NAB Faces Customer Backlash with Loan Rates Increase

The National Bank of Australia (NAB) yesterday announced the company would be implementing a 20 basis point increase on some business lending loans to cover wholesale funding costs and deposit costs.

This will have to be the second increase aimed at mid-sized and large sized businesses the NAB has made for the year.

Following the announcement, however, the bank has to contend with customer backlash. One of its executive, Joseph Healy, said that this was rather unexpected.

In defense the bank, Healy said that they were aware that businesses are struggling amidst global economic problems and that people are losing confidence over bank operations.

He, however, added that the bank expects people would understand that the move was a necessary business decision that reflected higher funding costs.

Customers have been saying that the increase was done so that the bank can subsidize mortgages but Healy denied this allegation, saying this is just competitive propaganda.

The NAB supposedly treats these businesses separately and maintains a business lending book as part of the core strength of the company.

Analysts say that this move by NAB is a realistic approach to managing business risks and that perhaps the NAB still considers this move as a profitable niche.