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 and Adelaide Bank says it has detected a lift in investor sentiment and is hopeful the margin lending sector may have hit a bottom. The bank plans to lift investment in its leveraged equities or margin lending business so it isn’t a latecomer if confidence continues to improve.
Margin lending provides borrowed funds to people investing in shares or managed funds. Retail investors use margin loans to increase their exposure to equities by borrowing against existing assets.
Reserve Bank figures show the total value of Australian margin loans was about $12.5 billion in the March quarter, compared with the peak of $41.6 billion in December 2007.
Bendigo’s CEO Mike Hirst said the sector “may well have seen the bottom,” but others remain cautious. For example, BT (Westpac-owned) has seen material improvement in activity — including interest in fixed-rate margin loans — but says it’s too early to call a permanent return to higher confidence.
Bendigo is the fourth-largest margin lender after buying Macquarie’s loan book during the global financial crisis. However, its margin loan book contracted by more than 20% to about $2 billion in the year to December as retail investors cut gearing.
Bendigo believes investor sentiment is improving and wants to ensure it isn’t a latecomer to any recovery. To support this, it has promoted Alexandra Tullio to an executive role in charge of margin lending and expects several more appointments.
Yes. Other lenders, including Westpac-owned BT, have reported a lift in margin lending activity. BT specifically noted significant appetite for fixed-rate margin loans, but many lenders say it’s still too soon to know if this is a sustained recovery.
Lending picked up in the March quarter — the first quarterly growth since the late‑2009 rally — but banks report that retail investors remain conservative about using debt to buy shares. That means while market activity is improving, many everyday investors are still cautious about taking on margin exposure.
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