Lender concentration — why too much of one bank hurts your book value

Most brokers can tell you their top-five lenders by share without looking. Far fewer can tell you what that top-five distribution does to their book's sale value. When a buyer or aggregator-led valuation walks in, lender concentration is one of the first three numbers they look at — and it's almost always one of the biggest discounts.

This piece is the working broker's guide to lender concentration: how it's measured, why buyers discount for it, what's a normal range, and what you can do about it.

What concentration actually means

Lender concentration is the share of your annual trail income sitting with each individual lender. It's not the share of loans by count, and it's not the share of total balance — though those numbers are close, they aren't the same.

Why income, not count? Because trail rates vary by lender. A 200-loan book with 80 CBA loans isn't 40% CBA if those CBA loans have lower trail rates than the rest. The dollars are what move book value, and the dollars are what you're selling.

The two metrics that matter:

• Top-lender share — the largest single lender's percentage of your trail income.
• Top-3 concentration — the combined share of your three largest lenders.

A clean residential book usually shows top-lender around 25–35% and top-3 around 60–70%. Anything significantly above those numbers is concentration risk.

Why buyers care

A book that's 60% with one lender is one lender-policy change away from a 60% revenue hit. Buyers think about it three ways:

1. Lender-policy risk

Big lenders change their broker policies. CBA's commission rate has moved twice in the last five years. ANZ has tightened serviceability assessments mid-book. NAB has periodically frozen new applications via specific aggregators. Each event affects the future cash flow attached to that lender's existing loans — sometimes mildly, sometimes materially.

A book with 25% in any one lender absorbs a 10% commission cut with a 2.5% income hit. A book with 60% in one lender takes a 6% income hit from the same event. Buyers price for this with a discount on the multiple.

2. Refinance-flow risk

If a competitor lender runs an aggressive cashback campaign aimed at your concentrated lender's customers, you're more exposed than a diversified book. Westpac runs a campaign targeting CBA refinancers, and 60% of your book is CBA — that's a meaningful share of your trail at risk in a single quarter.

3. Loss-of-accreditation risk

Lower probability, much higher tail. If for any reason — compliance issue, aggregator change, broker conduct — you lose accreditation with your largest lender, you also lose the future cash flow attached to those existing loans, because new business is impossible and book transfer becomes complicated. A diversified book makes this a 30% income event. A concentrated book makes it existential.

The thresholds buyers use

In the valuation work I've seen, the implicit discount curve looks like this:

• Top lender < 35% — neutral, no discount.
• Top lender 35–50% — modest discount, sometimes folded into the general "data quality" line. Buyers note it, don't always price it.
• Top lender 50–70% — material discount. Typically around -0.2× on the effective trail multiple. Buyers explicitly call this out in the offer letter.
• Top lender > 70% — substantial discount, sometimes a deal-killer. Some buyers won't price the book until you can demonstrate a path to diversification.

For top-3 concentration:

• Top-3 < 65% — well diversified.
• Top-3 65–80% — typical for a working broker.
• Top-3 > 85% — concentration is structural, not incidental. Buyers will look at lender-specific risk in detail.

These aren't published rules — they're patterns. Every buyer has their own multiplier table, but the curve shape is consistent.

Why books end up concentrated

Most concentration isn't a strategic choice — it's drift. Common causes:

• A good BDM relationship. When a CBA BDM is great to work with and packages get unconditional approval in 48 hours, brokers route more deals there. Over five years that's 50% CBA before you've thought about it.
• A specific product fit. A broker who specialises in a niche (FHB, self-employed, investor) often finds one lender is dominant in that niche. The book inherits the lender's footprint.
• Aggregator default routing. Some aggregators have preferred-lender arrangements that nudge default product selection. Over time the book tilts.
• Habit. A broker who learned to write deals through ANZ in 2018 still writes ANZ in 2026, even when other lenders are better-priced, because the workflow is muscle memory.

None of these are bad reasons. They become problems only when you want to sell the book or when policy changes hit.

Diversifying without losing relationships

If you're 60% in one lender and want to bring it down, the path is gradual:

• Cap new business with the dominant lender at 30–35% of new applications. Don't refuse the deals — just route the marginal ones elsewhere.
• Build genuine relationships with two more lenders at similar product quality. The point isn't to spread thinly across 12 lenders — it's to have three serious options.
• Re-rank lender choice at the product level. For each deal, ask which lender is best on rate, policy fit, and service — and stop defaulting on autopilot.
• Be willing to sell on price. A 5bp better rate at a less-familiar lender is often the right answer for the client and the right answer for your book's concentration.

Realistically, moving top-lender share from 60% to 35% takes 18–24 months of new business at the new mix. That's not because the existing book changes, but because the new settlements gradually outweigh the old in any rolling 12-month income view.

Measuring it on your own book

A quick approach: open your aggregator file, sum trail by lender for the last 12 months, divide each lender's total by the book total, sort descending. That's your concentration table.

The slightly more useful version splits it by canonical lender name — meaning CBA and CommBank and Commonwealth Bank count as the same row. If your aggregator file uses different lender strings for what's actually the same parent (which happens with white-label products), you'll underestimate concentration significantly.

Trail AI's valuation report does this with canonicalisation built in, so you see the real picture rather than an aggregator-flavoured one. The detail matters when concentration is the difference between a 2.0× and a 1.8× multiple on a book worth seven figures.

Cross-references

For the full valuation picture, see How to value an Australian trail book. For how concentration interacts with run-off rate, see the run-off piece — the two together drive most of the negotiating room on a book sale.

Key takeaways

• Measure concentration by trail income, not loan count or balance.
• Top-lender share above 50% drops your effective multiple by ~0.2×; above 70% gets ugly.
• Top-3 share above 85% means concentration is structural — buyers will want to understand the lender-specific risk in detail.
• Most concentration is drift, not strategy. Cap new business at the dominant lender at 30–35%; expect 18–24 months to materially shift the mix.
• Canonicalise lender names before measuring. White-label products and aggregator string variants will make a concentrated book look diversified if you don't.