The Commonwealth Bank of Australia (CBA) has reported a continued decline in broker-originated mortgage flows, with its proprietary channel now accounting for about 66% of its new mortgage business. In its full-year results for the financial year ending June 2024, the bank had grown its mortgage book by a significant $12 billion, a 2% increase in total balances compared to the previous year. This growth is a positive indicator of the bank’s future in the mortgage market.
CBA’s strategic focus on direct lending has been evident as the bank pushes more business through its proprietary channels and digital home loan offerings. Despite the record number of borrowers using mortgage brokers across the industry, CBA has bucked this trend, favouring its direct channels. As a result, broker flows have continued to shrink.
In the six months leading up to June 2024, nearly 66% of new CBA-branded mortgages were processed through direct channels, up from 61% in June 2023. This shift translates to over $35.75 billion of the $55 billion new mortgages funnelled through direct channels during this period.
CBA has positioned its subsidiary, Bankwest, as the primary brand for broker-originated loans. Even with Bankwest included, direct channels accounted for 54% of the $69 billion new mortgage business in the first half of 2024, with broker flows dropping to 46%. The overall proportion of broker-originated loans in CBA’s portfolio has now decreased to 39%, down from 40% a year earlier.
CBA CEO Matt Comyn emphasised the bank’s focus on building direct, primary relationships through a differentiated approach. Proprietary lending makes up 66% of new lending, compared to 28% across the broader market. However, Comyn reassured that the broker channel remains a significant distribution avenue, with ongoing investments in technology and enhancements to support brokers and their customers. This commitment to the broker channel underscores the value CBA places on its employees and their role in the bank’s operations.
Despite the falling broker flows, CBA continues prioritising direct lending, which has helped stabilise its net interest margin (NIM). The NIM was reported at 1.99%, down eight basis points from FY23 but up one basis point from the first half of 2024. The margin decrease was primarily due to competition and deposit switching. However, higher earnings from replicating portfolios and equity hedges partially offset this. Home lending margins were slightly down, while funding costs increased due to changes in term deposit and savings product pricing.