Bendigo Bank targets margin lending
Despite retail share investors cutting their gearing levels in recent years, on Monday the lender said the margin lending sector may have hit a bottom this year.
Others, including Westpac-owned BT Financial, have also experienced a lift in the $12.5 billion margin lending sector, which provides borrowed funds to people investing in shares or managed funds. But few are confident enough to predict a sustained recovery.
Bendigo is the fourth-largest margin lender in the country, after building up its presence through the purchase of Macquarie's loan book at the peak of the global financial crisis.
But the industry has been contracting for several years as retail investors abandon riskier strategies, with Bendigo's margin loan book shrinking by more than 20 per cent to $2 billion in the year to December.
Despite these challenges, Bendigo chief executive Mike Hirst said the bank had detected a lift in investor sentiment, and it "may well have seen the bottom of the market for the margin lending sector."
"Although it is early days yet, it does seem that the time is right to invest further in the margin lending business to ensure we are not latecomers to the opportunity," he said.
Banks have cut staff from their margin lending operations in response to the lower demand in recent years.
Bendigo's head of wealth markets, Alexandra Tullio, has been promoted to a new executive role in charge of margin lending, with several more appointments expected soon.
Other banks have also reported signs of improvement in the sector.
A spokesman for BT said: "We've seen material improvement in overall activity, including significant appetite for fixed-rate margin loans. However, it's too early to make the call whether we are witnessing a permanent return to higher levels of confidence."
The total value of Australian margin loans was $12.5 billion in the March quarter, compared with the December 2007 peak of $41.6billion, Reserve Bank figures show.
Lending picked up in the March quarter - the first quarterly growth since the stimulus-induced global rally of late 2009 - though lenders say people remain conservative in their use of debt to buy shares.
Frequently Asked Questions about this Article…
Bendigo said it has detected a lift in investor sentiment and believes the margin lending sector 'may well have seen the bottom', so it plans to increase investment in its leveraged equities business as confidence bounces back — although management cautioned it is still early days.
Bendigo's margin loan book shrank by more than 20% to about $2 billion in the year to December, reflecting several years of contraction in the industry as retail investors reduced their gearing.
Bendigo is the fourth-largest margin lender in Australia after it built up its presence by purchasing Macquarie's loan book at the peak of the global financial crisis.
Reserve Bank figures show the total value of Australian margin loans was $12.5 billion in the March quarter, down from a December 2007 peak of $41.6 billion, though lending picked up in the March quarter — the first quarterly growth since the late‑2009 rally.
Yes — other lenders, including Westpac‑owned BT Financial, have reported a lift in activity and 'material improvement' in demand, but they say it's too early to be sure whether this is a sustained recovery.
Banks cut staff in their margin lending operations during the downturn, and some like Bendigo are now making senior appointments — for example promoting Alexandra Tullio to an executive role overseeing margin lending — as they prepare to invest if the market recovers.
According to a BT spokesman quoted in the article, there has been significant appetite for fixed‑rate margin loans as part of the recent improvement in overall activity.
The article notes many retail investors have been cutting gearing and remaining conservative; while lenders report improving sentiment, they also say it's too early to call a permanent return to higher confidence — so the coverage describes signs of recovery but does not recommend changing personal investing or gearing strategies.
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