NAB’s Clyne Expects Mortgage Market Share Growth to SlowNarayanan Somasundaram
National Australia Bank Ltd., which has gained mortgage market share from its rivals in the past three years, expects the pace of that growth to slow as competition intensifies amid low credit expansion.
“I think competitors are back,” Cameron Clyne, chief executive officer of the country’s biggest bank by assets, said in an interview in Sydney today. “You have got four big banks built around big levels of origination and if there is less origination they tend to fight for it more aggressively.”
Clyne has led the push into the A$1.1 trillion ($1.2 trillion) Australian mortgage market by offering the lowest home-loan rate among the country’s four-largest banks. National Australia’s mortgage-market share increased to 15 percent by August 2012 from 12.8 percent in August 2009, company filings show. It remains the third-largest mortgage lender in the country, behind Commonwealth Bank of Australia and Westpac Banking Corp.
National Australia, Commonwealth Bank, Westpac and Australia & New Zealand Banking Group Ltd. control 85 percent of the mortgage market, which is expanding at close to the slowest pace since records began in 1977.
In February 2011, Clyne said NAB was “breaking up” with the other three big banks by offering lower rates on mortgages and abolishing some fees on credit cards and other products.
The advertising campaign brought in 1 million customers, Clyne said today. The bank increased mortgages at 1.6 times the industry’s average growth in the 12 months to Sept. 30, 2012 and 3.3 times average growth in the previous year, its filings show.
“We had a situation where the two biggest retail banks got stronger and the government was incentivizing retail banking and we were going backward,” Clyne said referring to the campaign. “So the only solution was to be bold.”
Falling funding costs are making mortgages more profitable for Australian banks than at any other time even as credit growth is low, UBS AG analysts led by Jonathan Mott said in a note to investors in February. Banks are making as much as 88 basis points in profit from near zero in December 2011 on new mortgages, UBS said.
The cost for banks raising funds in global bond markets has tumbled to the lowest in more than five years, Bank of America Merrill Lynch index data shows. Special interest rates used to attract term deposits from customers averaged 4.25 percent at the end of March, declining from three months earlier relative to the nation’s benchmark borrowing cost, according to Reserve Bank of Australia data.
Australian home prices and loan growth will be modest as consumers remain conservative about their level of indebtedness, economists at Westpac and National Australia said at the Bloomberg Australia Economic Summit Yesterday.
“The housing market will improve, but it won’t improve to the point that people are becoming over-leveraged or we’d start to see real issues in our loan book,” Bill Evans, chief economist at Westpac said.