“We’re just so lucky that the interest rates are so low.”
Ward, head of Macquarie’s banking and financial services group, has overseen the company’s rapid expansion in mortgages, taking the lender into the Big Four’s lucrative heartland of financing bricks and mortar.
But his comments underline a grim reality. About one in ten Australian home loans have been deferred in response to the COVID-19 economic crisis, and these six-month deferrals will start expiring from next month.
While many borrowers will be able to resume repayments, and banks can extend further leniency, he says this will not always be in customers’ interests and the bank must balance its obligations to shareholders and regulators while being fair to its clients.
“It’s a reality that some people were already in a tight situation before this (the pandemic), and this has made it sort of worse,” Ward says.
“Debt’s a wonderful thing when it’s working for you, but when it’s not working and you can’t support it, it’s pretty miserable.”
Debt’s a wonderful thing when it’s working for you, but when it’s not working and you can’t support it, it’s pretty miserable.
Ward‘s division made up more than a third of Macquarie’s profit last year after its mortgage book swelled by 35 per cent, and he is one of the most senior executives at the banking giant.
But Ward, who grew up near Nowra on the NSW South Coast, says he can empathise with borrowers in distress.
He says that after high school he had hoped to study medicine, but his family could not afford it in the era before HECS debt. He ended up in banking after studying accounting, a career he chose because the firms offered cadetships where they would pay their new recruits’ university fees.
“Particularly now as we go through payment pauses with customers and so forth, I can empathise with what it’s like to have debt collectors turn up at the door and things like this. That was what my family had, and so I can really empathise with making ends meet and it being sort of tough,” Ward says.
Ward has been at Macquarie since 1996, the year it listed. Within two years of joining, he was appointed chief financial officer at the age of 29, a position he held for 14 years including during the turmoil of the global financial crisis.
In his current role, he is driving Macquarie’s retail banking growth by targeting profitable niches in consumer and business banking. It does not have branches, relying mainly on brokers to distribute loans, and has also overhauled its technology systems in an attempt to improve productivity and service.
“We just thought there was an opportunity for us to play a meaningful role for an increasing number of people by making the experience much easier using technology,” he says.
He says the bank, which has about 2.65 per cent share of the Australian home loan market, expects to continue posting “double digit” growth in its home loan portfolio.
And despite the difficulties facing individual customers due to the pandemic, Ward is more optimistic about its portfolio as a whole.
Mortgages on deferral have declined from a peak of about 12 per cent of its portfolio to 10 per cent, he says. In business banking – where it also targets some niche industries – it has been surprised at the resilience of at-risk sectors, such as car dealers and real estate agents.
“I’m a little bit optimistic in terms of our book and portfolio. In terms of the economy overall, it to me looks like it’s pretty on par with where they were forecasting,” Ward says.
Similar to rival retail banks, Macquarie has also largely quit the mass-market financial advice business, after it was forced to agree to an enforceable undertaking with the corporate watchdog in 2013. It has slashed the number of advisers from 440 at its peak to 130, and is now focused on high-net-worth clients.
Ward says being slapped with the enforceable undertaking was “pretty disappointing,” conceding the systems and processes had not kept pace with clients’ expectations.
As all banks have faced pressure to improve culture, he says the division now has “behavioural tools” to monitor culture. The idea is to detect if staff are slipping into poor or lax compliance habits, such as not being diligent with their training, as the bank believes such cultural problems emerge gradually.
“We have the view that someone doesn’t go from being the most compliant, risk aware, engaged individual to doing something horrible in one sort of snap,” he says.
Clancy Yeates is a business reporter.
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