Commonwealth Bank chief executive Matt Comyn has defended his bank’s decision to maintain its mortgage margins, despite losing some market share to its rivals, especially ANZ.
ANZ reports lower margins and higher costs
ANZ reported its half-year results on Thursday, revealing a 28 per cent increase in cash profit to $3.4 billion. However, the bank also saw its net interest margin (NIM) — the difference between what it pays to borrow money and what it charges to lend it — fall by 10 basis points to 1.55 per cent, the lowest among the big four banks.
ANZ attributed the margin squeeze to its aggressive home lending growth, which outpaced the system by 1.8 times. The bank increased its mortgage book by 5.3 per cent in the six months to March, compared to CBA’s 3 per cent growth.
ANZ also reported higher operating expenses, up 2 per cent to $4.3 billion, due to increased investment in technology and digital capabilities.
CBA boss says ANZ’s results are ‘unsustainable’
Speaking at a Macquarie Group conference on Friday, Mr Comyn said he was not concerned by ANZ’s performance, calling it the “largest margin erosion in banking history”.
He said CBA had a different strategy, focusing on customer satisfaction, retention and cross-selling, rather than chasing market share at the expense of profitability.
“We have a very clear view of what drives long-term value for our shareholders, and that is not something that we’re prepared to compromise on,” he said.
He said CBA had the highest customer satisfaction ratings among the major banks, and the lowest level of customer attrition. He also said CBA had a more diversified revenue base, with strong growth in business lending, wealth management and institutional banking.
He said CBA’s NIM was stable at 2.01 per cent, and its operating expenses were down 2 per cent to $4.8 billion, reflecting its ongoing efficiency program.
CBA faces regulatory challenges and competition
Mr Comyn acknowledged that CBA faced some headwinds, such as the regulatory scrutiny over its proposed acquisition of 86 400, a digital-only bank, and its joint venture with Swedish buy now, pay later provider Klarna.
He said CBA was confident of getting the necessary approvals for the 86 400 deal, which would boost its digital offering and customer base. He said CBA was also pleased with the performance of Klarna, which had more than 2 million customers in Australia and New Zealand, and was growing faster than its competitors.
He said CBA was well positioned to compete with the emerging fintech players, as well as the traditional banks, by leveraging its scale, brand, distribution and innovation.
“We have a very clear strategy, we have a very clear view of what our competitive advantages are, and we’re investing behind those,” he said.
