National Australia Bank Ltd., the country’s fastest growing mortgage lender, is yet to reach its market share goal as competition for home loans increases, the head of its retail bank said.
NAB’s market share has risen by 2.5 percentage points to more than 15 percent since August 2009, trailing Commonwealth Bank of Australia and Westpac Banking Corp., data from the Australian Prudential Regulatory Authority show.
“Overall market share of 15.3 -- we’re not where we want to be, we want to be somewhere north of that,” Gavin Slater, who became the head of NAB’s retail bank in April said in an interview yesterday. “We do have ambition to continue to grow market share. We think this is a business that benefits from scale.” He declined to give specific targets.
NAB Chief Executive Officer Cameron Clyne has offered the lowest benchmark home loan rate among Australia’s four biggest banks since June 2009 to boost mortgages, the country’s fastest growing loan segment, as total loan demand expands at close to the slowest pace on record. Mortgage lending has risen seven straight months through July, the longest streak in four years, according to the Australian Bureau of Statistics.
Rival banks are now “aggressively competing” in home loans given the profitability, Slater said. Since May CBA has narrowed its interest-rate difference with NAB to 2 basis points, while ANZ is matching NAB’s rate.
NAB shares fell 0.6 percent to A$33.65 as of 1:07 p.m. in Sydney, paring this year’s gain to 35 percent. The benchmark S&P/ASX 200 Index has risen 12 percent.
Australia’s average standard variable home loan rate offered by banks was 5.95 percent in August from 6.85 percent a year earlier, according to central bank data. NAB cut its rate to 5.88 percent as of yesterday, its lowest level in four-and-a-half years, after the Reserve Bank of Australia lowered the cash rate by 25 basis points to a record 2.5 percent.
The competitive rate environment has helped boost housing credit by 4.7 percent in the year to July, while personal lending nudged up 0.5 percent and loans to business increased 1.3 percent, Reserve Bank of Australia data show. Home loans rose to A$24.2 billion ($22.4 billion) in July, the most in six years, according to the statistics bureau.
NAB’s retail banking unit, which offers mortgages, personal loans and lends to small businesses, reported a 19.2 percent rise in cash earnings to A$553 million in the six months to March 31, filings show.
While home prices rose last quarter at the fastest pace in more than three years, and June home sales were the highest since 2011, Slater ruled out concerns of an Australian housing bubble.
“I wouldn’t put housing in bubble territory,” he said. “Growth rates of 4 percent to 4.5 percent in mortgages probably doesn’t appear unreasonable. We have not relaxed our lending standards at all.’
Australian houses are 7 percent overvalued based on long-term trends, Sydney-based AMP Capital Investors Ltd. said Aug. 15 in a note to investors. Local homes are the sixth most overvalued globally and the house-price-to-income ratio was 21 percent above its long-term average, according to the Organisation for Economic Co-operation and Development.
Before taking on his current role, Slater spent four years leading the bank’s technology overhaul. He has been with NAB since 1999 and has had roles at the lender’s Australian, New Zealand and U.K units.