Brokers may represent too much of a good thing for National Bank, its president suggesting the lender will ease up on their use as it focuses on growing originations through, ahem, road reps and branches.
“In Ontario, we’ve seen good volume growth,” President and CEO Louis Vachon told analysts during a conference call Thursday. “A lot of that is coming – 40, 45 per cent – from brokers.
“Clearly, for the next few quarters we are going to look at net margins in that business … and we’re going to look at hopefully increasing the branch and mobile sales force contribution in Ontario and (although) we’re not pulling out of the mortgage brokers market, on a relative basis we’d like to reduce it a little bit.”
The comments came with the release of second quarter results pointing to a 13 per cent rise in the funded volume of residential mortgages, compared to the year-ago period.
Brokers, outside of Quebec, have contributed a disproportionately large share of that business to the bank, at the same time National has focused on cross-selling to those broker clients, according to bank officials.
Still, despite those cross-selling opportunities, profit margins attached to broker sales have hemmed in profit, suggested bank execs during Thursday’s conference call. The lender is now looking to transfer a greater share of originations outside its home province of Quebec to its proprietary branch network and mobile mortgage specialist teams.
That formula would better mirror the model used with La Belle Province, suggested Vachon, quick to reaffirm the bank’s commitment to the continued use of brokers.
Mortgage professionals have grown their reliance on National Bank, pointing to varied product line and broker services. At the same time the lender has also worked on building relationships with Realtors as a way of winning direct client referrals.
Some brokers have objected, arguing it effectively circumvents the broker channel and may limit client options.