Banks battle for business customers as mortgage margins shrink

Investors are looking to Westpac and Commonwealth Bank to see how their business banks stack up, after National Australia Bank set a high watermark for SME banking amid a fiercely competitive – and less profitable – home lending market.

“While all the banks are providing data on theoretical interest rate leverage [which are unreconcilable with each other], NAB has one significant advantage over its peers,” Barrenjoey banking analyst Jon Mott said.. NAB’s 27 per cent share in the SME market provides some net interest margin protection.”Barrenjoey calculates NAB’s business lending NIM expanded by 12 basis points to 1.94 per cent over the past year, while its NIM from house lending contracted 10 basis points to 1.22 per cent.

NAB and ANZ both increased their dividends and write-back provisions related to the COVID-19 pandemic, declaring the economy was in good shape and businesses would keep investing even if growth slowed in the mortgage market because of rising interest rates.

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NAB says competition helped business bank outperformNational Australia Bank’s head of business banking Andrew Irvine says competition is driving bank performance as companies invest to shore up supply chains.
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