NAB broker flows drop as it focuses on proprietary channel

National Australia Bank (NAB) has released its full-year results for 2024, revealing a drop in its broker flows of 3.8 per cent (on 1H24), from 64.9 per cent to 61.1 per cent of its $77 billion in new mortgages.

This comes despite the broker channel being responsible for 53.2 per cent of loan originations in its $353 billion mortgage portfolio in Australia (up from 51.4 per cent in the previous half).

New loans originated from the major lender’s proprietary channel increased from 35.1 per cent in the first half of the financial year to 38.9 per cent as NAB CEO Andrew Irvine announced an evolution of the bank’s strategic priorities with “a focus on becoming a more customer-centric, simpler and fast-paced organisation”.

In NAB’s ASX announcement, it said: “To build on our significant progress since FY20, we have evolved our strategy.

“While no major pivots are required, the evolved strategy aims to achieve stronger customer advocacy, increased simplification, and faster outcomes, along with ongoing focus on improved performance in deposits and proprietary lending.

“To support this, investment spend on a restated basis is expected to modestly increase from $1,638 million in FY24 to approximately $1.8 billion in FY25.”

On the release of the bank’s 1H24 results, Irvine told the media that returns on broker loans came back “below the cost of capital” as the lender struggled with net interest margin (NIM) constraints.

Irvine told Broker Daily (at the time operating as Mortgage Business) that the reason behind the third-party channel seeing returns below the cost of capital was due to its pricing.

He said at the time: “One of the things that we do in the broker channel is to have a price premium versus competitors. And so, routinely, we would price a five to seven price premium to other banks.

“We do that because we have a superior service proposition. And what we find is that when customers are buying when they’re in the purchase market, they’re comfortable with that premium because they want to have certainty on settlement and low stress. When it’s a refi-heavy market, I think customers are a little bit more price-sensitive.

“And so, what I think that does, is allow us to moderate volume in that channel. And you’re going to continue to see us do that while returns are south of the cost of capital.”

Further commenting on the full-year results, Irvine said: “The primary driver of pressure was in our home loan business, where margins particularly in the first were under significant competitive pressure. That has stabilised in the back half of the year.

“In Australian housing, our growth was subsystem at 3 per cent as we balanced growth against competitive pressures. We will continue to manage portfolio returns through a disciplined approach in this dynamic market.”

Underlying profit sits 6.9 per cent lower over the financial year due to margin pressure from home lending competition, however, has moderated with the underlying profit slow to 1.8 per cent when compared to the previous half.

Broker Daily has reached out to NAB for further commentary and clarification on the bank’s strategy concerning the broker channel and is awaiting a response.

[RELATED: Returns on NAB broker loans ‘below the cost of capital’]

Adrian Suljanovic is a journalist at Broker Daily with more than two years experience reporting on all facets of the third party distribution channel.

Adrian has written for a range of business and finance titles including IFA, Investor Daily and Lawyer’s Weekly before joining the mortgages team in 2022.

He graduated from the University of Wollongong in 2021 gaining a Bachelor of Communication & Media with a major in Digital & Social Media.

E-mail Adrian at: This email address is being protected from spambots. You need JavaScript enabled to view it.