Don’t believe the banks bullshit

I was at a Big 4 bank seminar today where they AGAIN complained about home loan profit margins being ‘tight’. This PR crap makes me so angry as it’s only half the story. Sure. The GFC has increased the cost of funding mortgages which is negative on profit – no argument. However, the GFC has also resulted in a hell of a lot of consolidations (mergers) and sent customers flooding back to the Big 4 banks on mass. Their market share is absolutely huge now (over 90%). They now have more customers that they can cross-sell products to = even more profit. But what happens when margins ease… they make zillions! Business nirvana is winning more clients at the same or higher profit margin. Stuff we all dream of. A very good outcome is winning heaps of new customers at slightly lower margins that you can sell more products to. I would take that any day of the week. Feeling sorry for the banks (or ‘buying’ their story) is like feeling sorry for someone that tells you they lost $1 million last week. If the person went on to tell you that they still had $500 million in the bank (i.e. you heard the full story), you wouldn’t be that sorry for them would you? A tighter home loan profit margin is only half the story. The fact of the matter is the GCF has been the best thing to happen to the Big 4 banks in years. Over the longer term they will prosper greatly. Tighter home loan margins in the medium term it’s a small price to pay for this huge upside and they know it!