ABA Banking Journal - November 2007 - (Page 8)

briefing mortgage loan in Australia is around four and a half years.” And while, with the emphasis on secondary market sales in the U.S., mortgages are “more of a transactional product, in Australia it’s a relationship product,” says Fegan. “In Australia, you borrow from St. George, St. George services it, the statement comes from St. George, and if you want to know anything about it, you ring the bank.” The breaking up of the mortgage process that the U.S. has seen isn’t typical in Australia, he explains. Increasingly, in fact, the Australian mortgage represents a centerpiece for cross-selling. Fegan explains that once Australians tended to pay off their nondeductible mortgage debt as quickly as possible, in order to own their house free and clear. But today, the pattern is, pay off the loan, “get the title, and then mortgage again,” says Fegan. “You use the security to ‘gear up’ [leverage yourself, in U.S. terms] and buy investment property. And then more investment property.” Fegan explains that parents increasingly don’t wait until death for their wealth to pass to children, but instead use products much like home equity loans or reverse annuity mortgages to help their children get into the investment property market. “So we’ve seen the mortgage product moving from a very short life span into the whole life cycle,” Fegan says. St. George Bank’s management American home equity line of credit. An optional feature of the package is “mortgage offset.” Essentially, the customer can choose to have the bank apply interest earned on savings toward loan interest. They can opt for 100% offset or partial offset. Bankers might think of this as a “reverse spread.” This feature appeals to those who want to own their homes sooner, but also enables the borrower to in effect reduce principal. On the other hand, those who want to leverage their home to buy investment property or other investments have the Portfolio Loan option. It’s a sort of hybrid home mortgage/home equity loan in practice, which enables the borrower to set up as many as ten sub-accounts, each a line of credit, for different purposes. The primary loan account is made at a variable rate; the borrower can choose between fixed or variable rates on the other sub-accounts. From Sydney to the Big Apple Over the summer Australian banking executive Paul Fegan and a team of other officers from St. George Bank, the fifth-largest retail bank in Australia ($100 billion assets), toured U.S. banking institutions, on the hunt for ideas. ABA Banking Journal’s Steve Cocheo, executive editor, and Lauren Bielski, senior editor, interviewed Fegan, group executive, retail bank and wealth management, and acting CEO, and three other members of the bank’s team: Peter Ewers, general manager, credit and risk management, group credit; David Clark, director, institutional business solutions, with the bank’s Asgard Wealth Solutions subsidiary; and Peter Zardo, manager, regional business banking, for Griffith and Leeton. This story represents highlights from the conversation. believes strongly in bundled products, and often uses the mortgage loan as the hub product. The Advantage Home Loan Package offers a choice of a standard variable rate mortgage, a fixed-rate mortgage, or a Portfolio Loan, which we’ll explain in a moment. The package also includes a choice of credit card, a choice of checking account, and waivers of many fees if the borrower goes for the bundled approach. Customers can also “redraw”—basically, borrow money back out of their mortgage loan by check, somewhat akin to the “Super”-charged wealth management Wealth management is a major business line at St. George, but not in the same way it is for some large U.S. institutions. “We have three million customers, and, yes, we have a private bank, but that’s 2,000 customers,” Fegan explains. So, overall, St. George can’t live just on premium segments or even “mass affluent.” Says Fegan: “Our customer base is very much around the middle.” In 2006 St. George Bank saw its managed funds level rise by 20.3%, and 2007 Sleight of mind By Lillian Nielsen Past solutions at ababj.com he NUMBERS and CUBES puzzle we ran in September brought in a small response from you bankers. It was very difficult. The problem was that there were only two numbers that would fit that description. They were, as Mike Stewart wrote: 5/7 and 8/7. He pointed out that credit goes to Diophantus. As you undoubtedly know, he was the famous Greek mathematician who invented Algebra! Stewart, PMP, CBCP, who is vice-president, SunTrust Robinson Humphrey, Atlanta, Ga., was the first one to send in the correct answer. This month’s teaser is somewhat less difficult to solve. However, it is very clever. Impossible as it seems, it is quite solvable. T See what you can do with it. Good luck! THE NINE MARKETS If you are asked to cover all the nine markets with the fewest possible continuous straight lines, your first attempt will probably be six lines, as in the illustration, and you will be surprised to learn that it can be done in as few as four strokes! Can you do it with four continuous straight lines? Fax your answers to Sleight of Mind at 212-633-1165 or send them to PUZZLES on our website, www.ababj.com. Be sure to include your name, job title, company, city, and state. 8 NOVEMBER 2007/ABA BANKING JOURNAL www.ababj.com/subscribe.html http://www.ababj.com/puzzle/winners.html http://www.ababj.com/puzzle/puzzle.html http://www.ababj.com/subscribe.html

Table of Contents Feed for the Digital Edition of ABA Banking Journal - November 2007

ABA Banking Journal - November 2007 Contents Editor’s Column Briefing: Good News for Mortgages Sleight of Mind N.Y. Hiring Bonanza May Be Bane Snapshot: A Look at Held-For-Investment Loan Growth ABA Resources ABA Chairman’s Position “The Moose Bank” Thrives on Manufactured Housing Loans Finding the Middle Way for Your Bank’s Retirement Program Pass the Aspirin Cover Story: Self-Service Steps Up DIY U.K. Style Marketing to Millennials Getting Real With “Gen Wired” Ethnic Marketing: Disinterested Banking Getting Good at Global Sourcing Case in Point Turn Compliance on It's Head Banker’s Mart To Advertise/Index of Advertisers The Economy

ABA Banking Journal - November 2007

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