Commonwealth Bank of Australia (ASX: CBA) is the only major big four bank share to release its annual result this month. But what did the result mean for National Australia Bank Ltd (ASX: NAB) shares?
Investors may think that the big four ASX banks of CBA, NAB, Australia and New Zealand Banking Group Ltd (ASX: ANZ) and Westpac Banking Corp (ASX: WBC) are all roughly the same. They are pretty similar, lending is the key profit driver. But, they are somewhat different.
If a potential borrower needs a mortgage they need to pick one bank. A gain of market share for one bank could mean the loss of market share for another.
And why would CBA's result matter for NAB shares? Well, investors may want to take note of the strong growth that CBA is seeing in one particular area, which NAB is known for.
CBA's growth to impact NAB shares?
NAB has a reputation as being a business bank.
CBA is more focused on household lending. But, the FY22 result showed that CBA is growing quickly in the business sector.
The biggest bank reported that its business lending grew by 13.6%, or $15.4 billion. This was 1.3 times the growth rate of the total system.
The amount of business deposits grew at an even faster rate, rising by 15.1% or $23.9 billion in dollar terms. That was 1.4 times the growth rate of the overall banking system. CBA also said that during FY22, its business lending margins increased.
CBA said that it is focused on continuing to differentiate its transaction and merchant banking propositions, and digitising the business banking experience. The bank said it wants to be Australia's "leading business bank". CBA said:
Our business banking strategy is centred around the quality of our customer relationships and being their main financial institution. We are proud of the strong customer relationships we have developed through the strength of our transaction banking, business lending and merchant offerings.
Our focus is to deepen these relationships by partnering with our customers and proactively meeting more of their needs. This, combined with our superior customer experience and leading physical and digital distribution, will allow us to exceed customer expectations and deliver sustainable growth and outperformance.
CBA also said that it wants to be at the forefront of how Australian businesses pay and get paid.
How bad is this for NAB shares?
Well, time will tell. CBA isn't specifically targeting NAB with this initiative. There are more lenders out there than just CBA and NAB.
There could be enough of a business lending market for both CBA and NAB to do well.
NAB said in its FY22 half-year result that its business lending increased from $220.8 billion at September 2021 to $237.1 billion in March 2022. NAB's third quarter report also showed more business lending growth.
In NAB's quarterly update, its cash earnings grew by 6% year over year. It was an increase of 10% of cash earnings before tax and credit impairment charges.
Management confident on the future
With the release of the FY22 third quarter, NAB CEO Ross McEwan said:
We have a clear strategy and executing this with discipline is our key priority. We will continue to focus on getting the basics right, managing our bank safely and improving customer and colleague outcomes to deliver sustainable growth and improved shareholder returns.
