National Australia Bank Ltd (ASX: NAB) shares are in focus as the big four ASX bank share looks to try to win over some new customers.
According to reporting by news.com.au, NAB has decided to reduce its variable home loan rate by 30 basis points. That means it's a decrease of 0.30%.
However, that decrease isn't for all customers. It's reportedly just for new customers only. Existing customers are seeing their mortgage rates soar as the big four ASX bank shares pass on the Reserve Bank of Australia's (RBA) interest rate rises.
Is this a good thing or a bad thing?
The media outlet news.com.au reported comments by Rate City research director Sally Tindall who implied that NAB (and others) may essentially be charging customers a loyalty tax for sticking with the bank.
Tindall said:
Log on to your banking app and check what rate you're paying. While you're there, work out the exact name of your loan.
Then look at your bank's website to see what rate it's offering new customers.
With refinancing at record highs and billions of dollars' worth of fixed loans coming to an end, lenders are cutting variable rates to attract new borrowers.
If you think as a loyal, long-serving customer your bank is doing right by you, double check that's actually the case. The results could surprise you.
But, for new customers, it could be a positive.
Is NAB losing market share?
According to research from Macquarie Research and APRA, NAB is the only big bank that gained housing market share over the 12 months to July 2022. Its housing market share increased by just under 20 basis points, while CBA's housing market share dropped more than 10 basis points. At the same time, Westpac's housing market share fell almost 100 basis points and ANZ's market share has fallen more than 100 basis points.
The CEO of Liberty Financial Group Ltd (ASX: LFG), James Boyle, suggested that smaller lenders might be able to gain ground on the big banks. This comes as falling house prices could mean some customers are deemed too risky for major banks as they focus on the safest type of borrowers, according to reporting by the Australian Financial Review.
Boyle noted that there is "vigorous competition for mainstream customers with low loan to value ratios, strong earnings and who are a great credit". He also suggested there could be even stronger competition for that type of borrower.
Is the NAB share price a buy?
Brokers are a bit mixed on the big four ASX banks at the moment. There is a general view that higher interest rates will help bank profitability, translating into better net interest margins (NIMs). However, there is also a concern that higher interest rates could lead to higher bad debts over time.
Morgan Stanley currently has an 'equal-weight' rating on NAB, with a price target of $27.20. That implies a drop of almost 10%.
But Ord Minnett has an 'accumulate' rating on NAB. The price target is $32.70 which implies a rise of around 9%. It thinks that NAB's revenue can keep growing well in the short term.
