Analysis: Macquarie’s meteoric rise

Many brokers will still remember the bank’s swift departure during the GFC and as a result Macquarie had to regain the trust of the industry – and fast – if it wanted to compete in the minefield that can be the lending market in Australia.

The media-shy lender is notoriously secretive about its mortgage strategy, which has seen its loan book grow 68.9 per cent over the past financial year to $15.2 billion.

A top Macquarie loan writer has revealed how the bank managed to regain broker trust and drive significant volumes through the third-party channel.

Insider’s knowledge

Finance Made Easy director Tony Bice is part of a select group of top Macquarie loan writers who meet a couple of times a year with bank executives to discuss the biggest issues impacting the third-party space.

“They get all of us large volume writers of Macquarie Bank business in a room and delve down and really try and understand what makes a broker tick,” Mr Bice says.

“They then use all that information to tailor their mortgage model so it reflects what brokers want from a bank,” he says

Mr Bice believes the key to Macquarie’s success is the quality of its BDMs.

“I’ve been writing mortgages for a long time and I’ve seen BDMs come and go,” he says.

“I don’t care what anybody says – the volume of business that you give a bank is directly proportionate to the assistance you get and the relationship you have with that BDM.”

What makes Macquarie’s BDMs preferable for brokers is their strong credit background and accessibility, Mr Bice says.

“The Macquarie BDMs will actually go and fight for you in credit,” he says.

“It is not uncommon for me to ring my BDM and he will be in the assessor’s office talking about a deal of mine. It’s the little things like that that have given them the success that they enjoy today.”

The quality of the bank’s broker support has been noticed right across the industry.

Storming the rankings

In The Adviser’s – Mortgage Business' sister title – annual non-major bank rankings, Macquarie usurped ING Direct for the top spot in both the BDM and credit assessment staff categories.

“The one thing they’re excelling at is the turnaround times,” says Outsource Financial chief executive Tanya Sale.

“Their BDMs are the best in the business.

“Macquarie have clearly gone out and uncovered and recruited the top BDMs in the industry and that has paid back ten-fold for them.

“Add to that their turnaround times, which I’d say were the best in the marketplace, and that just shows you that the smaller guys, the non-majors – if you can call them that – can take it to the big four if they want to,” Ms Sale says.

But the lender hasn’t always enjoyed such a glowing reputation with brokers.

It wasn’t that long ago that Macquarie had a very poor name in the third-party space with brokers after leaving the industry in 2008.

But it has been their response to that – rebuilding their relationships with brokers and listening to what brokers want – which has propelled them to the top of the second-tier lending market.

Building trust

Two years ago, Macquarie’s James Casey asked Mr Bice what the bank needed to do to gain the trust of brokers.

“I said you need to have a high-quality BDM with a strong credit background that the guys can ring and run a scenario past,” he says.

“If you get a stack of those guys, then they start to make a name for themselves as the BDMs that go the extra mile.

“Once you start to get that platform, which started about two years ago, that then builds the trust with the broker network.”

Aside from the support it gives to its brokers, Macquarie has put its money where its mouth is and invested heavily in a handful of mortgage businesses.

The bank holds 25 per cent of Connective, and minority shares in Yellow Brick Road, Vow Financial and AFG.

It also has a 17.5 per cent stake in Bluestone and a 19.8 per cent investment in ASX-listed non-bank lender Homeloans Ltd.

“It has had a lot of growth and they have plenty of investments in other mortgage businesses but I don’t know what their strategy is,” Firstpoint managing director Troy Phillips says.

Mr Phillips believes that, as an investment bank, Macquarie has seen the world change and looked to the retail banking space for opportunity.

“They have had a good crack at it and resourced themselves really well and got out there with a product that works,” he says.

“Everyone acknowledges that the old model is broken, so moving into this retail space is probably right up their alley.”

Market is ripe

With plenty of negative press surrounding financial planning, the mortgage market looks ripe for Macquarie as a potentially lucrative source of revenue.

But while a growing loan book may cushion any future losses from the bank’s more volatile investments, the real trick will be whether or not they can retain clients.

“You can grow from a standing start really quickly, but the complexity comes in down the track when you have to do up-stamps, increases, variations, discharges, and to retain existing customers is the trick,” Mr Phillips says.

“It’s easy to do $900 million month in and month out until you have to start servicing it – then you have to start doing all the unsexy stuff that retail banks do,” he says.

“It’s all good until you’ve got 40,000 customers calling and asking you for account balances, not knowing how to use the internet, discharging, having arrears, payments going missing, and all that unsexy stuff that goes with servicing a book.”

There is no doubt that Macquarie have regained the trust of the broker channel and done great things for the industry.

But with a $15 billion loan book and a history of losing interest, they are still a long way from holding the trophy.