Commonwealth Bank of Australia signalled an end to the mortgage wars by retracting its $2000 cashback offer to borrowers, bowing to investor pressure to restore discipline around profitability amid an expected slowdown in new lending.
, marking time on what analysts agree is a cyclical peak in profitability for the big four. An outbreak of fierce competition for home loans and deposits has downgraded the earnings outlook, as National Australia Bank and ANZ’s results revealed last week. “To take share you have to get sharper on price, that’s not our settings at the moment,” Mr King said. “It’ll be trickier in the second half with lots of moving bits [including slowing credit growth],” he warned.
Milford Asset Management portfolio manager Jason Kururangi said a ceasefire on cash backs would come as a “welcome relief to bank shareholders”. “It’s a really good outcome for the market structure more broadly because it’s clear that some of the new business that banks are writing is uneconomic,” Mr Kururangi said.“Some of them have been bleeding market share. Particularly I would point to ANZ and Westpac,” he said.
The Sydney-based bank said it would pay a 70¢ a share dividend, up 15 per cent. Mr King said the biggest risk facing the economy was unemployment rising faster than the 4.5 per cent in the RBA’s forecasts by December 2024. “We’re still early in the transmission of monetary policy and the later rate rises are more important because they’re a little bit above the buffers that we assume when we were lending,” Mr King said.