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Commonwealth Bank chair Paul O’Malley has signalled it will defend its dominant position in home lending, after CBA’s flagship mortgage portfolio recently contracted amid fierce competition from rivals.
At CBA’s annual meeting of shareholders in Sydney on Wednesday, O’Malley emphasised the intensity of competition for both loans and deposits, as chief executive Matt Comyn reiterated that pricing in the mortgage market earlier this year had been “destroying value”.
CBA chairman Paul O’Malley and CEO Matt Comyn.Credit: Peter Rae
In a wide-ranging meeting, O’Malley also reiterated the bank’s support for the Voice, which has included a $2 million donation to the Yes campaign, saying the position was consistent with CBA’s long-standing goals.
CBA is Australia’s biggest mortgage player, accounting for about one in four home loans. But the latest official figures, published late last month, show its home loan book contracted in July and August, as Westpac and ANZ Bank expanded.
Responding to a shareholder asking how it would respond, O’Malley said this was a question that was also on the board’s mind, as he emphasised the intensity of mortgage competition.
“I’m actually going to get Matt to elaborate on the competitive response, noting that the board is also asking that question because it’s important that we maintain share,” O’Malley said.
“But it’s also very important that we do it economically, and understand that it’s important that we deliver the right return on capital for using shareholders’ money as we actually price and compete for mortgages.
“Perhaps getting that balance right is not always easy, but the loss of share I think was done for the right reasons – it was to make sure that we were appropriately using shareholders’ money.”
Comyn referred to comments he made earlier this year about new mortgages being written at unsustainable interest rates – saying the bank was reluctant to write loans at rates that were “destroying value for shareholders”. Comyn said the bank needed to strike the balance between writing enough new business, making acceptable margins, and taking risks.
“It’s really important for us to get all of those right to make sure that we can both support our customers and deliver sustainable returns to our shareholders,” Comyn said.
CBA is one of several major Australian businesses that has supported the Voice, and several shareholders questioned the bank’s position before this weekend’s referendum.
O’Malley said the Voice was aligned with the bank’s purpose, and it had found that “listening to Indigenous voices has improved the way we support First Nations customers, employees and community members”.
“We have had a longstanding commitment to supporting First Nations people through listening to them,” he said, referring to a series of CBA Reconciliation Action Plans.
Rival banks NAB, ANZ and Westpac will report full-year profits next month, and investors will look for any signs of rising stress in their mortgage portfolios, after the 4 percentage point increase in mortgage rates since May last year.
O’Malley said calls to the bank’s hardship line were starting to “tick up”, although they were still at lower levels than before the COVID-19 pandemic. “We acknowledge distress and vulnerability. We are seeing that people are making tough decisions at the moment,” he said.
Comyn said high interest rates were being felt unevenly across the economy, but the bank remained positive in its outlook for the economy. CBA forecasts interest rate cuts next year.
“We expect pressure on households to ease as inflation continues to moderate. The economy remains fundamentally sound, and we remain optimistic about the outlook,” Comyn said.
All the resolutions were carried, with 97.9 per cent of votes supporting the bank’s remuneration report.
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