The intense battle for market share that is being waged by Australia’s big four lenders is being criticized by investors, who fear that the increasingly bitter battle for customer hearts and minds will inevitably lead to pressure on profit margins and result in downgraded earnings.
Banking industry analysts and fund managers are increasingly of the belief that the fierce competition between the big four lenders will only intensify going forward, reducing their earnings as each lender seeks to defend its market share with tit for tat cuts to either interest rates or fees.
Australian banking major CBA is facing a backlash from its mortgage borrowers, after the lenders satisfaction ratings took another dip during January.
CBA’s poor result is the latest in a series of losses by the big four lenders, who have seen their efforts at winning over their customers through the cutting of fees undermined.
Australian banking major NAB has launched an all out assault on its big four rivals, urging customers to dump their banks.
NAB escalated what appears to be an intensifying war between big four lenders for borrowers. The lender is estimated to have spent several million dollars on its campaign which was launched on Valentine’s Day and using the slogan which appeared in several newspapers which said “It’s over between us.”
Australian banking major Westpac has fired its first salvo in an emerging war in the market for home loans, after the lender launched an aggressive discount campaign on Tuesday as it seeks to win new customers and expand its market share in the face of more intense competition from rivals.
Australia’s second largest lender in the latest twist to an increasingly bitter battle for market share was responding to NAB’s revelation at the weekend, that it would pay the ext fees for CBA and Westpac borrowers who switch their mortgages to NAB.
Australian banking major National Australia Bank, which raised its interest rates by less than its big four rivals has managed to capitalize on that differential by increasing its mortgage lending market share, though as the expense of losing some of its deposits.
The Australian Prudential Regulation Authority (APRA) published December statistics earlier this week which showed that NAB has managed to capture some market share at the expense of its rivals with its “Fair Value” banking campaign.
The battle for deposits amongst Australian lenders seems to be petering out, with only two of the country’s top online savings accounts passing on November’s interest rate hike by the Reserve Bank of Australia, to their customers in full.
Despite failing to pass on the interest rate increase to depositors, bank’s continue to make the argument that higher funding costs are the reason behind higher interest rates which have been passed onto borrowers in excess of official rate hikes by the central bank.
According to the minutes of the most recent board meeting of the Reserve Bank of Australia, the decision by the central bank to hold interest rates steady was driven by restrain in both household consumption and borrowing.
The notes from the meeting however failed to indicate the central bank’s bias on interest rate policy over the next few months and only suggests that the RBA was content with the current interest rate level.
Mike Smith, chief executive of Australian banking major ANZ is the latest banking chieftain to rail against bank bashing, once again justifying ANZ’s interest rate policy as one being driven by the “permanently higher” costs of doing business.
Mr. Smith made his comments during the lenders annual general meeting last week and followed similar comments made by ANZ chairman John Morschel who defended ANZ’s decision to lift its interest rates by 120 basis points over and above official interest rate rises since the start of the global financial crisis.
Australian banking major ANZ has come out in strong defence of its interest rate policy, after raising them higher than the official rate hike. The lender says it needed to pass on higher funding costs in order to maintain its profitability.
ANZ made its case in a submission to the Senate inquiry investigating competition within the banking industry, and was more vociferous that its rivals in defending its super sized rate hikes which it began implementing in 2008.
Smaller Australian lenders have begun offering rewards to mortgage borrowers who stay loyal to their bank by offering discounts to home loan interest rates which can be as high as 0.75 per cent.
Smaller banks are seeking to retain their existing customers and are pushing harder to earn their loyalty by rewarding loyal customers with significant discounts on their borrowing rates.