Scott Tanner.

Scott Tanner. Photo: Arsineh Houspian

BANK of Melbourne is looking to defy a subdued credit market, planning to double its staff and its branches over the next few years and snare a greater slice of the market in its home state.

This will see at least 500 banking jobs and nearly 50 branches added in an environment in which banks are clamping down on costs. Is this the right time to be expanding?

Definitely, says the bank's chief executive, Scott Tanner. ''The results that are coming through show we're on track with our business case. That business case was set in a much more robust market, and despite that, we're growing at the rates that we anticipated.''

And last night Bank of Melbourne moved to tackle National Australia Bank's claim to have the lowest-priced mortgages of the major banks when it matched the rival lender's rate. Bank of Melbourne cut its variable mortgage by 41 basis points to 6.99 per cent.

So far the bank has 54 branches, with a further six slated to open by the end of June. Mr Tanner is eyeing as many as 100 branches within the first five years, aimed at growth corridors in the west and the city's north. This will also see staff numbers double from the current 585.

Westpac opted to revise its Bank of Melbourne brand last year as part of efforts to give the lender a strong regional banking franchise across the state. It set about running the bank on its St George platform, which Westpac uses as a regional brand in other states. Some investors have questioned the strategy, arguing that it comes at a cost. Others have raised doubts about robust returns in the face of a slowing banking market.

Still, since its launch in July last year, Bank of Melbourne has added more than 35,000 customers. Deposit growth of 16 per cent is easily outpacing growth in the broader market.

St George executives argue that growth in Victoria is now far greater than it would have been under the St George brand, a bank that grew out of Sydney's south-eastern suburbs.

Growth has come from rival banks, even with the chase for customers hotter than ever.

Mr Tanner declined to say where exactly customers were coming from, but it is believed the the bank's promotion of its Melbourne identity is aimed at winning borrowers and depositors from regional lenders such as Bendigo and Bank of Queensland and the market heavyweight, Commonwealth Bank.

While growth across Victoria's broader economy has slowed, particularly with manufacturing being squeezed by a higher dollar, Mr Tanner said underlying demand for housing loans and deposit products remained robust.

''It all boils down to confidence, and the 50-basis-point move by the Reserve Bank will stimulate that,'' he said. ''If we can just build that consumer and business confidence, investment will occur.''