NAB, which for the past year has been written off as the weakest of the Big Four banks, is starting to post some serious numbers in retail banking on the back of its decision to focus on price as the clear point of separation.

NAB’s big focus has been on the fact that the bank is the champion of the consumer and by implication that all other banks are not.

This standpoint is annoying but not really troublesome for Westpac and CBA, which still dominate share, however by doing this NAB has stolen the spot that Virgin, the credit unions and building societies used to occupy and even assigned Aussie Home Loans to the margin.

The goal of NAB is clear – to grab back the growth agenda when the rest of the market is sliding sideways and focus squarely on what consumers in a nervous market want – price-based utility.

Let’s pause here to talk about utility – not in the car with the back half missing variety but in the economic sense – utility can be best described as: ‘What do I actually get and how much does it cost?’

There are several types of utility, but in real terms, they are all a function of a type of value – for example, cost, time, expertise and ego.  For commodities like power or debt in which people will simply ask: ‘How much does this cost and what do I get?’ everything else becomes less attractive.

In home loans at least, the idea of being the cheapest appears to be powerful enough to outweigh almost any other driver in gaining share.

To demonstrate just how successful NAB’s strategy has been let’s look at the numbers.

The NAB price lead strategy increased the bank’s mortgage book by 1.5% for the month of June, well ahead of second-placed Westpac with 0.9%, and more than double Commonwealth (0.7% gain) and ANZ (0.6% gain).

This equates to NAB increasing the book by $2.55 billion for the period, followed by Westpac ($2.46 billion gain), Commonwealth ($2.16 billion gain) and ANZ ($940 million gain).

Highlighting NAB’s success beyond residential lending, the bank is also generally outperforming its Big Four peers in retail deposits and credit card acquisition.

For the year to June 2011, NAB with a 14.0% increase outpaced ANZ (11.1% gain), Westpac (4.1% gain) and Commonwealth (2.8% gain).

It appears that success for the NAB has also emerged in attracting short-term debt in the form of credit cards.

In the three months to June 2011, the credit card book increased by a net 3.0%, almost double ANZ (1.7% gain), three times Commonwealth (0.95% gain) and more than six times Westpac (0.4% gain).

There are some considerations in this – not least of which is profitability. While NAB continues to outpace the competition in market share – we are yet to establish just what that means to the return to investors.

Check out the chart on the burningpants homepage (The reality of Australian financial sector share performance) which tells the truth about how effective the banking businesses strategies have been.


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