National Australia Bank (NAB) Chief Executive Cameron Clyne blamed on Wednesday the battle for deposits among Australian lenders for the high mortgage interest rates in the country. In effect, he belied claims by the other banks that the European crisis, which caused wholesale funding cost to rise, is the culprit.

In a bid to attract more depositors, other Aussie banks have kept deposit interest rates high, but NAB recently cut its deposit rates by 50 basis points to match the reduction on the overnight cash rate made by the Reserve Bank of Australia. He cited Westpac as one of the lenders that had been aggressively competing for deposits.

"What is happening in Europe is not having an impact on our cost of funding today because we can always sit out of the (wholesale debt) market for a period," Business Spectator quoted Mr Clyne.

NAB recently topped customer satisfaction among the big four, signed in 650,000 new customers, grew transactions 12 times and hiked deposits by 17 per cent a year.

Mr Clyne attributed the turnaround of NAB to discounted standard variable rates and the removal of many bank fees considered in the finance industry as lucrative.

When Mr Clyne took over NAB, the bank had collateralised debt obligation hedges and a wealth management business that the lender bought at top market rates.

A CLSA analyst observed that even if NAB has reduced its risk profile from historic levels, the market has not yet fully appreciated that move.

"The noughties decade saw NAB's earnings growth eliminated through recurring one-off events. The apparent PE (price earnings) discount at which NAB continues to trade relative to its peers suggest the market continue to carry higher earnings risk," The Age quoted CLSA banking analyst Brian Johnson.

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