Banking blog series | 2) Support measures: from promise to proof

By Banking, News

In this blog, we want to provide practical tips about ways in which banks can successfully fulfil their societal role during this corona crisis.  

Entrepreneurs are in acute need
As expected, the demand from SMEs for support measures offered by the government and payment holidays offered by banks is high. At the end of March, about 40.000 self-employed and thousands of entrepreneurs (bars, restaurants and retail) applied for these measures. This massive amount of applications will probably increase further due to the extension of the corona measures until April 28. Current estimates are that up to 85% of all SMEs need support by its bank.  This requires fast handling. Only then, entrepreneurs in need – due to their direct loss of income – can continue to fulfil their obligations, such as paying their rent. 

We see different approaches in the way banks offer these payment holidays to their clientsAs ABN AMRO chooses for opt-out, ING and Rabobank offer their clients opt-in arrangementsThis means that ABN AMRO automatically includes all clients, unless they state that they do not want to make use of this arrangementOn the contrary, clients of ING and Rabobank need to apply for these payment holidays themselves when they want to participate. Each approach impacts the client and organisation differently.  

This acute need of measures makes it necessary for banks to design their operational processes in such a way they can start processing these tens of thousands of applications. Furthermore, this requires close cooperation with other parties, like the government and RVO. In short: a massive operation! 

tips to fulfil your promise 
Our experience has taught us that it’s important to already think two or three steps ahead, while taking these direct support measures that are needed during this corona crisis. This is, among others, demonstrated during the current contribution of IG&H to the National Coordination Centre for Patient Evacuation (read more here) 

In this article we will focus on practical tips1) people first2) fact-based decision making3) forward looking 

1) People first
Peoples vitality really is the most important condition to keep the bank up and running and to engage non-stop with clients in acute need. Especially for them, the support of banks is of the utmost importance! We see that clients in Retail, Leisure and Transport sectors are in most desperate need of this supportThese clients will remember the way the bank stands with them during this crisis, for a long time. The enormous amount of applications requires a short-term disciplined approach using ‘command and control’ style to accelerate.

2) Fact-based decision making
In order to process the massive amount of applications in a short period of time, banks need to act fastUsing resources efficiently demands an approach based on data and facts instead of gut feelingCreating a smart, data-driven assessment process helps tanalyze customer needs and assess liquidity forecastsThis makes it possible to estimate risks and prioritize them, which speeds up the process. Also, clients classified as high risks for payment difficulties, can be contacted pro-actively. Moreover, data can help to detect fraud in the enormous pile of applications, even though you surely assume your clients act in accordance with their best intention during this crisis.   

3) Forward looking
During times of crisis, immediate action as well as forward looking to future-proof solutions is required. Banks can play an important role in supporting their clients to establish a sustainable business model that can withstand these kinds of shocksBanks can realize this by assisting clients with smart solutions, for example a stress test app, which provides clients with real-time insights in their liquidity position and financial resilience. This way, banks can build sustainable business models and a sustainable relationship with its client. An impactful promise fulfilled!  

If you want to know more about these practical tips, we are willing to think along with you! 

In our next blog we will discuss how to shift from crisis management to forward looking for when this crisis ends 

Joppe Smit
Director at IG&H
E: joppe.smit@igh.com T: +31620352438 

Authors:
Bas de Jong (bas.dejong@igh.com); Laura Hendriks (laura.hendriks@igh.com); Juliette Vernooij (juliette.vernooij@igh.com ; Annelies Stemfoort (annelies.stemfoort@igh.com 

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IG&H Mortgage Update | Insights from Q4 2019 and an annual review of 2019

By Banking, Mortgage Update, News

Utrecht, March 5, 2020 – New figures from Kadaster (The Netherlands’ Cadastre, Land Registry and Mapping Agency) show that growth in the mortgage market continued in the fourth quarter of 2019. This is mainly caused by the mortgage revenue increase among people taking out refinancing and additional loans. In the fourth quarter of 2019, the number of mortgages issued to this group grew by 26.1% compared to the preceding quarter. Over the whole of 2019, the mortgage market rose to a record high of €128 billion.

Download the Mortgage Update (in dutch)

“This surprisingly strong growth is caused by a rise in the number of mortgages as well as a mortgage loan increase,” says IG&H Consultancy’s Joppe Smit. In 2019, the average mortgage loan increased by 6.5%, reaching € 326,000 – its highest point since 2006. Compared to 2018, the number of mortgages increased by 13.4% to 392,000 mortgages taken out. This growth is mainly caused by an increase in the number of mortgages among people taking out refinancing and additional loans (+35.9% compared to 2018).

First-time homeowners lag behind
The mortgage revenue among first-time homeowners fell by 1.4% in the fourth quarter. Compared to the third quarter of 2019, the number of mortgages taken out by first-time homeowners fell by 3.2%. The average mortgage loan among first-time homeowners, however, increased by 1.9% to €276,000, while it dropped among existing homeowners and those taking out refinancing and additional loans. “The number of mortgages only fell among first-time homeowners, and the average mortgage loan only increased among the same group,” says Joppe Smit. “This illustrates the difficult position they’re in.”

The majority of those taking out a mortgage is still made up of existing homeowners – with a market share of nearly 46%. However, those taking out refinancing and additional loans come increasingly closer with a market share of nearly 36%. Compared to the third quarter of 2019, the number of mortgages taken out, in particular, rose significantly (+26.1%) among those taking out refinancing and additional loans. Among existing homeowners, growth is less significant (+6.9%) compared to the third quarter of 2019.

Growth of Aegon’s and Munt’s market shares
In the fourth quarter of 2019, banks lost a market share (-4.7 percentage points) among all groups of people taking out mortgages. Investment funds enabling non-bank lending benefited from this decline and grew their market share (+4 percentage points). “What’s notable is that the market share of the top 3 banks dropped to 48.9%, hitting the lowest level since 2016,” says Joppe Smit.

This quarter, there were several noteworthy shifts in the top 10 providers. Aegon and Munt moved up 3 spots, taking the 5th and 6th spot. MUNT Hypotheken increased by 2.2%, marking the highest increase in the market. As a result, it has strengthened its position in the top 10 of mortgage lenders. The biggest losers in the market were Florius (-1.9%) and Volksbank (-1.2%), which dropped to the 7th and 9th spots, respectively.

We hope you enjoy reading the Mortgage Update and welcome your response!

Sincerely,

Joppe Smit
Director at IG&H
E: joppe.smit@igh.com T: 0031 6 2035 2438

IG&H Mortgage Update
Authors & data analysis:
Annelies Stemfoort (annelies.stemfoort@igh.com), Brenno Baas (brenno.baas@igh.com)

Corrected Kadaster figures
Due to shortcomings in data provided previously, Kadaster corrected and then re-provided figures over the whole of 2019. The figures included in this Mortgage Update are based on the new figures. After consultation, we also corrected one mortgage lender’s production figures, as these didn’t include a significant part of the production – even after Kadaster’s correction.

 

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Will finding a dream house remain being just a dream for first-time homeowners?

By Banking, News

It has already been a month since a third major protest was held at the Malieveld. After the agricultural sector, the construction sector now calls for attention, too. Although the nitrogen problem has been known for a while, farmers and construction companies feel abandoned by politicians because they lack help with this inevitable change. And it is not only farmers and construction companies that feel the blow. In the short term, the impact of restrictions will also be felt across the housing market.

It fits the image of a housing policy that – in recent years – has sometimes caused more problems than it has solved. For years, several government agencies and private sector parties have worked at cross-purposes, insufficiently advancing towards a common goal together. With the current, favorable economic tailwinds, the time has come to jointly take targeted action – from national and local government to mortgage lender – and tackle the problems in the housing market.

The situation of Kees illustrates the state of today’s housing market. In 2005, Kees wanted to buy his first house in the city but decided to rent a place with his girlfriend instead, because purchasing a home turned out to be too expensive. Now, 14 years later, they are a young family with a middle income, and they still can’t afford to buy their own home due to rising house prices and the housing market shortage.

Every day, we read another great example of the upended housing market. A €1.5 million, simple terraced house in southern Amsterdam was sold within a week. For the first time, the interest for a rate fixation period of 30 years drops below 2%. One out of ten first-time homeowners now opt for ‘interest-only’ and prefer lowering their monthly costs by a few hundred euros over accruing, paying off, or benefiting from mortgage interest deduction. Or, various mortgage lenders decide to deduct credit spread for ‘interest-only,’ 12 months after the start of a major campaign aiming to encourage action on interest-only mortgages. For consumers, it’s all difficult to understand.

Fortunately, it was time for the 2019 opening of Parliament. There was an ambitious section on the housing policy for the coming year, in which the government tries to make up lost ground with a much-needed new set of plans. The proposed measures – from encouraging housing cooperatives, constructing temporary houses, and adjusting the transfer tax to setting up a separate building fund for the local preparation of construction sites – seem to make sense in terms of content. These plans are necessary to help people like Kees get their dream house in the long term.

However, it is striking that within the same government, plans don’t seem to have been aligned. For example, the Ministry of Agriculture has not taken action on the nitrogen crisis, which currently impedes 18,000 construction projects. And due to the new guidelines set by the Ministry of Housing, Spatial Planning, and the Environment, newly built houses will be 15% more expensive, while the average price of new houses is often too high already for less privileged home seekers.

If this trend continues, the consumer won’t stop footing the bill any time soon. This is also evident from the accelerated rise in the average mortgage loan (+3.4% compared to Q2, 2019) and the first-time homeowner’s average age compared to the previous quarter (+5 months, 31.8 years old – source: Kadaster). Therefore, people like Kees will have to keep their patience for a while.

In my opinion, better cooperation is essential to really tackle the issues in the housing market – cooperation between various government agencies, but also with market parties such as mortgage lenders. Cooperation that’s aimed at a solid long-term plan, which also provides short-term help to groups that struggle with getting help – and which includes smart solutions for financing housing and encouraging innovation in construction to achieve more sustainable and faster construction.

As Remkes wrote in his report: “Not everything is possible.” But I’m convinced that we can make the housing market a lot more accessible again – especially to people like Kees – if everyone in the sector cooperates well, if targeted choices are made, and if the policy is aligned.

Contact
Bas de Jong
E: bas.dejong@igh.com

2019 – Q3 | Mortgage market revival

By Banking, Mortgage Update, News

Utrecht, November 7, 2019 – The revival of the mortgage market results in the best third quarter since 2007. Mortgage revenue grows across the market by 15.1% compared to the previous quarter to €28 billion. This marks the market’s recovery from the shrinkage in the first six months of the year.

“The strong third quarter ensures the market comes close to the level of top year 2018 on an annual basis,” says Joppe Smit from consultancy firm IG&H. Revenue growth in the past quarter is caused by a rise in the number of mortgages as well as a mortgage loan increase. Compared to the second quarter, the number of mortgages increased by 12.8% to 85,000. The average mortgage loan rose to a new record high of €324,000.

Download the IG&H Mortgage Update (in dutch)

Growth among first-time homeowners
Remarkably, the number of mortgages among first-time homeowners also increased (+1.8%), while revenue even rose by 17.2% compared to the previous quarter. This is caused by a strong mortgage loan increase for first-time homeowners. “A possible explanation is that first-time homeowners are older, which means they can afford a higher mortgage loan,” says Smit.

Existing homeowners remain the largest group of those who take out a mortgage with a 46% share. Furthermore, those taking out refinancing and additional loans once again contribute significantly to the growth of the mortgage market (+ 16.5% compared to Q2). Therefore, this group continues to grow, which means it is increasingly important for mortgage lenders to focus on it.

Growth in market share of ABN AMRO and Florius
The market share of banks as a whole, as well as that of the Top 3 Bank Holding, grows at the expense of investment funds enabling non-bank lending. With a 65.9% market share, banks reach the highest market share since 2013, despite a shrinkage of ING and Rabobank. Determining factors for this growth are the increase in banks’ market share among those taking out refinancing and additional loans as well as the substantial growth of ABN AMRO and Florius in the past quarter. A possible explanation is that ABN AMRO has an above-average share of production in the growing group of those taking out refinancing and additional loans.

You can read more about these developments in the appendix, where you can also find the Mortgage Update. We hope you enjoy reading it and welcome your response!

Sincerely,

Joppe Smit
Director at IG&H
E: joppe.smit@igh.com T: 0031 6 2035 2438

IG&H Mortgage Update – authors & data analysis performers:
Niels Roelofs (niels.roelofs@igh.com); Annelies Stemfoort (annelies.stemfoort@igh.com)

IG&H Dutch Mortgage Update: Mortgage market growth caused entirely by refinancers

By Banking, Mortgage Update, News

Dutch mortgage revenues grew in 2018 from 101 billion euros to 106 billion euros, according to consultancy bureau IG&H’s Dutch Mortgage Update. Compared to the fourth quarter of 2017, the number of mortgages shrinked considerably (8.7 percent). That was the largest decrease since the fourth quarter of 2013. As a result, the full growth in the mortgage market has come entirely from people who are not moving to new homes.

The number of mortgages also fell throughout 2018; by 2,1 percent to a total of 346.000. The average mortage sum few by  grew by 7.2% to 306,000 euros; the highest ever. Whilst the number of starters and existing homeowners in the market fell, the number of refinancers grew from 78,000 to 96,000 in 2018. This makes it the highest number ever. “These signs point to mortgage lenders not succeeding in retaining their existing customers”, says Joppe Smit, senior manager at IG&H. “These signs point to mortgage lenders not succeeding in retaining their existing customers.”

Lowest mortgage revenue growth fourth quarter 2018

The total mortgage revenue during the fourth quarter of 2018 was 28 billion euros; a growth of 2.2% over the third quarter. This is the lowest growth rate during this period since 2011.

Smit: “In previous years, there was additional market growth during the final quarter. This year we will not see as much of this. The lower number of granted mortgages and the smaller growth of the mortgage sums play a role in this. Moreover, the maximum lending capacity in past years was lowered at the end of the year, which always ensured extra volume during the final quarter. The lowering of the capacity did not happen this year.”

The shares of major banks during the final quarter sank to 50%, the lowest point in 3 years. Refinancers were responsible for 8.4 billion euros of the total mortgage revenue during the final quarter. The shares of starters (€5.9 billion) and existing homeowners (€13.8 billion) fell by 12 and 15 percent respectively compared to the fourth quarter of 2017. Foreign parties rose slightly to 4,7 percent. Both the largest grower and shrinker is an insurer this quarter. The market share of Nationale Nederlanden increases by 2.05 percent, while Aegon surrenders 3.31 percent.

Written by: Joppe Smit (Senior Manager), Lisa Klein Goldewijk (Banking Consultant) and Niels Roelofs (Banking Consultant).

IG&H and GroupLife combine forces

By Banking, Health, Insurance, News, Pensions, Retail

Consultancy firms IG&H and GroupLife are moving forward together under the name IG&H, resulting in a specialized consulting group that is able to help realize business and technology transformations from start to finish.

Both companies have in-depth sectoral knowledge, close customer relationships, high quality people and service. By combining their expertise in strategy, organizational transformation, data analytics and technology, they will be able to more effectively help organizations with transformative matters. The new consortium includes more than 220 specialized professionals.

Execution of strategy requires integral approach

Jan van Hasenbroek, managing partner IG&H: “The rapid developments in the technology sector have an enormous impact on the business models of our clients. In order to remain successful in the future, our vision must include addressing organization and technology together. This will lead to corporate strategies being immediately operable, providing concrete results and sustainable organizational transformation. GroupLife has an impressive track record and a proven methodology in business modelling, implementation of technological platforms, and data management. That’s why a collaboration fits well within IG&H’s strategy to continually strengthen its technological ecosystem.”

Wim Groenen and Tom Bottinga, co-founders of GroupLife: “In previous projects with joint clients, we discovered that we had similar ideas about how to address complex business transformations. IG&H knows how to combine its expertise in strategy, data analytics, technology and organizational transformation with sector knowledge. We are delighted with the collaboration and together with IG&H we can make an even greater contribution to the success of our clients.”

About IG&H

IG&H is committed to help leading organisations in the financial services, retail and healthcare sectors. With 160 involved and enterprising professionals, the consultancy and implementation firm, based in Utrecht, helps organizations take steps towards radical customer centricity. They set high standards for themselves and their way of working. With in-depth knowledge and a personal approach, they aid their clients to help them improve the sector. IG&H is recognized as a ‘Great Place to Work’ and puts a lot of emphasis on a high net promotor score.

Commercial banking: the burning platform that nobody sees

By Banking, News

Technology’s influence on the banking sector is becoming increasingly important. Despite this, commercial banks are far behind retail banks in terms of innovation, way of working and digitalisation. The clock is ticking; if the sector doesn’t change it’s ways, choosing to remain process-driven rather than client-driven, the bank will turn itself into a burning platform.

Even though traditional players are still dominating the banking sector, the world is changing at a faster pace than ever. The new payment law (PSD2) and changes in the banking sector have opened the market for ‘new’ players. Google starts to develop payment initiatives and challenger banks are winning market shares.

Fintechs are taking over the profitable parts of the operation. If this trend continues, commercial banks will have to be careful that they do not become merely a utility provider.

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