Non-banks growing ‘80% faster than system’: CBA

On Wednesday, CBA announced a cash profit of $4.7 billion for the half-year to December 2017, down by 1.9 per cent on the prior corresponding period.

During a media briefing in Sydney, outgoing chief executive Ian Narev noted that for “risk reasons” and managing margin, the bank is tapering its growth, particularly in mortgage lending.

A CBA chart pack shows the bank achieved 5.2 per cent home loan growth over the 12 months to December 2017, below system (6.3 per cent) and well below non-bank lenders (11.3 per cent).

“You can see that in home loan growth, where we have grown a little bit below system,” Mr Narev said.

“Clearly, the standout of that chart is that non-bank financial institutions have grown about 80 per cent faster than the system overall,” the CEO said.

Later in the briefing, Mr Narev was asked by a journalist about the level of competition in the mortgage market. He again took the opportunity to highlight the recent growth of the non-banks and the “pretty low” barriers to entry in the segment.

“The extremely strong growth of non-bank financial institutions in the mortgage market relative to the major banks shows that barriers to entry are pretty low, [and] people are willing to get into the market, provide choice and extend credit,” Mr Narev said.

CBA’s half-year profit came in under expectations. Morningstar had tipped the bank to deliver a cash profit of around $5.1 billion for the six months ended 31 December 2017.

Ongoing scandals were the primary drag on CBA’s result, as the bank set aside $375 million for expected penalties relating to the AUSTRAC allegations and an additional $200 million for ongoing regulatory costs.

“We have had a lot of activity relating to the world of regulation and compliance,” Mr Narev said.

“We need to be clear that we brought on ourselves a lot of the additional activity we have had to do by not reaching standards that others expect of us or indeed that we expect of ourselves,” Mr Narev said. “That has had reputational consequences and financial consequences.”