CBA boss keeps his cool as deposit squeeze arrives
Commonwealth Bank’s profit margin was squeezed further last quarter, but this time the culprit was growing competition for deposits rather than aggressive mortgage pricing, chief executive Matt Comyn said, as savers chased better returns on their money.
CBA favoured profitable mortgage growth over fighting ANZ and Westpac for volume, keeping its returns from home lending intact. Now, it is fighting harder for funding, and paying more to savers switching to term deposits that pay a better interest rate.
CBA is paying a higher interest rate than the other major banks for its online savings account – 5.10 per cent for five months, which then reverts to 2.35 per cent – while it has just launched a special offer for a 2-year term deposit paying 5 per cent, and it pays 4.25 per cent to savers who lock up funds for a year.
Commonwealth Bank boss Matt Comyn. Analysts believe bank profits have peaked. Dominic Lorrimer
The bank’s market update on Tuesday for the three months to September 30 conceded it suffered “lower” net interest margins over that period – without saying by how much – caused by “continued competitive pressure in deposits, and customers switching to higher-yielding deposits”.
As the competition regulator prepares its report on major bank deposit pricing due next month, Australian banks have passed through around three-quarters of the Reserve Bank’s tightening to deposit customers this cycle. CBA’s update shows this is now emerging as fresh pressure on margins.
In contrast, home lending margins “stabilised in the quarter,” CBA said, which analysts took as a positive sign of mortgage pricing discipline. Its mortgage book contracted for three consecutive months over the September quarter.
Mr Comyn told The
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