AMP Bank has been investing in the digitisation of its business for the past couple of years but there wasn’t much to show for it in its latest results.
Net interest income fell 13.7 per cent in the six months to June, compared with the previous corresponding period, costs were up and net profit fell 45.2 per cent to A$46 million.
“Intense competition, low rates and a higher proportion of fixed rate loans continued to place downward pressure on revenue margins in the March quarter,” the bank said in its half-year financial report.
The bank’s net interest margin fell from 1.71 per cent in the June half last year to 1.53 per cent in the December half and then 1.32 per cent in the latest half.
“In the June quarter, NIM recovered slightly due to the increasing rate environment and the bank will continue to look at ways to optimise deposit and funding costs.”
The residential mortgage book grew by $705 million in the half, 1.15 times system, to $22.4 billion. Deposits grew by 24.2 per cent to $20 billion.
There was no loan impairment expense. The bank had reported loan impairment benefits in each of the previous two halves.
Mortgages in arrears by 90 days or more fell from 50 basis points to 39 bps year-on-year.
In its push to be a modern, IT-driven bank, AMP Bank stopped issuing cheques last year and also stopped offering paper applications for certain products. More than 70 per cent of deposit accounts were opened by digital origination and the bank said it is exploring a direct mortgage offering with potential partners.
It has invested in technology to enhance the loan origination process and reduced the average. The average “formal customer cycle time to yes” was cut by 7.5 days to 15.5 days during the half.
It has introduced electronic signatures for applications, online identity checks and a “broker-ordered valuation” service, which saves brokers time.
Its big moves this year was to choose digital home loan start-up Nano to partner on the development of a digital mortgage platform. It aims to release the product in the September quarter, offering a “fully digital mortgage experience capable of providing unconditional approval for a residential loan within minutes”.
Investment in technology increased by 50 per cent.. So far it has been a drag on earnings, but the bank is confident it will see the rewards.