any more than 1.5% for any quarter during 2009,

with the weakest growth of 0.4% recorded for the September quarter.

1.8 The Suncorp struggle continues

If the Suncorp snail-paced mortgage growth continues at the current level of less

than one per cent per annum, then Tier 2 bank competitors Bendigo and

Adelaide Bank or Bank of Queensland may overtake Suncorp as Australia’s

sixth biggest residential lender.

1.9 Bank of Queensland shining light

Bank of Queensland continues to impress with the ability to grow mortgage

market share above system, when all other Tier 2 banking rivals struggle.

1.10 Macquarie Bank catalyst for run-off example

With no new lending for several years, the Macquarie Bank mortgage book

continues to fall by a consistent percentage each quarter, and remains thelending indicator of how quickly a book shrinks in run-off.

This indicates any mortgage books in run-off decrease by between 23% and

25% each year.

1.11 GFC has no impact on mutuals

The Global Financial Crisis had virtually no impact on the mutual sector which

continues to grow at around 10% annually.

As a combined group, mutuals would be the fifth biggest mortgage lender in

Australia, behind the big four banks and well ahead of current fifth placed holder

ING Direct.




The success of the subsidiary brand

St George mortgage breakdown

The St George mortgage book increased by $11 billion to $85.5 billion during

2009, an extremely strong result considering more than half of all mortgages

under the brand are domiciled in New South Wales.

The St George mortgage book increased 14.7% for the year ending December

2009.

4%

8%

12%

16%

D e c - 0

4

D e c - 0

5

D e c - 0

6

D e c - 0

7

D e c - 0

8

D e c - 0

9

Source: APRA

St. George

Bankwest mortgage book growth peaked at 9.4% in the December quarter, with

a low of 4.2% for the June quarter.

2.0%

4.0%

6.0%

8.0%

10.0%

M a r - 0 9

J u n - 0 9

S e p - 0 9

D e c - 0 9

Source: APRA

Bankwest




Sector Market Share Analysis

The stranglehold of the big four banks on the Australian mortgage market has

been well documented, but a new milestone has now been reached.

The ‘big two’, Commonwealth Bank and Westpac by the end of 2009 hold 50.0%

of all outstanding mortgages in Australia, with market share continuing to

increase each quarter.

December 2009

ANZ / NAB

Foreign

banks

Non-bank

lenders

CBA / WBC

Tier 2

Australian

Mutuals

Mortgage Market Ranking

Analysis on the 18 banks operating in Australia, including;

Short term analysis – quarter by quarter

Long term analysis – year on year

Market share analysis – change over six years




Bank Analysis (NAB Example)

At a glance

Significant mortgage focus: Renewed mortgage acquisition focus

Mortgage ranking by value: 3

Mortgage market share: 13.2%

Mortgage book size: $142 billion

Year to December 2009: 9.2% increase

Quarter to December 2009: 4.9% increase

Short term analysis – quarter on quarter change

The RHG $440 million loan purchase pushed the December quarter mortgage

book increase to 4.9%; the March quarter was weakest at just 0.7%.

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

M a r - 0 9

J u n - 0 9

S e p - 0 9

D e c - 0 9

Source: APRA

National




Mortgage market share analysis

National mortgage growth was maintained below system until mid 2009, causing

market share to fall from a peak of 14.8% in 2003 down to 12.9% in June 2009,

with market share increasing to 13.2% by the end of 2009.

12.5%

13.0%

13.5%

14.0%

14.5%

15.0%

D e c - 0 3

D e c - 0 4

D e c - 0 5

D e c - 0 6

D e c - 0 7

D e c - 0 8

D e c - 0 9

Source: APRA / RBA

National

Cost

The Australian Mortgage Report can be purchased individually, or as an annual subscription,

which can include a client ‘in house’ presentation of the major findings.

For further details contact the Brand Management office on (02) 9376 9600.




BackgroundCoreData is a specialist financial services research and strategy consultancy based out of Sydney,

Australia.

The firm is part of the brandmanagement group, which has operations in Australia, the United Kingdom,

China and the Philippines.

With a primary focus on financial services CoreData provides clients with both bespoke and syndicated

research services through a variety of data collection strategies and methodologies.

Clients benefit from a dual offering of business-to-business and business-to-consumer research and

consulting services.

The group provides clients with market intelligence, guidance on strategic positioning, methods for

developing new business, advice on operational marketing and other consulting services.

CoreData Research prides itself in identifying market trends at the earliest opportunity and formulating

insightful quantifiable research that clients can use to help them stay ahead of the market and better meet

the day-to-day challenges facing their businesses.

Our focus is on bringing deep market knowledge to research and strategy development.

The group’s research is not just about information and data but at providing insight so clients can develop

strategies that work.

The team is a complimentary blend of experienced financial services, research, marketing and media

professionals, who together combine their years of industry experience with primary research to bring

perspective to existing market conditions and evolving trends.

CoreData-brandmanagement has a number of syndicated benchmark proprietary indexes across a broad

range of business areas within the financial services industry.




CoreData-brandmanagement has an extensive proprietary nationwide database of 80,000 Australians and

is used to recruit consumer participant respondents for studies.




Disclaimer

To ensure the privacy of the individuals conducting this research and to comply with privacy laws, no persons have been mentioned by

name and no personal details are contained within this document.

This document was compiled from primary research and other information at the time of writing.

The information is believed to be accurate however no representation or warranty, express or implied, is made by brandmanagement as to

its completeness, and it does not make any warranty to correct any information subsequently found to be inaccurate.

This document does not constitute investment advice or a business recommendation.

This document may contain the personal views, standards and opinions of the researchers and third party contributors.

The inclusion of this material is not an endorsement by brandmanagement

In all cases, people reading this material should attain appropriate professional advice in evaluating its accuracy, currency, completeness

and relevance for their purposes.

Brandmanagement disclaims any direct or indirect liability or costs arising from any reliance on the information contained within this

publication.

The information within this paper remains the express property of brandmanagement. It may not be reproduced in any form without express

permission.

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