Alice Del Vecchio: HSBC's homecoming

After an 11-year absence, HSBC is re-entering the broker channel in partnership with Aussie. HSBC’s head of mortgages tells MPA editor Sam Richardson why

Alice Del Vecchio: HSBC's homecoming
After an 11-year absence, HSBC is re-entering the broker channel in partnership with Aussie. HSBC’s head of mortgages tells MPA editor Sam Richardson why

HSBC’s return to the broker market couldn’t have come at a better time – or at least a more eventful time. In March ASIC recommended tweaks to broker commission, in April the majors committed to flat-fee commission, and by May UBS was calling for the banks to save $2.4bn by cutting commissions entirely. Brokers need some good publicity, and HSBC head of mortgages Alice Del Vecchio is the woman to provide it.

HSBC’s re-entry into broking, according to Aussie CEO James Symond, is “a vote of confidence that it gives not just [to] Aussie but the industry; that HSBC are thoughtfully jumping back into it, is really, really strong. Having a global lender like HSBC on our panel is really important; having a global leader from a banking point of view is really important”.

Far from a humble panel addition, HSBC’s agreement with Aussie represents the conclusion of an 11-year experiment in distribution. Having sold its mortgage book to Firstmac in 2006, the bank became an anomaly: outside the broker channel, but with the resources and consumer awareness of a non-major. HSBC’s loan book stood at $11.1bn in March, according to APRA, putting it on a par with AMP and making it a much bigger catch than the various mutuals that have flocked to aggregators’ panels in the last few years.

“I think we know that we have really strong, compelling products,” says Del Vecchio. “We’ve seen our above-system growth over the last few years and we really want to reach out and resonate with more consumers, and Aussie’s in the perfect place to do that; we definitely think the timing’s right for us.”

A not-quite-exclusive partnership
HSBC’s vote of confidence in mortgage brokers is not without caveats. Aussie was chosen as a distribution network not just because of its size, Del Vecchio explains. “We really value the fact they have strong compliance and training, and, as a global bank that is extremely compliant and values that sort of thing, they’re the perfect partner for us.”

Brokers with National Mortgage Brokers – which is owned by Aussie – will not initially be able to offer HSBC products, according to Symond. “It’s very much a very focused salesforce under the one brand; it’s a very controlled process, and so it’s easiest to unpack it with the Aussie brokers first and from there we’ll look at the other options.”

HSBC’s partnership with Aussie may not remain exclusive for long, however. “We do expect and have been in discussions with other groups, but we don’t expect to be on everyone’s panel,” says Del Vecchio. “We will have a limited number that we will probably partner with, but to be brutally honest we want to do this properly and are running this as a parallel panel. We’re not in a hurry; we just want to do it right.”

Global consumers, local advantage
Foreign banks have been in the spotlight recently, amid claims by Australia’s majors that the government’s bank levy will hand banks like HSBC an advantage. Yet the experience of foreign banks suggests HSBC may struggle to compete in a crowded non-major bank sector.

Take HSBC’s equivalent, Citibank, which wrote just 0.81% of loans sold by AFG brokers in February. The two banks have much in common: a global brand; special streams for high net worth clients (HSBC Premier; Citigold) – and both, unusually, have a continued appetite for lending to borrowers earning foreign income.

HSBC Premier customers, including foreigners, will be able to get discounted home loan rates through brokers, Del Vecchio confirms. “We absolutely lend to non-residents, but we lend to non-residents that we know who are part of our global Premier package.”

However, Premier customers need a minimum of $500,000 in loans with the banks or $200,000 in savings and investments, putting the Premier package out of the reach of many broker clients. 

Perhaps conscious of Citibank’s limited appeal, Del Vecchio is looking beyond such “internationally minded consumers”.

“I think the brand is so much bigger than that, and most of the consumers who come through and are onboarded are local Aussies just looking for better value.”

Brokers can sell the bank’s full range of home loan products, and HSBC’s home value loan had (at the time of writing) a sub-4% interest rate, with a 90% LVR limit for both owner-occupiers and investors.

In Del Vecchio’s opinion, HSBC will succeed by making its brand of relationship banking available to Australia’s ‘mass affluent’ consumers. “I know a lot of banks say that, but our whole reason for being is that we are a relationship bank and we have long-term relationships; that’s what we do.”

To that end, HSBC has invested in a whole new team, a head office in Sydney and state staff supporting the broker rollout, as Del Vecchio is mindful that relationship banking starts with brokers. “For brokers they have to live that experience, and the first time they submit a deal is going to be critical.”

The paradox facing the banks
Although the timing of HSBC’s return to broking was perfect for brokers, it could have been better for HSBC. Investing heavily in a channel under investigation by regulators was hardly ideal but may have been unavoidable: brokers’ market share reached 53.6% in February, according to the MFAA.

When HSBC left the channel in 2006, brokers only accounted for around 25% of lending. Should a major bank attempt to move away from the channel today, as many in the industry predict, they would face a much bigger challenge. Furthermore, that bank would have to explain to shareholders why they’re moving away just as HSBC has decided to put its reputation on the line in the broker channel.

Ultimately, HSBC’s re-entry to the channel provides a vital opportunity for brokers to get back on track after months of reacting to regulation, Symond explains. “Considering the ASIC report, Sedgwick report, bank levies; considering all the complications that the mortgage broking market always gets, is such a good thing for the industry.”