Macquarie Bank CEO Greg Ward
Macquarie Group is looking to reproduce the digital enhancements it has introduced into its personal banking business in its business banking operation, as it targets higher growth in that market.
Macquarie’s banking and financial services division has a A$117.9 billion home loan portfolio, which has grown at a compound annual growth rate of 24 per cent since 2013, when the group got serious about investing in banking services. Its market share has grown from 0.5 per cent to 5.3 per cent over that time.
Macquarie’s BFS group head, Greg Ward, said much of the success of the home loan business had come from investment in technology that made loan approvals and account opening faster, introduced “fully digital self-service rate reviews”, and upgraded fraud controls.
The business banking loan portfolio stands at $15.5 billion and has had a relatively modest compound annual growth rate of 15 per cent since 2013.
Macquarie has recently launched a business deposit account with similar features to its personal deposit accounts, giving business customers faster response times and more self-service capabilities.
Ward cautioned that growth in business lending was unlikely to match growth in home lending. This is because business loan underwriting is less homogenised, it relies less on brokers and risk assessments are more involved.
However, if the bank can get the same improvement in net promoter scores among business customers that it has had from personal customers following its tech upgrades, it will see growth pick up.
Ward said deposit flows remain strong and will fund additional business lending. BFS has $135.6 billion of customer deposits, which have grown at a compound annual growth rate of 15 per cent since 2013.
He said the bank would not be looking to change its risk settings as part of its growth strategy. Business banking realised loan losses were below 10 basis points in the December quarter.
In the home loan book 90-day arrears are currently 30 bps.
Macquarie released a December quarter update yesterday, reporting “substantially lower” earnings. This was largely the result of a reduction in asset realisations and margin compression in BFS.
Ward said BFS had good growth in a highly competitive market and has had to operate on lower margins along with the rest of the industry.
He said the group was maintaining its conservative approach to mortgage lending: focusing on loans with loan-to-valuation ratios below 80 per cent, not offering cashbacks and not changing risk settings.