The banking oligopoly has failed, and here’s how

afr.com:

Westpac boss Peter King called it “one competitor”. National Australia Bank’s Ross McEwan referred to “a couple of players looking to grow market share”. ANZ has become the bogeyman of banking – say his name three times, and its chief executive, Shayne Elliott, appears to shrink your margins.

ANZ’s hard push into the mortgage market has put noses out of joint at its fellow majors, especially over the past six months when it grew market share in mortgages from 13.2 per cent to 13.4 per cent. It is the bank’s highest point in about 18 months, fuelled by cash-back offers and sharp pricing.

Jefferies analyst Matthew Wilson says the results of Westpac and NAB show the banking oligopoly has failed. Paul Rovere

This has gone some way to keeping intense mortgage competition alive, and the toll was clear on Westpac and NAB as they worked to hold (and grow) their share of the market.

Net interest margins – a key measure of profitability – at Westpac fell 2 basis points to 1.94 per cent from March to September. NAB’s margins dived further, 6 basis points in the half to 1.71. For both, that is at a group level; diluted just to the retail banks, margins were off more than 20 basis points.

Mr McEwan told analysts these were the thinnest margins he had ever seen, squeezed at either end by mortgage discounts and strong demand for better deposit rates.

Even though the major banks are raising rates in lockstep – NAB, Westpac, ANZ and Commonwealth Bank responded to the Reserve Bank’s decision to lift the cash rate on Melbourne Cup Day with a 25 basis point hike to their interest rates within a day of each other – they are competing away the benefits.

Jefferies analyst Matthew Wilson says there are two “unusual points at play” and that the