Market Update John Flavell General Manager NAB Broker
Market Update John Flavell General Manager, NAB Broker
Australian property riding on China’s back AFR, Nov 2012 Lenders face off on out-of -cycle rate cuts Australian Broker Feb 2013 Europe delays, US ‘fiscal cliff’ threatens AFR Nov 12 growth: G 20 Japan posts record trade deficit BBC News, Feb 2013 China’s investment in Australia cut in half 3 Australian, Oct 2012 Aussie John sells to which bank? AFR Dec 12 Britain on the brink of ‘triple-dip’ recession AFR, Jan 2013 Congress votes to extend US debt limit BBC News, Jan 2013
Financial markets have turned surprisingly optimistic. Equity markets up, fear index down.
European sentiment may be bottoming but not their economy • European confidence still at historic lows • But might have bottomed – re ECB and Fed • Delaying Basel 3 liquidity will help further • But can’t say the same about their economy
Our forecast suggests moderate ongoing US growth Model based on: Real interest rates, House prices, Equity prices, Oil prices, TWI (currency), Commodity prices, Credit rationing and lags.
China Growth outlook: We expect further acceleration of growth to around 8 ¼% in 2013 – with policy helping
World still very multi speed Developed v Developing
AUD a proxy for global risk appetite and commodities. And of course China Model driven by: commodity prices; USD/EURO – as measure of USD weakness; long and short run rates; relative unemployment; relative equity markets and VIX.
Near- term Australian growth also constrained by consumer caution. § Saving ratio remains around GFC levels in trend terms § Personal (credit card) and business credit currently around flat to negative § Deposit inflow both by consumer and (especially) business strong § Home loans at 5% a 30 year low
Flattish house prices not helping perceptions of wealth. May be turning now but don’t expect much going forward § House price expectations at end 2012 have turned slightly positive § Over the medium term our model wants moderate growth. § Very different by state – WA still strong: SA and VIC less so. § Accelerating in near term but then flattens out by end 2013 as unemployment rises
Interest rates • Our expectation RBA will cut by 75 bps in 2013 to 2. 25% • First cut probably May • As unemployment rises to 5. 75% by mid-late 2013, RBA will need to respond again • We expect a final cut in late 2013 as mining phasing heralds further labour market weakness (say November) • Forecasts imply a bottom in rates between 2 and 2. 5% depending on extent of the slow down
Australian economic forecasts 2012 -13 2013 -14 2012 2013 2014 GDP 2. 3 2. 8 3. 5 2. 0 3. 3 Employment** 0. 5 1. 5 0. 8 1. 1 1. 3 5. 6 5. 7 5. 2 5. 6 5. 8 2. 9 2. 5 2. 7 2. 9 2. 5 2. 25 3. 0 2. 25 2. 75 0. 97 0. 99 1. 03 . 97 0. 95 Unemployment rate* CPI underlying ** (includes carbon) RBA cash rate* $US/$A* * at end of period; ** through-year growth
Customer deposits Source: NAB Weekly Advertised Term Deposit Rates since 2007 ^Represents advertised term deposit rates, used here as a peer comparison. These make up less than 15% of total term deposit costs.
Term Wholesale Funding * Includes Covered Bonds Source: NAB Treasury
Short-term Wholesale Funding Source: Bloomberg
Overall funding cost picture Source: NAB Treasury & Bloomberg
In summary • Environment will remain volatile both globally and domestically • Confidence running ahead of the fundamentals • Domestic downturn in growth post peak of mining boom • Property prices sideways • Credit growth slow • Cash rate down
Social media a missed opportunity for brokers The Adviser, May 12 Your choice: Embrace social media or bust Australian Broker, Jan 2013 Small firms say Linked. In works, Twitter doesn’t Wall St Journal, Jan 2013 Twitter move to Australia ‘imminent’ AFR, Jan 2013 Get to grips with Gen Y or lose out, say brokers 19 Broker News, July 2012 MFAA uses social media to promote brokers New App promotes brokers to borrowers The Adviser, Nov 12 5 tips for engaging clients on Facebook Australian Broker Jan 13
NAB Broker Update John Flavell General Manager, NAB Broker
Our view is the broker channel will continue to grow 40% 4045% 4555% 7% 1520% 53% 4045% Broker Online 2030% 3035% Branch
Broker Satisfaction Implementation of Single Document Pack
The basics…where are we today ? Service Product & Price Credit People Commission + At Market − Service. Our objective is to deliver consistency. We have made good progress…with more enhancements to come Product. Simple yet feature rich. Price for Risk. Continues to lead the market We are at market with our credit policy Our people are regarded the best in the industry Our Ramped Trail commission structure increasing broker profits on a daily basis.
Service…what have we delivered • State-based teams • Outbound calls, we pick up the phone and talk to you when there is an question • Embedded DCAs in production team • Construction Lending case management • Customer on-boarding program • Single Document Pack • New NAB Broker website NAB Broker/Homeside Major Lender of the Year 2012
Product • Homeplus package − Bundled NAB Classic Banking (deposit offset) and Credit Card • Homeside brand refresh − New customer website (homeside. com. au) Homeside Homeplus Best Product 2012 − New broker to customer tools • 3 Year Anniversary Homeside Price for Risk Homeside Homeplus Canstar Cannex 5 star rating
Our people • Largest broker distribution team in the market • Recently expanded with 10 new positions to provide greater levels of support and advice • Realigned BDM panels to give you access to knowledgeable experienced staff in person, over the phone and online • Tailored and flexible support − Field-based − Office-based − Broker Support Specialist − Lending Specialist − Aggregator alignment Nick Murray Best Bank BDM 2012
Commission A win-win approach 0. 65% Ramped trail benefits • Longer customer relationships • Increased revenue and book value for brokers 0. 35% 0. 30% 0. 25% 0. 20% 0. 15%
Rewarding customer life vs loan life Example scenario 1. 00% • Existing Homeside client of 7 years wants to buy and investment property • They take out an additional Homeside loan 0. 35%
In Summary • Uncertain economic conditions • Opportunity for broker channel to continue to grow • NAB Broker will continue to grow our share • Keynote - Digital marketing • We will continue to focus and invest in: − Compelling proposition for the end customer − Our service proposition − Compelling partnership proposition − Our people
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