NAB has revealed bank profit at a healthy 8% placing the bank under pressure to reduce margins and pass on any rate cuts announced by the RBA to the borrowers in full.
The bank has reported unaudited cash earnings in the three months to December 31 of $1.4 billion, up from $1.3 billion in the same period the previous year.
Yesterday NAB has hit the media with a pledge to continue to offer the cheapest home loans it can – below the rates of its other big bank rivals.
The Reserve Bank is tipped to cut the official cash rate to 4 per cent today – its third consecutive reduction in interest rates – in a bid to provide some relief to struggling households.
Banks have made it clear that they are not intending to necessarily follow the RBA with their pricing of home loans.
But in a pre-emptive strike to undermine its rivals, NAB’s head of personal banking, Lisa Gray, last night wrote to staff telling them the bank was “committed to having the lowest standard home loan rate of the major banks” throughout 2012.
It is almost a year to the date in 2011 when NAB had introduced their ‘break up with your lender’ marketing campaign which was the start of the home loan war between Australian lenders.
NAB has made it clear that they will be offering borrowers the cheapest home loans that they can.
Almost 90 per cent of NAB’s home loan borrowers are on the standard variable rate, which has been consistently the lowest among the majors for more than two years.
Meanwhile, Federal Treasurer Wayne Swan yesterday warned there was no excuse for the banks not to pass on the full rate cut as government reforms had made it easier for customers to switch lenders.
The four banks pocketed more than $24 billion in profit last year but have blamed rising funding costs as a result of the European debt crisis for their reluctance to follow any future Reserve Bank cuts.
According to new data from the banking industry watchdog, the Australian Prudential Regulation Authority, the big four banks are losing market share to smaller more nimble financial institutions.
APRA found that, in the past 12 months, non-major banks increased their lending by almost 15 per cent last year compared with 7.8 per cent growth for the big four.
Mr Swan said it was clear from APRA’s figures that borrowers were taking advantage of the ban on exit fees introduced last year.
The Treasurer said the official interest rate of 4.25 per cent compared favourably to the 6.75 per cent rate at the end of the Howard Government.