In its recent earnings announcement conference call, NAB chief executive Cameron Clyne indicated his intention of holding mortgage rates down and maintaining the competitive pressure on the other major banks.

NAB has stated its intention to increase its share of the mortgage market by undercutting its competitors’ rates. Currently the bank’s standard variable mortgage rate is 7.24%, versus 7.36% with the Commonwealth Bank, 7.41% for ANZ, and 7.51% for Westpac.

The bank’s strategy doesn’t appear to have injured its bottom line, as third quarter earnings increased 22% to $1.1 billion. Mr. Clyne said NAB’s margins weren’t yet being eroded by increases in wholesale borrowing costs although they were under pressure, and “flexibility” in mortgage rates may be required should those borrowing costs continue to rise.

Economic analysts, observing the major banks’ margins, are widely predicting the banks will have little choice but to raise their retail interest rates on mortgages and other financial products following the election, even if the Reserve Bank holds the overnight cash rate steady.

“’I can say that while we watch these closely, we don’t have any immediate plans to change our current settings,” said Mr. Clyne.

During the quarter, NAB also gained market share in its retail banking sector and reduced its balance of bad loans by half. However, business lending, the banking sector dominated by NAB, hasn’t recovered as quickly as some analysts had predicted, due to a jittery global financial market and the looming federal election.

Mr. Clyne claimed “the (business lending) pipeline remains strong,” but many intended projects have been delayed until more propitious economic circumstances. He predicted growth in the business lending sector of 6.5% in the next fiscal year.

“We are pleased with the momentum our business is achieving,” he said. “By maintaining a competitive proposition, we think that it is the right thing for the business as well as our customers.”

Source: http://www.smh.com.au/business/nab-holds-loan-rates-20100810-11ya0.html