BNZ mulls a return to mortgage brokers

National Australia Bank's Bank of New Zealand is looking at a return to mortgage brokers after more than a decade of being the only major bank not using them.

BNZ's new chief executive Anthony Healy told Banking Day the bank was considering such a move even though a refocus on growing mortgage market share in the second half through existing channels had successfully turned around a market share fall.

Healy said BNZ chose in the first half to manage its net interest margins and not engage in aggressive competition for share, which drove down the net interest margins of its competitors.

But, with his appointment as CEO in May, Healy moved to ramp up BNZ's activities in the mortgage market.

"In the second half we refocused our efforts on the areas of [small to medium enterprise owners], housing, retention and getting the basics right," he said, citing the launch of BNZ's Home Advantage offer of credit cards for mortgage borrowers at mortgage interest rate.

"We've been growing that core franchise focus on housing a lot more and it's starting to pay dividends," he said.

BNZ's market share in home lending fell to 15.8 per cent in the first half from 16 per cent, but then bounced back to 15.9 per cent in the second half as mortgage lending growth jumped to 2.7 per cent from one per cent. BNZ's traditional strengths have been in business lending rather than mortgage lending, where Commonwealth Bank's ASB and more recently ANZ have been strongest.

Healy said he was pleased BNZ was winning share without being in the broker market, but he did not have any "sacred cows" and a return to using brokers was one option being considered.

"There's nothing off the table for me. We're thinking deeply at the moment about whether we should be having conversations with people who have chosen for one reason or another to use brokers, and we're certainly thinking that through," he said.

"It's in the short rather than the long term."

Earlier, BNZ reported a cash profit for the full year to September 30 of NZ$807 million, up 2.4 per cent from the previous year.  Its net interest margin slipped two basis points to 2.34 per cent as the lower margin fixed mortgage share of its mortgage book rose to 68 per cent from 49 per cent.

Home owners have been switching from floating to fixed mortgages over the last year as the Reserve Bank of New Zealand hiked its Official Cash Rate by 100 basis points between March and July.

Gross lending rose 4.0 per cent to NZ$63 billion, while operating costs rose 1.9 per cent to NZ$806 million. The bulk of the NZ$19 million of cash earnings growth for the year was driven by a NZ$12 million reduction in bad and doubtful debts to NZ$87 million.

Healy said business and agribusiness lending grew solidly, in part because of BNZ's traditionally strong position in Christchurch, where the earthquake rebuild is ramping up activity, and in the Kiwifruit industry, which is rebounding from a devastating outbreak of the bacterial disease PSA.

Healy said he was pleased with BNZ's more moderate cash earnings growth than its big three rivals. ANZ in particular has driven costs lower over the last two years as it reaped the benefits of its merger with National. He said BNZ had reinvested its cost savings in the business and its bad debts cycle was less volatile than its rivals.