Commonwealth Bank has quickly passed on the Reserve Bank’s cash rate cut in full to its customers, suggesting it had little choice following the reputational damage that followed a series of scandals.
While ANZ responded to the RBA’s 0.25 percentage point cut with a 0.18 basis point reduction to its variable rate home loans, Australia’s biggest bank said it would go further as it rebuilds amid the fallout of last year’s financial services royal commission.
“We have carefully considered the RBA rate decision and the current funding environment, together with how we continue to meet our regulatory commitments, capital requirements, and community expectations,” CBA retail boss Angus Sullivan said.
The RBA on Tuesday cut the cash rate by 0.25 percentage points to a record low 1.25 per cent.
ANZ was first major to respond in a move similar to that by big banks following the previous RBA cut in August 2016, when they reduced variable rates by an average 0.13 percentage points and pocketed the rest.
About an hour later, CBA said it would pass on the full RBA cut – albeit only from June 25.
Prior to Tuesday, just half the 12 RBA cuts since November 2011 were passed on in full – or within 0.01 percentage points of full – by the major banks.
“Today’s (RBA) move will directly benefit those with variable rate mortgages as long as the banks pass on the cut,” said Kate Howitt, portfolio manager at Fidelity International.
ANZ retail boss Mark Hand acknowledged that many would have hoped to benefit from the full cut, but said the bank also had other considerations.
The bank last month lifted first-half profit but reported that net interest margin – the difference between interest charged on a loan and that paid to fund it – fell to 1.80 per cent from 1.93 a year earlier.
““In making this decision we have weighed up a number of factors, such as business performance, market conditions and the impact on our customers,” Mr Hand said.
“While we recognise some home loan customers will be disappointed, in making this decision we have needed to balance the increased cost in managing our business with our desire to provide customers with the most competitive lending and deposit rates possible.”
Sally Tindall, research director at comparison site RateCity, said big banks should now face renewed competition for customers with some smaller lenders already agreeing to pass on the full cut to customers.
“ANZ’s decision to not pass on today’s cut in full is a huge disappointment and now all eyes will on the remaining big banks to see if they can go one better,” Ms Tindall said.
Westpac and National Australia Bank have yet to respond to the RBA’s well-telegraphed and long-expected move.