AMP Bank to roll out direct-to-consumer digital mortgage

AMP CEO Alexis George has revealed that part of the group’s growth plans for the bank includes “establishing digital direct-to-consumer propositions” and “partnering with fintechs.”

While releasing AMP’s financial results for financial year 2021, the CEO outlined that the bank had identified an opportunity for “significant” direct-to-consumer (D2C) growth with “innovative digital propositions on offer and customers demanding end-to-end digital experiences”.

Currently, 90 per cent of its residential mortgages are written through the broker channel (up from 84 per cent in 2020).

As such, the bank told investors that it “continues to explore direct mortgage offerings with potential partners” and will launch digital mortgages this year.

“Despite the increase in broker originated loans, the bank has the ambition to grow its direct channel in order to maintain its competitive cost to income ratio,” the investor report read. 

The bank has already started growing its capacity in the home lending space to ramp up for this push. 

During the year, AMP Bank continued to simplify its platform architecture and modernise its core system. The auto credit decisioning rate improved by 75 per cent to greater than 60 per cent during FY21, resulting in “faster and more consistent approvals” (average time to conditional approval improved from 6.2 days in FY20 to 5.3 days in FY21, the bank said).

It said it aims to improve customer “time to yes” for mortgage approval by around 30 per cent in FY22.

Last week, AMP Bank welcomed Melissa Christy as its new head of lending operations and client assist to help deliver its strategy of strengthening the bank’s home lending proposition for customers and brokers, and its transformation into a technology-enabled, service-led business.

AMP said at the time that automated, digital self-service would be central to this approach, noting Ms Christy’s experience in building the mortgage arm of fintech lender 86 400.

AMP Bank’s loan book continues to grow

In its FY21 results, the group highlighted that AMP Bank had made “strong progress” on the digital origination and establishment of deposit products (STP), with more than 70 per cent of retail deposit accounts opened digitally. 

It added that it was continuing to invest in technology to streamline the origination process, thus improving the experience for both customers and brokers. 

It suggested that this had fed into its loan book growth in FY21, which rose 7.7 per cent (or $1.55 billion), with the majority of growth in the second half of the year, despite a “highly competitive lending environment”.

Over the course of FY21, AMP Bank’s residential mortgage book increased to $21.7 billion.

It said this growth was “driven by competitive pricing and offers”, as well as “targeted growth in principal and interest loans across both owner-occupied and investment lending”, and “broker service experience” (highlighting that it continues to be ranked by brokers as the top five Australian banks in Momentum Intelligence’s Third-Party Lending Report 2021).

It also reduced its proportion of interest-only (IO) loans in its portfolio, with IO lending representing 14 per cent of the total book, down from 20 per cent at FY20, the result of “active management”.

“In 1H22, AMP Bank will leverage the strong momentum in 2H21, with the applications pipeline increasing by 14 per cent between July and December 2021,” the group told investors on Thursday (10 February).

“AMP Bank also had an average of 73 applications per day in 2021, an increase from 49 per day in 2020.

“AMP Bank is targeting total residential lending growth above system over the long term, subject to risk appetite, competitive landscape, return on capital hurdles and funding availability.”

Total deposits increased by 10.4 per cent to $17.8 billion, in line with the bank’s strategy to “optimise” its funding mix to support growth. Deposit-to-loan ratio increased to 81 per cent at FY21 (up from 78 per cent) in FY20.

AMP Bank said it “continues to closely monitor risks of slower growth in the housing market following heightened expectations of an official interest rate rise in 2022 off the back of strong economic recovery”.

“The bank continues to focus on maintaining book quality with 69 per cent of customers being owner-occupied, an average loan-to-value ratio (LVR) of 67 per cent, dynamic LVR of 58 per cent, and credit quality improved with 90+ days arrears at 0.50 per cent, a 0.12 percentage point improvement from FY20,” it said.

Ms George commented: “We’ve achieved a solid underlying profit result, which shows the strength of our bank, growth of the North platform with increased inflows from external financial advisers, and the significant cost savings achieved from across the business, in line with our targets.

“[AMP] Bank is delivering mortgage lending growth above system, benefiting from our investment in service and support, with further digitisation and automation planned…

“We have good momentum in the transformation of AMP, repositioning our core capabilities to take advantage of the opportunities ahead of us, as we progress towards and beyond demerger as a simpler and purpose-led business.”

AMP Bank’s overall net profit after tax was $153 million in FY21, up 38 per cent on 2020.

[Related: New head of lending ops at AMP]