👉 Background: The Commonwealth Bank or CBA is the biggest bank in Australia. It recently announced their third quarter profits of $2.6 billion, which was a 10% rise from the same quarter last year. But investors weren't too impressed because its net interest income fell by 2%.

👉 What happened: As a result, CBA's CEO announced that they will be ditching their $2,000 mortgage cash back offer from the end of this month. Get this: in March this year, there were a record 35 banks offering cash back offers to new customers.

👉 What else: CBA wants to strike a balance between chasing growth while still preserving shareholder returns. So now, this has pushed them to rein back some of its perks that were designed to attract new customers.

What's the key learning?

💡Engaging in price wars quickly turns into a race to the bottom. Banks have been going hard competing against each other for new mortgages.

💡The sweet, sweet perks of cash backs and discounts are often led by the market leaders (ie CBA) and force everyone else to follow. So it will be interesting what CBA's cash back move does to the now-29 cash backs on the market.

💡 This isn't the first price war we've seen in Australia. Remember the milk price wars? This war ended up harming both Coles and Woolies' margins, as well as farmers and wholesalers in their supply chain.

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