Thursday, May 03, 2012

NAB. It's no different, it's certainly deceptive

Once it told us it was very different

The National Australia Bank has cleared the way for each of Australia’s big four banks to withhold a large chunk of the Reserve Bank’s 0.50 point rate cut delivered Tuesday.

NAB announced late yesterday it would cut its variable mortgage and business rates 0.32 points instead of 0.50, giving customers who have borrowed $300,000 a saving of $62 per month instead of $96.

In contrast NAB depositors will be hit with the full Reserve Bank cut of 0.50 points, suffering a slide in their earnings from 4.15 per cent to 3.65 per cent.

NAB did not make the extent of the slide clear in its announcement, saying only that its deposit rate would “change to 3.65 per cent”.

Treasurer Wayne Swan labelled the move “an insult to hardworking Australians”.

“Customers with a mortgage or small business loan will rightly feel short changed,” he said. “NAB and all the major banks are booking huge profits. Customers shouldn’t hesitate to ditch any bank that takes them for a ride with decisions like this.”

Rohan Gamble, managing director of rate tracking company Mozo, said NAB “unfortunately has given other banks the excuse to follow their lead and once again put profits before customers in not passing on the full cut.’’

Another analyst, who asked not to be named, said the move was departure for NAB which on Valentine’s Day 2011 purported to “break up” with the other banks and offer lower rates and fees.

"It could be NAB claiming to be one thing and now doing something different - grabbing margin because they’re under pressure," he said, noting the bank’s profits were under the more pressure than the other banks at the end of last year.

Calculations by Deutsche Bank suggest NAB will pocket more than $75 million this year by not passing on the full cut...

A separate Australia Institute analysis found that each day the big four delay passing on the Reserve Bank’s cut made them $12 million.

“While the ANZ has been complaining that their cost of borrowing has been increasing, the consolidated financial report areleased Wednesday shows their interest expenses are down two per cent,” said senior research fellow David Richardson.

“Where are the costs pressures the ANZ is facing if they can’t be found in their financial accounts? The banks have set a pattern, always complaining about cost pressures only to publish results that show the cost of funds has been low and falling,” he said.

ANZ yesterday  reported a first-half underlying profit of just under $3 billion.

Its chief executive Mike Smith said he was prepared to make "tough decisions" in order to restore lending margins which had been eroded by higher funding costs. ANZ will announce its decision Friday week.

Neither Westpac nor the Commonwealth Bank have indicated when they will move. Westpac will report its half-year profit today and NAB will report next week.

Mr Swan said his reforms had made it easier than ever for disgruntled customers to “walk down the road and get a better deal”.

“By the end of the year around 1 million Australians will have a home loan completely free of exit fees because the Government banned them, a move opposed by Mr Hockey and the Liberals,” he said.

Coalition Treasury spokesman Joe Hockey has called on each the banks to either pass on in full the Reserve Bank’s 0.50 point rate cut or explain very clearly why not. He was unavailable for comment last night.

In today's Sydney Morning Herald and Age


Sigh. Once upon a Valentines Day..





How's this for deception?

NAB's press release assures us:

"The reduction will save NAB customers $80 per month in interest, on the average $300,000 home loan."

The fine print (not on the NAB website, but sent in an email to me) says:

The $80 monthly saving reflects interest savings resulting from the 0.32%p.a. reduction in standard variable rate on a $300,000 interest-only home loan

The average $300,000 home loan is interest-only? ??

Crap. The average $300,000 home loan is interest-plus-principal, and NAB must know it.

In which case the saving would be around $62 per month (if the loan term was 25 years).

NAB's announcement is a disgrace.

It is indeed like the other banks.


12.05.02 NAB Reduces Standard Variable Rate to 6.99%



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9 comments:

kymbos said...

This is good work, Peter. Well done.

Marek said...

I think your being a bit harsh on the NAb Peter They have started from a lower number than the other banks. For example in order for westpac to match the NAB rate they would have to cut by 47 points

Peter Martin said...

Their announcement was deceptive, in two respects.

They are not different to the other banks.

Marek said...

totally agree with you on that point

Anonymous said...

Well said, having worked for one of the big 4 for 25 years I had enough and took the biggest risk of my life and moved, the deception shown here is not even a fraction of where it starts.

Well written

The Lorax said...

NABs UBank is still paying 6 percent at call which is the same rate they've been paying since the December cut. UBank is also paying 6% on a 6 month term deposit so you have the opportunity to lock it in ahead of any further RBA cuts.

The NAB press release says:

The NAB iSaver variable rate will change to 3.65%p.a. An additional 1.35%p.a. bonus interest is payable on new iSaver accounts for the first four months, bringing the total rate to 5.00%p.a.

You didn't mention the bonus Pete!

Ok, its a pretty crap deal, but the 4-month bonus thing is standard practice at all banks these days, and if you call them up and threaten to take your money elsewhere most banks will renew the bonus rate.

At UBank you can opt to automatically deposit $200/month (which you can withdraw again after the interest is paid) and you get the bonus rate (6.01%) forever. IMO, NAB's UBank still offers the best deal for savers. Better than Rabo, ING etc where the bonus rates disappear after a few months.

So to be fair, the NAB ain't all bad, and I'm an no fan of the big four.

The Lorax said...

Scrap that, UBank just cut by 50bps. Bastards!

Peter Martin said...

0.50 points!

"NAB. Just like the rest."

The Lorax said...

UBank still paying 6.01 percent on 6mo term.

Time to lock it in?

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