CBA and Westpac corner mortgage market

Nick Tabakoff | August 03, 2009

Article from: The Australian

AUSTRALIA'S "big two" banks, the Commonwealth and Westpac, have tightened their stranglehold on the national mortgage book by taking more than 85 per cent of new mortgage lending by the banking sector during the June quarter.

The extraordinary growth means the combined size of the mortgage books of the big two has now topped $500 billion for the first time.

A report obtained by The Australian has shown that of the $35.6bn of new mortgage lending achieved during the quarter, the merged CBA/Bankwest and Westpac/St George achieved an extraordinary 85.2 per cent, or $30.3bn, of the growth.

But the growing disparity between the haves and have-nots of the banking sector has seen the head of the Australian Competition & Consumer Commission, Graeme Samuel, reiterate fears about the state of competition between larger and smaller banks.

He said yesterday there was "no one concerned with competition that would say the current situation is healthy".

The new figures released by financial intelligence firm CoreData show the merged Westpac/St George had the fastest-growing mortgage book during the quarter, with $15.2bn in new mortgage lending. CBA/Bankwest grew by $15.1bn.

The figures come days after Australian Prudential Regulatory Authority statistics showed the big four banks dominating deposits and home lending.

Westpac/St George was the aggressive mover for the period, with growth in its mortgage book almost doubling from the combined $7.7bn figure for the March quarter. CBA/Bankwest and Westpac/St George now have just under half of all outstanding mortgages in Australia by value. The enlarged CBA has 25.2 per cent of the market with $260bn, while the merged Westpac has 23.3 per cent with $241bn.

By comparison, National Australia Bank and ANZ combined have 25.5 per cent market share. NAB has a mortgage loan book of $133.9bn and the ANZ $130.4bn. NAB recorded mortgage growth of just 2.2 per cent in the June quarter, while ANZ's growth was 1.8 per cent. While NAB and ANZ record tepid growth, tier-two banks -- as well as foreign-owned banks operating locally -- are losing their small market share.

The big four raised their combined market share of residential lending to a record high of 74.1 per cent during the June quarter, up from 72.2 per cent in the March quarter. But at the end of the June quarter, the tier-two banks -- made up mainly of regionals such as Suncorp, and Bendigo and Adelaide -- had an 11.2 per cent market share, 0.3 per cent below the 11.5 per cent share they recorded at the end of March.

CoreData principal Andrew Inwood said the regional banks, in particular, needed to reinvent themselves after recently trying to match big banks in cutting mortgage interest rates.

"Competing with CBA on price is like trying to compete with Walmart on price," he said. "The regionals should be focusing on their ability to take care of customers in a way with which the big two can't possibly compete."