As the Reserve Bank of Australia (RBA) shaved a further 25 basis points (bps) of the official cash rate on Tuesday, all eyes turned to the 'Big Four' banks to see how they would respond in turn.
The RBA has now cut rates for the second month in a row, with Treasurer Josh Frydenberg imploring the Big Four to pass on the rates to consumers in the hopes of kickstarting the sputtering economy – but did they follow orders?
Australia and New Zealand Banking Group Ltd (ASX: ANZ)
ANZ led the pack as far as the July rate cut was concerned, reducing all variable interest rates for Australian home and residential investment loans by 25 bps and passing on the RBA's cut in full.
The decision to pass on the cut in full comes after Treasurer Frydenberg blasted ANZ in June for only partially passing on the 25 bps cut, saying "ANZ has let down its customers" and that it was "deeply disappointing from the ANZ."
Commonwealth Bank of Australia (ASX: CBA)
Australia's biggest bank declined to pass on the full rate cut this month, waiting 3 hours after the RBA's announcement to say it would cut interest rates on its home loans but not to all customers.
CBA plans to reduce owner-occupier and principal-and-interest (P&I) investor loans by 19 bps from 23 July while passing on the full 25 bps to interest-only (IO) loan customers.
National Australia Bank Ltd (ASX: NAB)
NAB seemed to be playing its own follow-the-leader game, announcing that it would reduce variable home loan interest rates by 19 bps, but only after the CBA announcement.
This follows last month's decision by NAB to announce it would reduce all variable home loan interest rates by 25 bps, passing on the June rate cut in full.
Westpac Banking Corporation Ltd (ASX: WBC)
Westpac was the slowest mover of the four banks, engaging in its own form of game theory before announcing it would reduce variable interest rates for owner-occupiers by 20 bps and 30 bps for interest-only investors.
Westpac has been one of the banks that has battled to maintain its net interest margin (NIM) and, like the others, appears to be trying to balance profitability with driving new loan volume.
The Big Four share prices were hammered lower in 2018 amid the 2018 Financial Services Royal Commission, but have since rebounded due to a better-than-expected final report and a broader uptick in domestic equities.
