A collapse in interest margins at Auswide Bank since the start of July yesterday sent the company’s share price to its lowest level since the outbreak of the pandemic in 2020. In a trading update filed to the ASX on Wednesday morning, the Queensland-based bank revealed that its net interest margin had plummeted 25 basis points in the four months since the end of June. At the end of October, the net interest margin stood at 1.52 per cent compared to 1.77 per cent on the June balance date. The bank’s managing director Martin Barrett attributed the sharp slide to rising funding costs and intense price competition in the mortgage market. “This has been an unprecedented time as the bank faces significant margin pressure,” Barrett said. “Industry margin contraction is evident across retail banking following the recent result announcements from three of the Big Four banks. “Deposit and lending competition have been significant and wholesale funding costs elevated.  “Hedging assumptions on the fixed rate book have been tested in the face of record interest rate increases and low-cost deposit migration to higher priced deposits.  “However, the position is now recovering as our fixed rate loan book continues to rollover to variable rate loans and our funding has materially re-priced.” Auswide appears to be stepping back from growing market share in home lending by focusing on the profitability of its A$4 billion-plus mortgage book. While the bank did not disclose the size of its mortgage book at the end of October, it revealed that its total loan book contracted by 1.5 per cent in the four month period.  In 2023 the bank expanded its total lending by $582 million or 14.2 per cent, which equated to three times the system growth rate. Despite the massive volume growth, Auswide reported a 4.1 per cent fall in net profit to $25.1 million. “The bank is focusing on profitable home loan growth,” the company told the ASX. “Following the intense home lending competition that prevailed in the first quarter, the bank has taken a conservative pricing position for new home lending.” Auswide said it “anticipates” margins will recover in the second half as price competition eases and fixed rate borrowers convert to variable-rate pricing. The company’s scrip underperformed all other listed banks on Wednesday, closing down 18 cents or 3.5 per cent to $4.94 The last time Auswide’s share price closed below $5 was in October 2020.