Macquarie Bank is keen to write more loans to property investors even though its momentum in the mortgage market is slipping, and is betting that an open approach to data will help reignite business lending, which has also been lagging behind the big four.
After Bankwest said it would no longer accept applications from new customers wanting to refinance investment loans, Macquarie said it retained an appetite for lending to investors, including interest-only loans. Although a slide pack released by Macquarie on Tuesday showed the ratio of investor loans to owner-occupier loans had fallen in the third quarter to a level below the rest of the market. Macquarie also wrote fewer interest-only loans than its rivals.
But this did not reflect any change in Macquarie's appetite for investor lending and the bank would continue to invest in partnerships to get its loans to the market, said the head of the banking and financial services group, Greg Ward.
"We do like investor loans. We like interest-only investor loans," he said. "We have slowed the number of investor loans a little bit but it is more market forces that have caused that shift."
The investor lending market is "very competitive and dynamic", he added. "You see all sorts of offers and promotions and rate changes. There was a period when AMP bank were not writing investor loans of any form, and now they are back in a big way doing that."
Macquarie is a long way from the 10 per cent growth cap for investor lending imposed by the prudential regulator in 2014; according to APRA figures released a week ago, Macquarie's investor loan book of $8.7 billion is lower than its level a month and a year ago.
But Mr Ward also said Macquarie was not keen on chasing mortgage market share by reducing prices. "There has been really aggressive discounting in the market. Our focus has been on quality and returns; we haven't always followed the aggressive prices in the market. We lead with relationship and service here, we don't lead on price."
An open approach to data through the adoption of "application programming interfaces" (APIs) would help the bank deepen partnerships, including with corporate customers wanting to white-label products such as credit cards, which Macquarie already does for the likes of Jetstar and Woolworths, he said.
After spending $228 million on IT projects in 2015 and $245 million in 2016, Mr Ward said that level of spending "will start abating somewhat in years to come – that was really the peak investment period". But now Macquarie was seeking to reap returns from this IT investment.
Its cost-to-income ratio has fallen to 70 per cent, from 76 per cent in 2016 and 79 per cent in 2015, but Mr Ward said there was "a long way to go" and that it could fall to 50 per cent. He pointed to the introduction of biometrics to conduct customer identification in call centres and new natural language processing technology as examples of systems that will create efficiencies.
The market for Australian financial services has grown from $6.1 trillion in FY16 to $6.4 trillion at the first half of 2017 and "we expect good growth in this market to continue", Mr Ward said, driven by digital. "We are in a highly connected world and we are seeing seamless integration of financial services offerings in that world."
