Opinion: Is NAB breaking up with the majors again?

While this would not usually make headlines, the move has garnered significant airtime — including mention from the new Prime Minister, Scott Morrison — given that it is out of step with what the other big four banks have been doing.

Last week, three of the major banks announced out-of-cycle interest rate increases, with Westpac, Commonwealth Bank (CBA) and ANZ lifting rates on their variable owner-occupier home loan products by 14, 15 and 16 basis points, respectively.

According to these three lenders, the move largely comes down to rising wholesale costs, but some analysts have also noted that the decision to hike rates is timely given that it coincides with the beginning of the spring home selling season and that they are therefore doing all they can to maintain profitability in the face of lower mortgage volumes.

All eyes were on NAB this week to announce a similar rate — and many expected that they would follow suit with a similar rate hike. But instead, the major bank took a different tack, announcing that it would not only keep its rates on hold, but that it was doing so for the benefit of its customers.

NAB CEO Andrew Thorburn said: “Our commitment is to our customers and the longer we can hold the rate, the greater the benefit they get… This message, this decision, is squarely focused on our customers, and thanking them for their business — particularly home loan customers who have been with us for some time.

“The longer we can hold this rate, the greater the benefit for them. In the end, our bank is based on our customers and how they feel about us, and the trust that they have in us.

“I think we are focused on serving them better and I think this is a step in that direction.”

It’s a message that will undoubtedly rub the other big four banks the wrong way, but it’s not the first time that NAB has tried to differentiate itself from the other big four banks. In 2011, it ran the famous “it’s over” marketing campaign, telling ANZ, CBA and Westpac that it was “breaking up” with them and that it did not want to be “considered together with the other big banks anymore” (see video below).

It was a humorous and memorable campaign, and one that the bank could make given that it had a lower proportion of the owner-occupier mortgage market than the other big four. Given that NAB still has the lowest proportion of owner-occupier mortgage (in dollar terms), according to recent ABS stats, it sees the bank is taking another shot at separating itself from the big four brand, an understandable move given the negative media attention the major banks have been getting from the ongoing royal commission into misconduct.

But the decision to delay begs the question: Just how long can the bank hold out on raising rates given increasing funding costs?

With the bank estimating that a 15 basis point rise would cost the average home loan customer more than $330 a year extra on a $300,000 loan, it suggests that by forgoing the rate increase for its 930,000-strong customer base, the bank could be missing out on at least $26 million a month.

That’s no meagre sum — especially given the fact that the NAB CEO has said that the bank is “not immune to market and funding conditions” and has experienced “some pressure there”. Further, in its most recent trading update, the bank noted that its net interest margin has declined, reflecting “elevated short-term wholesale funding costs and ongoing intense home loan competition”.

It seems that, for now at least, NAB if prioritising its reputation over its black line, flying in the face of what the other three majors are doing to show that it really is “more than money”.

Speaking of its customers, Mr Thorburn said: “Their loyalty is really important to us and we need to appreciate them more. We know they have a choice and it’s really important that we respect that and we need to rebuild trust over time by listening and acting differently, and I think [this] announcement confirms that we are listening and we are acting differently.”

[Related: Majors accused of ‘anti-competitive’ behaviour]