SBS CEO Wayne Evans says headline grabbing 5-year home loan offer designed to buy his bank time with customers

By Gareth Vaughan

SBS Bank CEO Wayne Evans says his bank's 4.99% five-year home loan offer is being met by "heavy, heavy demand," and is an attempt by SBS to buy time with customers.

SBS launched the 4.99% offer, the lowest carded five-year home loan rate offered by a New Zealand bank since interest.co.nz's records began in 2001, earlier this month. Evans, who succeeded SBS' CEO of 22 years Ross Smith last August, told interest.co.nz in a Double Shot interview it's being met with "wide acceptance" from the market.

"Right now I'm in the midst of a strategic roadshow through the network and last night at the Heritage (Hotel) we had a big sized team in. Mobile mortgage managers, branch staff, (were) for a change complaining about not being able to get to all the enquiry that's coming their way," said Evans. "There is heavy, heavy demand."

"We have shaved margin, our profitability will be lower for this (offer). But the nature of the offer is less about rate for us and it's more about time with that customer/member. We all of a sudden have five years to establish the banking relationship with these borrowers so they can start to buy more products, so they can actually start to understand our membership story. And as a result, through referring their friends and family and so on, we actually start to build a big member based asset base, liability base, (and) we become a bigger more profitable bank as a result of that," Evans said.

He indicated, however, that SBS was unlikely to follow TSB Bank with a 10-year home loan offer, at least at this stage. TSB launched a 5.89% 10-year home loan offer last month.

"Internationally long-term borrowing is not unusual, - 15, 20 year fixed terms aren't unusual. But in New Zealand I suspect that culturally we're very optimistic people. We always expect our house prices to go up, and perhaps in this respect interest rates to come down, and that's why people are taking a decision to borrow shorter-term," said Evans.

"TSB did a good job launching that 10-year product. I think it generated a lot of interest. I'm not sure that it will generate a lot of enquiry for them because perhaps 10-years culturally, in the mindset of people, is just a little bit too long."

"We decided that five years is about right. I do think that a wise borrower will look to spread their interests across floating and other terms shorter than five years just to manage their own credit rate risk. And we're certainly looking to provide that guidance to people to consider that," added Evans.

'NZ's member bank'

Separately he said SBS, which aside from being a bank is also a mutually owned building society, has as its "vision statement" to be New Zealand's member bank.

"So that reinforces both our history of a building society and focus on member outcomes, particularly those that help people into their first homes. It also talks about the fact that we want to focus on niche markets and serve those very, very well as opposed to try and be all things to everybody," said Evans.

"The point of difference (from other banks) is as members (customers) are also owners. I think in other organisations where there's a shareholder-customer split the benefits flow one way or the other. What we're able to do is strike a balance."

SBS staff are currently working through what membership means "in tangible terms," he added.

"We see a lot of activity in relation to defining benefits (with banks) giving away cash, TVs, cellphones. We've decided to give our members choice, and choice by leaving money in their back pockets by charging them less, or for investors actually paying them more. Either way there's more money in their back pocket and they can decide how they wish to spend that money," said Evans.

SBS doesn't disclose how many owner-members it has.

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