Bank satisfaction not guaranteed

THE decision by Australia's major banks to lift mortgage rates when the Reserve Bank left official rates steady has come back to haunt them, with customer satisfaction levels falling last month.

By InvestSMART · 27 Mar 2012

By InvestSMART ·
27 Mar 2012

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THE decision by Australia's major banks to lift mortgage rates when the Reserve Bank left official rates steady has come back to haunt them, with customer satisfaction levels falling last month.

And in what could make things interesting when rates rise, the first bank to move can expect to get hit the hardest.

Satisfaction with the big banks declined in February to 79.3 per cent, down from 79.6 per cent in January, after the RBA decided to keep rates on hold last month.

ANZ's home-loan customers recorded the biggest fall in satisfaction, according to figures from Roy Morgan Research.

"It appears that the first bank to make an upward movement in their home-loan rate suffers the greatest negative impact on customer satisfaction because of the widespread adverse publicity it attracts," Roy Morgan director Norman Morris said.

The fall came despite ANZ's rate increase being the lowest of the big four.

NAB, which gained the top position in customer satisfaction late last year, continues to lead the majors, with a 78.7 per cent approval rate. However, NAB suffered the biggest fall generally in satisfaction levels among the major banks, falling 0.8 percentage points during February, largely due to business customers.

It was followed by ANZ, on 77.9 per cent, which was off 0.7 percentage points. Westpac suffered a 0.5 percentage-point hit after pushing through one of the biggest mortgage rate rises. Commonwealth Bank's satisfaction rating of 77.3 per cent was off slightly.

The customers of Australia's smaller banks recorded greater satisfaction, with Bendigo and Adelaide Bank, on 89.8 per cent, outpacing its bigger rivals.

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Frequently Asked Questions about this Article…

Why did customer satisfaction with Australia's major banks fall in February?

Customer satisfaction slipped after the big banks lifted mortgage rates even though the Reserve Bank of Australia (RBA) left official rates on hold. Roy Morgan Research reported overall satisfaction with the major banks fell to 79.3% in February from 79.6% in January.

How big was the overall drop in big-bank customer satisfaction in February?

According to Roy Morgan Research, satisfaction with the big banks fell from 79.6% in January to 79.3% in February — a modest but measurable decline linked to mortgage rate moves when the RBA kept rates steady.

Which bank saw the largest fall in home-loan customer satisfaction?

ANZ's home-loan customers recorded the biggest fall in satisfaction in February, despite ANZ's mortgage rate increase being the smallest among the big four banks.

Which major bank led on customer satisfaction and did it fall in February?

NAB continued to lead the major banks with a 78.7% approval rate, but it also experienced the largest overall fall among the big four in February — down 0.8 percentage points — largely driven by business customers.

How did the other big four banks perform on satisfaction in February?

Roy Morgan's figures showed ANZ at 77.9% (down 0.7 percentage points), Westpac suffered a 0.5 percentage-point fall after pushing through one of the biggest mortgage rate rises, and Commonwealth Bank was at 77.3% with a slight decline.

Why does the first bank to raise mortgage rates tend to suffer the most reputational damage?

Roy Morgan director Norman Morris said the first bank to move rates upward typically suffers the greatest negative impact on customer satisfaction because of the widespread adverse publicity that follows being the first to increase home-loan rates.

Did smaller Australian banks do better on customer satisfaction than the big banks?

Yes. Customers of smaller banks recorded higher satisfaction levels — for example, Bendigo and Adelaide Bank topped the list at 89.8%, outpacing the major banks.

What do these satisfaction trends mean for everyday investors watching bank performance?

The article suggests that rate decisions and timing matter for customer sentiment: banks that raise mortgages when the RBA holds rates can see falls in customer satisfaction and face negative publicity. Investors should note that this can affect a bank's reputation metrics (as reported by Roy Morgan) and that smaller banks in this report recorded notably higher satisfaction levels than the majors.