Bendigo’s mortgage customers eye proactive measures

  • By Christine St Anne

Bendigo and Adelaide Bank is seeing a solid base of its customers proactively managing their mortgage repayments as the bank announced additional provisions as it prepares for the impact of COVID-19. 

Customers who have not elected to defer their mortgage repayments are looking to adopt a more conservative financial position, according to Bendigo and Adelaide Bank’s executive, consumer banking Richard Fennell.

“We have seen strong inflows into offset accounts with some customers making additional repayments on their home loans,” Fennell told AB+F. 

“This indicates to us that at this point in time, borrowers are looking to put more money against their mortgage and reduce their debt, as a form of insurance against potential challenges in the future. 

“This is a positive from a credit perspective and clearly a good sign that our customers are coping well.” 

In fact, on Thursday, the bank announced a $148.3 million COVID-19 overlay as it prepares for the future impacts of COVID-19. 

For Morningstar bank analyst Nathan Zaia, the provision is higher than what he estimated for  but “remains comfortable the provision does not reflect challenges specific to Bendigo”.  

“We attribute this to the bank placing a greater weighting on the downside scenarios for the economy rather than the bank having a lower quality loan book than peers,” Zaia said in a client note. 

Currently the bank has 16,227 mortgage accounts on pause worth $4.6 billion. 

Like many other banks, Bendigo and Adelaide Bank’s COVID-19 support packages also included 6-month repayment deferrals on loans including mortgages.

For Fennell, some of its customers who originally opted for the loan deferrals have elected to start making repayments again. 

Anecdotal data from RFi Group reveals that the Bank is among the top two banks that lead in terms of consumer awareness and engagement with COVID-19 support packages. 

Fennell said the bank saw the introduction of the support packages as an opportunity to discuss the impact of the health pandemic with their customers and how they could help them with their financial position. 

“It isn't a one-off conversation. We started checking in with our customers and we intend to keep checking in with them over that six month period to assess how they are feeling and whether they will have the ability to get back on their feet and start making repayments again,” Fennell said. 

The total amount going into additional mortgage repayments is now double what it was a year ago. 

In terms of the proportion of customers who have the scope to actively use their offset accounts, Fennell said that the total amount going into additional mortgage repayments is now double what it was a year ago. 

Around half of its mortgage customers are three months ahead in their mortgage repayments and 40 per cent are more than six months ahead.

“Many of our customers took out mortgages at a time of higher interest rates. As interest rates have fallen, they have kept up their [higher] minimum repayments. This puts these customers in a better financial position and provides us with a good buffer.” 

The adoption of digital banking has also been amplified during the pandemic. 

RFi Group data already reveals that cash usage has dropped by 10 per cent while the proportion of consumers engaging with a mobile phone has grown by 10 per cent. 

The big banks have responded by automatically providing debit cards to their older customers who were using passbooks, but Bendigo and Adelaide Bank’s approach has been more tailored.

The bank had flagged this customer cohort in its systems. When any of these customers came into the branch, staff were able to initiate a conversation with them around potentially taking a debit card. 

“We found that was really well received and quite a large number of those customers took up that opportunity to take out a debit card. And the feedback we had from them was fantastic,” Fennell said.

In parallel, the bank made calls to these customers, but the take-up was not as high which signalled to Fennell that these customers probably preferred face-to-face interaction. 

“It was really interesting to see the different reaction from that customer base through a face-to-face interaction in the branch versus being contacted by us over the telephone. And I must admit, I am pleased we didn’t go down the unpromoted automatic approach of just issuing debit cards.” 

Like the majority of bank executives, Fennell believes COVID-19 will reshape the way banks interact with their customers – most notably on the branch front. 

“We have already seen a 25 per cent drop off in branch transactions before COVID-19. 

For now, however, it will be a wait-and-see approach as the health pandemic plays out. To date, in a handful of cases, the bank has temporarily closed some branches as staff have had to manage challenges such as school or child-care closures. 

Despite the drop off in branch transactions we still see an important role for branches going forward

“We are already investing in digital channels and continue to make investments to make sure we are well-positioned to deliver services to our customers.

“Despite the drop off in branch transactions we still see an important role for branches going forward.” 

Closer to home, Fennell also sees implications from the health pandemic on the workforce. 
 
Over 95 per cent the bank’s workforce are working from home, including its contact centres and processing centres.

“It has been pleasing how quickly we have made that transition and to see there has been no drop off in productivity.”

Bendigo and Adelaide Bank will take a measured approach to getting its staff back to the office and Fennell signaled the shift could start in July and August.

However, like many in the industry, Fennell recognises that the new way of working will have an impact on office life.

“Previously I would work from home half a day every two weeks. Through this experience, I have realised that we can work from home given the technology. It will be interesting to see if this will be a long-term trend where the home will be the default place of work for a majority of people who just come to the office sporadically.”