Trending Financial News 8 October

Commonwealth Bank wants to hear from customers

Commonwealth Bank is sending 8.5 million letters to its customers today inviting them to participate in a customer forum to be webcast from Brisbane next month.

In the letter, Commbank chief Matt Comyn said: “The Commonwealth Bank of Australia was established in 1911 to be the bank for all Australians, a bank for businesses and a bank for the country.

“I’d like to hear from you — when we get it right, when we get it wrong, and what changes you hope to see from us in the future.”

400 Commonwealth Bank customers from the Brisbane area will be able to register to attend the forum. Other customers can log in to watch.

Big banks are profiting from customer loyalty

The big four banks are collectively reaping $3.1 billion in additional profits derived from leaving existing loyal customers on loan rates higher than they offer to new customers according to new analysis from the Australian Financial Review.

The average difference in rates offered to new customers and the rates being charged on existing loans is about 0.41 percentage points. The banks say this difference is eroding as rates fall and competition for new borrowers intensifies.

Big banks say “We are helping our loyal customers”

The big four banks, Commonwealth, Westpac, NAB and ANZ have reacted swiftly to recent criticism from the treasurer Josh Frydenberg and Rod Sims, chair of the competition watchdog the ACCC, that they offer better rates and deals to their new customers than they do for their loyal long-term customers.

NAB executive Rachel Slade said her bank had scrapped 100 fees in the last 6 months and was looking for other ways to reward long term customers. Westpac told the AFR that many of its customers are on packaged discount deals. Commonwealth Bank said it has foregone $275 million in revenue to cut fees.

Which banks have happy customers?

Nearly 90 per cent of credit union, building society and mutual bank customers say they are satisfied with their institution.

“The customer is at the heart of every decision for our sector,” said Michael Lawrence, CEO of the Customer Owned Banking Association.

Roy Morgan Research reports that the sector’s housing loan sales have increased 7.8 per cent compared with the major banks which grew loan sales by 2.6 per cent.

“Once people make the move across to a customer owned banking institution, they’re happy about their decision,” said Mr Lawrence.

NSW based building society, Newcastle Permanent, has scored the highest customer satisfaction scores of all mutual institutions every month this year, reported Roy Morgan

Frydenberg wants banks to ease up on loan applications

Treasurer Josh Frydenberg said banks should not apply responsible lending laws “too stringently” in a major policy speech last week.

“The risk that the provision of credit may cause substantial hardship to some should not result in a significantly reduced ability to access credit by the vast majority of borrowers,” said Mr Frydenberg.

The Reserve Bank and other banking sector regulators have imposed tougher controls on loan eligibility in recent years to limit risk. The additional regulations have led to more stringent assessment of loan applications and higher rates for investor and interest only loans.

RBA stands firm on tough loan rules

In its latest Financial Stability Review, the Reserve Bank of Australia said tighter lending standards that it has imposed on banks are working to contain consumer debt.

“Improvements in bank lending standards over recent years reduce the risk that lower interest rates will see an unsustainable increase in household debt.”

The RBA also said the reduction in the number of high loan-to-valuation ratio home loans has limited the share of mortgages in negative equity.

“Improvements in lending standards have significantly increased the capacity of borrowers who have taken out loans in recent years to service their debts.”