Mortgage Loans, Home Loans, Bad Credit Home Loans

Recent media reports suggest that The Bendigo and Adelaide Bank have weathered the financial crisis quite well and have come out with a report of healthy earnings.

All this is despite the fact that smaller banks are continuing to be plagued by lack of access to wholesale funding markets on competitive terms.

The Bendigo bank has done very well in part due to its ability to grow its deposit base from an already very healthy 84 per cent of its funding base to 88 per cent while also improving its net interest margin.

Strategically, that ability to improve margins while growing its loan book by about 11 per cent, with the the most significant growth coming from home loans, is the key. This ability allowed the bank to turn what could have been a competitive disadvantage – the lack of access to wholesale funding in the context of a big bank battle for retail deposits – into a competitive advantage.

The big banks have been experiencing margin pressures because their funding costs have been edging up but they have been largely unable, because of the politics of home loans, to pass on the full impact of the higher costs to borrowers. They have, of course, been able to use their ability to re-price loans to business as something of a safety valve.

Bendigo has been able to grow its home loan and non-mortgage books above system growth while maintaining its share of deposits.

After the GFC,the major banks have started to move away from commercial loans into residential mortgages.

That is starting to change – there is renewed interest among the majors, and increasing competition, in lending to business – but the reality for Bendigo, Suncorp and Bank of Queensland is that their experience during the crisis was a reminder that their competitive advantage and their security lies in behaving and lending more like building societies than major banks.