Matt Comyn calls out irrational mortgage price competition

The Commonwealth Bank’s chief executive says some rivals are chasing riskier, unprofitable loans.

Commonwealth Bank boss Matt Comyn is taking a wait-and-see approach to fierce price competition in the mortgage market, noting some rivals were chasing riskier and unprofitable loans.

CBA shied away from participating in “elevated levels” of price competition for home loans in the six months ended June 30, Mr Comyn said.

He cited that as the reason the bank’s mortgage growth was 7.4 per cent for the fiscal year, but still slightly trailed the average of its peer group.

“Some of the offers that are in market are well below cost of capital … it doesn’t tend to remain the case for a persistent period of time but we’ll have to see,” Mr Comyn said.

“We’ve been conscious … the most recent (loan) origination cohorts are also higher risk given the cycle we’re in.”

Mr Comyn highlighted that one player was still offering up to $6000 cash back on mortgages, and he said CBA was constantly assessing factors in the home-loan market spanning volume, pricing and risk.

The bank will be positioning to hold on to fixed-rate mortgages that roll over to much higher variable rates in coming months, with CBA expecting a monthly peak of $11bn for fixed-rate changeovers in June.

Across the sector there are $500bn of fixed-rate loans nearing expiry which will result in banks attempting to retain and win customers. Many borrowers who locked in record-low rates during 2020 and 2021 now face the prospect of markedly higher variable and fixed rates after four successive rises by the Reserve Bank.

Mr Comyn expects housing credit growth to moderate to between 3 per cent to 4 per cent over this financial year, as rate rises cool demand. The bank has remodelled its worst and base-case scenarios for potential loan losses to account for stagflation, in which the economy is slowing but inflation is rising.

Commonwealth Bank chief financial officer Alan Docherty and chief executive Matt Comyn.

Analysts also peppered CBA with questions about increasing competition for deposit and savings customers, after years of very low returns. Banks such as Macquarie and ANZ have released aggressive rates on at-call accounts.

Mr Comyn said he believed CBA maintained a strong deposit franchise but said the bank was “watching share of flows very closely”.

A highlight in CBA’s results was almost 14 per cent annual growth in business lending and 15 per cent growth in business deposits. It has been seeking to boost its position in business banking to better compete with dominant player National Australia Bank.

Mr Comyn said business lending volumes continued to be “very robust” but would also slow across the industry as rate rises crimped demand for some products.

“We would expect business confidence to probably reduce … as changes in interest rates start to flow through to the household sector we think that will cause some contraction of consumption, particularly in some discretionary items,” he said.

Separately, when asked about whether CBA’s position on cryptocurrencies had changed given the rout in prices this year, Mr Comyn said: “Our interest in crypto remains and certainly over the medium and long term … There’s a wide range of assets that are available in that market, some of which are in our view entirely inappropriate for our customers. There’s a smaller subset and the underlying technology which is of interest.

“We continue to work closely with our regulators on what’s the most appropriate disclosure regime for those products and I think hopefully that will create clarity and a set of standards … I envisage that will take some time.”

CBA in November announced a pilot program that will eventually give bank customers the ability to buy, sell and hold crypto assets, directly through its app.