ANZ, NAB and the Home Loan War
Posted date: May 2, 2011 | Tags: home loan wars | No comment
ANZ’s decision to set out in the aggressive lending war may reduce the major banks market share in the Australian home loan market. The momentum continues to grow as competitor, NAB expands its promotional campaigns to get more customers and increase its share the overall market. Additionally, the bank has offered to pay the exit fees for mortgage borrowers that choose to leave rival banks. This is not good news for ANZ.
In some statistics released recently, it was noted that ANZ expanded its share of mortgages by a much lower rate than the previous month. Its numbers neared that of last year’s poor performers the Commonwealth Bank and Westpac.
The exit-free offer is just the latest dimension of NAB’s campaign that began back in February, on Valentine’s Day, that has made serious in-roads against home buyers at the other major banks, ANZ included.
This offer by NAB has been characterized by some industry analysts as a potential problem since there are suggestions that the offer would undermine the profit margins and the quality of their balance sheets. The offer, which was set to expire today, is being extended through the end of June 2011. While ANZ and other banks seek ways to respond, NAB seems unconcerned that focusing their promotions on the more cost-conscious clients may be wrong-headed.
Those at ANZ and other top lenders consider the promotion nothing more than a foolish gimmick that has caused a number of discounted deals in the Australian mortgage markets.
Despite outcries from ANZ, Westpac, and others, there are some signs that the promotion was actually working. It has been named a catalyst in a resurgence of refinancing activity as well applications for other forms of home loan products by NAB’s Lisa Gray. In fact, the bank’s head of personal banking said that the amount of home loan applications has increased by 20% since the beginning of the campaign.
The requests for refinancing came from Westpac and CBA customers, just two of the banks specifically targeted by the NAB promotion, reaching 40%. The bank made no move to disclose the total number of these customers. CBA responded by offering NAB home loan customers a $1,200 cash incentive for moving their business over.
There are questions still circulating as to how this trend will affect ANZ and other big Australian banks. Data release by the Australian Prudential Regulation Authority shows that NAB saw higher rates of new borrowers, with revenues up to $1.9 billion or 1.2% just last month. This is more than triple the 0.28% growth reached by ANZ. Of course, ANZ spokesman Stephen Ries added that such data can send the wrong impression.
“We are comfortable with growing our mortgage book at 1.5 times (the wider banking) system over the past year while maintaining our lending standards and lower loan-to-value ratio,” said Ries.
Another analyst from Nomura, named Victor German, also noted that it was clear that in some respects ANZ’s growth rate is slowing down surreptitiously. However, this was taken as a opinion. Obviously, a definitive answer could only be uncovered with additional information just to get confirmation on the status of the trend.
ANZ was not alone in achieving some modest growth despite NAB’s promotional campaign. In fact, Westpac and the Commonwealth Bank have increased their mortgage books. The former by 0.48% while the later by 0.46%.
There are still questions that remain unanswered about the end result of this home loan war.