National Australia Bank is eyeing stronger growth among customers paying off a loan on the home they live in, as banks face a softening property market that is feeling the effects of a crackdown on lending to investors.
Amid soft property market conditions in most cities and fierce competition that is squeezing margins for mortgage lenders, NAB group executive Gavin Slater said the bank wanted to lift its share, but it was not a case of "growth at all costs".
NAB sees real estate cooling off
The latest NAB survey of residential property developers, owners, agents and investors shows house prices will climb slightly, while apartment prices will fall as local investors and foreign buyers pull back.
It came as Deutsche Bank analyst Andrew Triggs predicted NAB would trim its dividend this year, after losing the profits from the British business that is spinning off to its shareholders.
Mr Slater said NAB and other banks were especially keen on owner-occupiers with loan to value ratios of 80 per cent or less.
"We have obviously had more appetite for growth at the 80 per cent and below LVR space," Mr Slater said.
"Competition is as intense as it's ever been … the owner-occupier space is where it is particularly sharp."
He said all the banks were also seeking customers who held several products with the bank as well as their mortgage, such as credit cards or wealth products.
"We have an ambition to grow. It's not growth at all costs, it's to grow in the right way," he said.
NAB's share of the home loan market is 15.7 per cent, close to ANZ's but significantly smaller than Westpac's and Commonwealth Bank, Deutsche Bank figures show.
The fierce competition for owner-occupiers came after the Australian Prudential Regulation Authority forced banks to slow growth in the housing investor loan market to less than 10 per cent, a change that has also helped to dampen house price growth.
Figures published earlier this week showed the value of loans to housing investors fell 2.9 per cent in the three months ended December 31, though Mr Slater said property investor lending remained an important segment for the bank.
Mr Slater also acknowledged bank capital requirements are also likely to rise, citing recent comments from APRA chair Wayne Byres.
Meanwhile, Deutsche Bank's Mr Triggs trimmed his forecasts for cash profit by 4 per cent to 5 per cent as a result of the hit to NAB's earnings from its demerger of its British banking business, Clydesdale Bank.
Mr Triggs is penciling in a dividend of 94¢ a share in each half of this year, down from 99¢ in each half last year.
NAB shares fell 5.5 per cent to $26.36 as it traded ex-Clydesdale for the first time. Clydesdale shares will be listed in London and will trade for the first time on Wednesday night Australian time.