Mr Chronican acknowledged that discounts offered by banks to new customers could become uncompetitive over time, but said NAB had sought to address this by offering customers an annual review of their mortgage. In October, he said 15,000 customers had taken up the review and got themselves a lower interest rate as a result.
Deputy committee chair, Labor MP Andrew Leigh, appeared unconvinced. “Why is it that those customers have to respond to a request for a review, rather than simply receiving the same rate as a new customer would get? Aren’t you profiting from inertia?” Dr Leigh asked.
Mr Chronican replied: “It doesn’t exactly feel like that. It’s a competitive market to get new business.”
He said the bank competed for new business by offering discounts. While these could become uncompetitive over time, he said it wasn’t clear how everyone could be charged the same rate on their mortgage.
“It’s hard to have an individual negotiated rate if everybody has to get the same rate,” he said.
Low interest rates were a recurring theme of questioning, with Mr Chronican re-iterating his view that cuts to rates meant Australia had “largely exhausted” its interest rate “firepower.”
Responding to a question from committee chair, Liberal MP Tim Wilson, Mr Chronican also said it had become “impossible” for the bank to reduce retail deposit rates in line with last month’s official interest rate cut.
“Across the totality of our retail deposit book, it’s been impossible to get the costs down by anything like 25 basis points,” Mr Chronican said.
Friday is Mr Chronican’s last day as interim CEO of NAB, before incoming chief Ross McEwan takes the reins next month, with Mr Chronican to become chairman.
The lending giant also released its annual report on Friday, which confirmed senior executives missed out on bonuses potentially worth up to $14.4 million, following a record-breaking shareholder backlash on pay in 2018. The report also said NAB would stop financing thermal coal from 2035, as part of the bank supporting a “transition” away from coal.
Mr Chronican is the third bank CEO to appear before the government’s banking inquiry, and he also faced a wide range of question on topics including demand for business credit, responsible lending laws, the influence of environmental activists.
Clancy Yeates is a business reporter.