NAB says digital home loans will help win more shares

With the Reserve Bank’s interest rate hike expected to drive down house prices by limiting how much people can borrow, McEwan said the speed of decision-making could be more important than pricing. He said NAB will not pursue growth in a slowing market by taking on riskier borrowers.

“Pricing will always be important, but it may be of secondary importance,” he said. “As long as the price is right, customers want certainty [that an application] will go to the unconditional. We are very excited about what is developed here, not dreamed.

NAB earlier reported a 4.1% increase in interim cash earnings of $3.48 billion, in line with expectations, and raised the dividend to 73¢ per share from 67¢, which was slightly above expectations analysts.

Caring for savers

The NAB boss also hit back at Commonwealth Bank’s response to Prime Minister Scott Morrison’s call for banks to give savers a ‘fair deal’, saying it would be NAB’s approach that would see the RBA rate hike passed on to more savers.

The CBA announced on Wednesday it would raise the 18-month term deposit rate by 1.95 percentage points, requiring customers to actively take up the offer, while maintaining the rate paid to the majority of its savers. . This contrasts with other major banks, including NAB, which passed on higher cash rates to floating rates on popular savings accounts.

“We moved the savings rate for the bulk of our savings group – 1.3 million customers – at the same time we moved interest rates,” McEwan said.

“We all know that over the past 11 years savers have been affected by falling interest rates, so we thought it was very important to take care of them, especially in the first rising rates, to signal that they are also important.

“We thought it was fair to move on both sides of the balance sheet on the first move, which is a clear signal that we want to take care of our savers.”

While ANZ reports a $278 billion home loan portfolio, flat on half, NAB said its $218 billion in personal home loans rose 5.6% half on half, while the $95 billion in mortgages underwritten by business and private banking rose 11.9%.

ANZ tackled an explosion in home loan approval times last year by hiring more staff to fix manual processes. Mr Elliott said he had increased capacity by 30%. But Mr Ewan said NAB was focused on the end-to-end digital platform, with “human intervention only happening by exception”.

“ANZ is trying to solve this problem by improving turnaround times by employing more staff. In addition, the development of its new ANZ Plus mortgage platform does not enter the testing phase until the end of this year. , and full functionality is still a long way off,” said Barrenjoey analyst Jon Mott.

Mott said NAB’s underlying margin trends were better than its peers and its volume growth had been strong across the business. “While costs will be higher, we believe the market will continue to view NAB favorably,” Mott said.

NAB shares fell 0.7% to $32.22 by mid-afternoon, less than ANZ fell. The shares of CBA and Westpac were higher.

John Whelan, portfolio manager at PM Capital, said NAB’s program to speed up home loan approval times was important, but may not be the differentiator suggested by Mr McEwan, given that the bar is was rising in the area.

“NAB is competing against a wider market, not just ANZ, and customer expectations for quick turnaround are only growing,” Whelan said. “Companies like Macquarie Bank have been relatively efficient for some time now, and smaller players will continue to push the envelope and force bigger players to follow suit.”

Macquarie will release its annual results on Friday and is expected to show strong momentum in its mortgage business.

NAB has also increased its market share in SME lending, an area in which Commonwealth Bank competes aggressively. NAB increased its lending to SMEs by $7.7 billion or 6.6%, 1.9 times the growth of the system.

Asked if the growth reflected NAB taking on riskier borrowers, Mr McEwan said that was not the case as the risk profiles of new customers were the same as in the book. existing. He said most SMEs were in good financial shape and the rising cost of debt was not as big an issue as finding staff to support growth.

NAB said its costs rose 2.6% for the six months to the end of March, mostly reflecting higher wage pressure. It expects costs to rise 2% in the second half or 3%, including addressing issues with its anti-money laundering compliance plan, as identified by AUSTRAC.

NAB avoided a fine but agreed to an enforceable undertaking with AUSTRAC, the national financial crime regulator, to improve its anti-money laundering and anti-terrorist financing capabilities. He said the EU would cost him between $80 million and $120 million for the next three fiscal years.

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