NAB’s curious battle with its cannibal

Charis Palmer | Business Spectator | February 22, 2011
http://www.businessspectator.com.au/bs.nsf/Article/NAB-Ubank-mortgage-lending-banks-pd20110221-EAA94?OpenDocument&src=sph

While National Australia Bank was busy grabbing headlines last week with its ‘break up’ campaign, its online offshoot UBank was putting the finishing touches on its first home loan, the fourth in a line of products designed to take market share from NAB’s major rivals.

UBank has generated more than $7 billion in deposits since its launch in 2008, so it makes sense for the business to offer a mortgage. In fact given UBank was born in the midst of a major property boom, you could ask why it hasn’t moved more quickly.

Perhaps it’s because parent NAB is worried about cannibalisation.

At 7.05 per cent the UBank mortgage is more than 50 basis points cheaper than NAB’s standard variable rate product, and 12 basis points above its base rate product.

In addition to undercutting its parent, UBank will also be competing on price against a Mortgage Choice product launched in November last year and funded by NAB-owned Advantedge. Pricing will no doubt be a subject of debate between those inside the bank who champion the broker channel, and those who want more investment in direct online sales.

It looks like the parent has had the final say, since UBank won’t we following in NAB’s footsteps and paying the exit fees of CBA/Westpac customers looking to switch.

The teams selling mortgages at NAB would surely be breathing a collective sigh of relief.

UBank argues it has avoided cannibalisation with its deposit product, but there are some within the bank that think UBank was getting a little too big for its boots.

The home loan was quietly revealed over the weekend, without fanfare, after the original November 2010 launch was delayed by the NAB systems glitch that left staff scrambling to fix a problem affecting thousands of customers.

Compared with last week’s high-profile grab for home loan customers by NAB, it’s clear to see where the business has decided to focus. Ironically, the guerrilla marketing tactics and social media campaigning run by NAB last week had, until recently, been solely the domain of UBank.

It was UBank that helped drag NAB onto Twitter to serve customers, and UBank that led with the adoption of many other social media channels.

Perhaps it was a case of the parent being taught what’s de rigueur by the more progressive child. Or maybe NAB’s marketing team was tired of being seen as the dowdy cousin.

Now NAB is telling us it’s “not like the others”, where does that leave UBank who’s not quite like NAB?