Why ANZ Bank (ASX:ANZ) is losing market share to other big ASX banks

The Australia and New Zealand Banking Group Ltd (ASX: ANZ) share price is on track to exit 2021 on a …

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The Australia and New Zealand Banking Group Ltd (ASX: ANZ) share price is on track to exit 2021 on a positive note. But investors will be left wondering if its shares could be soaring higher if the bank wasn’t losing the mortgage war.

ANZ Bank is the only one of the big four ASX banks to lose share of the mortgage market in October, reported the Australian Financial Review.

ANZ Bank losing mortgage market share

The data from the Reserve Bank of Australia and the Australian Prudential Regulation Authority (APRA) showed that ANZ Bank’s market share dropped another 8 basis points to 13.09% in October.

Westpac Banking Corp (ASX: WBC) also underperformed on this front in October, but it still managed to grow its loan book.

There are a few possible reasons to explain ANZ Bank’s poor performance in winning new mortgagees.

ANZ Bank share price is a silver-lining

To be sure, this isn’t a new issue for the bank either. This is why supporters can still hold their head high as the ANZ Bank share price is up over 18% since January 2021.

In contrast, the S&P/ASX 200 Index’s (Index:^AXJO) gain for the year is half that of the bank.

Further, ANZ Bank isn’t the worst performing big ASX bank share. The wooden spoon goes to the Westpac share price as it’s only 7% above breakeven.

The increase in the ANZ Bank share price also matches that of the Commonwealth Bank of Australia (ASX: CBA) share price. CBA is widely regarded as the premium ASX bank share, so matching its share price performance is still a notable feat.

Why ANZ is losing the mortgage battle

But investors can only ponder how much higher the ANZ Bank share price could be trading if wasn’t losing out on the mortgage market.

The bank’s long lead-time in processing mortgages is one big reason for this, according to the AFR. ANZ Bank takes 51 days (median) to process third-party applications.

Mortgage brokers would rather put their client loans through another bank with National Australia Bank Ltd. (ASX: NAB) and CBA only taking around 10 to 11 days.

What’s more, ANZ Bank has an overreliance on mortgage brokers to generate new business. This not only explains the market share erosion, but the bank’s poorer net interest margin (NIM) and return on equity (ROE).

Outlook for the ANZ Bank share price

Both the NIM and ROE are key valuation measures investors use to price ASX bank shares. This helps explain why the CBA share price trades at such a hefty premium to its cohort.

What gives CBA this edge is its investment in technology to lift productivity. The other ASX banks are playing catch up on this front, but it appears that ANZ Bank’s investment on IT isn’t paying off.

ANZ Bank shareholders will be hoping for better news in 2022.

Motley Fool contributor Brendon Lau owns shares of Australia & New Zealand Banking Group Limited, Commonwealth Bank of Australia, National Australia Bank Limited, and Westpac Banking Corporation. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Westpac Banking Corporation. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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