NAB reclaiming margin

by BN07 May 2009

The fact that none of the big banks passed on the full effect of the last RBA rate cut was brought into sharp focus at the Sydney NAB Broker roundtable when its regional general manager, Matt Lawler, told brokers that the bank had been "taking back margin".

Lawler was responding to questions posed by brokers about 'cost of funds' explanation given by banks for not passing on RBA rate cuts.

He tempered his response by saying the bank was not taking back as much as it did in the 1990s when he said margins were as high as 4%.

Prior to making this explanation, Lawler said it was difficult to explain to customers the reasons for why cost of funding was going up: "It's a very difficult message to get across to consumers on Sunrise in three minutes."

He said that while in some areas cost of funding had eased up; average funding costs were still going up - particularly medium term funding.

Furthermore, he said the bank only funded 50% of its mortgage lending from its term deposits.

"If term deposits matched mortgage lending, the RBA cash rate would be the perfect barometer," he said.

NAB was the only one of the big banks not to pass on any of the cut to homeowners

Did you attend Thursday's NAB Broker roundtable? If so, Australian Broker would like to hear what you thought of the event. Please send all responses to

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  • by Paul Gollan 7/05/2009 11:26:43 PM

    If I did not live in this great country and if there was only one or two banks in Austalia I would be saying shame on you instead of good on you. It is great to see a Bank Executive telling it as is rather than tiptoeing around the obvious point that.....


    It is reasonable that if economic circumstances provide the opportunity to increase margins that any business should do so.

    My brokers have families to feed also.

    Paul Gollan
    Australian Mortgage Brokers

  • by OzBoy 8/05/2009 8:05:10 AM

    they are getting mum and dad home loan holders to pay for the huge losses in their commercial and business area's. While taking back margin can be seen as good business some how I just can't get it to sit with me when I as a tax payer are protecting the banks by guaranteeing their deposits. This is leading to reduced competition which as a broker and Australian I know will hurt everyone over the next 5 years. I am surprised by your comments Paul perhaps there is another agenda in the post?

  • by Paul Gollan 8/05/2009 10:23:22 AM

    Every single business in a free market economy has the right to price their product or service as they see fit. There have been many subtle reductions in interest rates by the banks over the past 15 years over and above official RBA rates, due in part to "unsustainable" and "irrational" competition from many players no longer in business.
    My agenda is the protection of income for all the hard working mortgage brokers across Australia. The price charged for a mortgage needs to ensure all stakeholders involved in the origination of a mortgage make money. Simple!

    ---This is slightly off topic, but---
    The non-financial contribution made by a broker to a originating a mortgage is often discounted or overlooked by the so-called experts such as Marty North of Fujitsu fame and the media.
    To truly determine the value a mortgage broker brings to the food chain requires a consideration of the amount of capital that a bank DOES NOT HAVE TO EXPEND to bring in mortgages they would otherwise not have written. Bank of Queensland’s snub of the broker market in favour of their franchises is a perfect example of a decision that simply does not get it.
    MAJOR BANK A for example might be originating 40% of all mortgages via their broker channel, but the underlying numbers might show that say 80% of all NEW mortgage customers are being introduced by mortgage brokers. A true comparison of the cost of originating a loan through BROKER V BRANCH would therefore need to address the following question.
    What amount of capital would MAJOR BANK A need to expend, such that NEW mortgage originations were split 50/50 between branches and brokers? Easier said than done of course.
    Many banks are doing a great job of servicing their existing customers but brokers are winning the battle when it comes to originating new customers and this fact is not lost on most banks. This simple analysis of course does not take into account how much extra income they make from all the extra products they flog to these new customers.