CBA loans 'just crossed' profitability line with hike

by Adam Smith20 Feb 2012

Commonwealth Bank CEO Ian Narev has claimed the bank's recent rate hike will not "make a huge difference" to the bank's profitability.

Narev told the ABC's Inside Business yesterday that the current cost of funds meant the bank was writing new mortgages at a loss before it hiked its rates 10bps last week.

"On the current cost of funds, new loans have just crossed the profitability line. Ten basis points don’t exactly make a huge difference," Narev said.

Narev defended the bank's decision to move rates in spite of the Reserve Bank leaving the official cash rate on hold. In the bank's half-yearly results, released last week, CBA indicated it had seen a 10bp decline in net interest margin.

"Costs of funds move over time. What we don’t want to do is react in a kneejerk way every time things change because our customers want some sense of stability. The primary thing we look at obviously is the action of our competitors," Narev told the ABC.

The CBA chief also took aim at political pressure on the majors not to raise mortgage rates.

"There’s no doubt the whole industry does get influenced by public debate which focuses on these prices. The whole relationship between a bank and its customer base should not be defined by one pricing point and one product. The debate must be had on the facts," he said.

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COMMENTS

  • by 1martym1 20/02/2012 11:16:20 AM

    They offer the biggest discounts the industry has ever seen, then complain the business was not profitable. Geez I wish I had their market power...just put up their rates!

  • by Will-Perh 15/03/2012 1:50:29 PM

    Gee, the CBA is not even the cheapest out there. Plus with their size one would think they can buy money cheaper than other smaller lenders. So something does not add up here. Or its all just more SPIN !!

  • by ozboy 16/03/2012 8:38:46 AM

    I don't believe you! Prove your claims.