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CBA loan book drops as pricing war heats up

by Adrian Suljanovic11 minute read

The major bank’s loan growth has dropped, with some brokers suggesting a lack of competitive pricing has been a contributing factor.

The latest monthly authorised deposit-taking institution (ADI) statistics for August 2023 released by the Australian Prudential Regulation Authority (APRA) revealed that the Commonwealth Bank of Australia’s (CBA) loan book has suffered losses in back-to-back months.

For the month of August, CBA recorded a loss of $1.4 billion across its mortgage portfolio, down from $544 billion in July to $543 billion.

CBA’s owner-occupier loan book dropped from $364 billion in July to $362 in August, while its investor loan book saw only a marginal decrease, remaining at $180 billion.

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However, CBA maintained its leading position in mortgage market share at 25.7 per cent, followed by Westpac at 21.3 per cent, NAB at 15 per cent, and ANZ at 13.4 per cent.

Meanwhile, CBA’s big four counterparts all recorded increases to their loan books over this period, particularly Westpac, which saw the largest total loan book growth with an increase of $2.8 billion, up from $451 billion to $454 billion.

Westpac’s owner-occupier loan book contributed to the majority of this growth, up by $2.1 billion from $295 billion to $297 billion.

Speaking to The Adviser, senior credit adviser at Shore Financial, Christian Stevens, attributed CBA’s shrinking loan book to the competitive pricing seen in the market.

“CBA has traditionally been a strong player in the lending market. However, in recent times their pricing has not remained as competitive compared to other lenders,” Mr Stevens said.

“The primary factor contributing to the recent decline in CBA’s loan book can be attributed to sharper interest rate offers available through other lenders.”

He added that Westpac in particular has been “aggressive in its pricing” and as a result has been sending more applications to Westpac than CBA in recent months.

“It’s worth noting that CBA’s decision to discontinue cashback incentives has further compounded their competitive disadvantage,” Mr Stevens said.

Echoing this sentiment, director and owner of Mortgage Choice Berwick, David Thurmond, told The Adviser that the biggest cause of CBA’s loan book loss is the pullback of pricing over the last six months.

“Over the last couple of years, all through COVID-19 all the major lenders were being quite aggressive with their pricing, offering refinance rebates to try and entice clients, offering decent rate discounts to keep themselves competitive with the smaller lenders,” Mr Thurmond said.

“They were winning business, but over the last six months Commonwealth Bank has pulled back completely.”

In an analysis from the Broker Pulse survey by research arm Agile Market Intelligence for the month of August, brokers were asked to indicate the “primary reason(s)” for recommending a particular lender to their clients.

In particular with Westpac and CBA, “client circumstances” was the primary reason for 62 per cent of brokers when recommending a client to CBA, while for Westpac, “product pricing” was the main reason for 51 per cent of brokers.

[RELATED: Owner-occupied lending lifts more than $5bn in April]

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