The chief executive of Australia’s largest bank has told a parliamentary committee that the group’s 30 basis point rate hike on existing borrowers was measured by “what our competitors had done”.
Outgoing CBA chief executive Ian Narev appeared in Canberra on Friday (20 October) where he faced a volley of questions from committee members led by chair David Coleman MP.
CBA is the last of the big four to appear before the House of Representatives Standing Committee on Economics this month. Westpac, ANZ and NAB have all been called to account on their decision to reprice their back books in response to APRA’s 30 per cent limit on new interest-only lending flows.
CBA was one of the more prescriptive of the majors in its 27 June media release, which alerted the market of a 30 basis point rate hike for new and existing interest-only mortgage holders “to meet regulatory requirements”.
Committee chair David Coleman MP asked Mr Narev if the regulatory cost to the bank was the equivalent required to increase rates by 30 points.
“The reason we made the pricing move was to make sure we met our regulatory requirements,” the CBA chief executive said. “And the quantum of the pricing move was made in response to having seen what our competitors had done to meet those requirements.
“We were not the first bank to move and part of our decision was based on a competitive market.”
Pressed on the profitability of the rate hike, Mr Narev explained that in the short term, “if you are going to move margins then revenues will improve”, but “that wasn’t the motivation behind it”.
Mr Coleman pointed to a Macquarie analyst report, which indicated that the CBA’s 30-point hike on new and existing interest-only loans generated $500 million for the bank.
“Macquarie thinks it’s a $500 million decision,” Mr Coleman said.
Mr Narev replied: “We are a business. I won’t shy away from the fact that we are a business.”
More to come.