It’s the $33 billion question hanging over Australia’s banking sector: how will Commonwealth Bank respond tInside the country’s largest bank there’s concern rather than alarm. While CBA’s mortgage book hasn’t shrunk for three consecutive months for the best part of 20 years, and its market share has slipped from 25.8 per cent in June to 25.4 per cent, this has occurred against the backdrop of an eventful period.
And all of this has taken place against the backdrop of the peak of the fixed-rate mortgage refinancing rush, which has added extra competitive pressure to the market, where new loan growth is muted.With Westpac, NAB and ANZ set to report their full-year earnings in the next week and a half, investors will get a sense of whether growing mortgage volumes and market share have translated to lower mortgage margins.
But while the questions around CBA’s mortgage market slip and the looming bank reporting season are fascinating, this should also be a moment when the local market needs to zoom out and consider the long-term trajectory of this sector.For the first time in a long time, there are some serious questions about the state of Australia’s banking oligopoly. A 20-year shift in the power balance in the market now appears to be coming back to bite the big banks.
Today, the banks pay around $4.2 billion a year to the mortgage broker industry, which compares to around $3 billion a year to run their entire branch network, which obviously covers mortgages, personal loans, business loans, payments and deposits.Brokers control the flow of customers, who mainly want the best price they can get.