NAB, Westpac match RBA rate rise

The last two of the big four banks have stepped into line with their peers and
matched the interest rate rise by the Reserve Bank of Australia (RBA).
Both National Australia Bank Ltd (NAB) and Westpac Banking Corp announced on
Wednesday they would lift their standard variable rate on home loans by the same
extent as the RBA's quarter of a percentage point increase on the cash rate.
NAB also said its strategy of matching the RBA previously has led its mortgage
volumes to soar.
Group executive personal banking Lisa Gray defended the bank's retail strategy of
maintaining low interest rates and cutting fees, saying NAB had experienced a surge
in mortgage applications in February.
"The uplift is across all our home loan brands," she said in a statement.
Mortgage application volumes were four times greater last month than in February
2009, NAB said.
The increase in rates by NAB and Westpac follows Commonwealth Bank of Australia
(CBA) and ANZ Banking Group (ANZ) announcing on Tuesday a rate increase of the same
extent as the RBA on their standard variable mortgages.
NAB and Westpac will also lift interest rates on deposits and Westpac will increase
rates on credit cards.
The rate rises by all banks becomes effective on Friday and followed the RBA raising
the cash rate to four per cent on Tuesday, its highest level in a year.
The central bank also raised the cash rate by 0.25 per cent each in October,
November and December last year.
The big four moved in lock-step with the RBA this week after three of the banks,
with the exception of NAB, faced a public backlash for bigger rate hikes in
December than that announced by the RBA.
In December, Westpac raised its standard variable rate by 45 basis points, 20 basis
points more than the RBA's hike that month.
CBA increased its standard variable rate in December by 37 basis points and ANZ by
35 basis points.
NAB matched the RBA's 25 basis point rise in December and at the time urged
customers of rival banks to switch their accounts.
NAB's low-margin strategy resulted in subdued revenue growth and weak loan volume
growth in the December quarter, producing flat earnings for the quarter and a
sell-off in its share price last month, analysts said.
Westpac, which has the most expensive mortgage rate, was also on the defensive on
Wednesday.
Retail and business banking boss Rob Coombe highlighting the bank's interest rates
on five-year deposits, which stands at 7.25 per cent.
Analysts also said NAB's strategy has given it weak operational momentum relative to
its peers.
UBS told clients that NAB's business mix made it unlikely to grow its loan book
during 2009/10 given that business was reducing debt and the climate of more subdued
housing credit growth.
Credit Suisse noted NAB's subdued lending growth and exception fee cuts, which had
crimped income.
UBS said Westpac has stable margins and grew its loan book in the December quarter.