Commonwealth Bank chief executive Ralph Norris has opened fire on National Australia Bank. Picture: Renee Nowtarger Source: The Australian

In a rare example of the big-bank oligopoly turning on one of its own, Mr Norris said it was "rubbish" for NAB to argue that CBA was hurting the economy by neglecting the business sector in its preference for less-risky home lending.

"I think the real issue is that we have a bank (NAB) that has performed poorly for many years and missed out on an opportunity when the mortgage market opened up," Mr Norris said. "Now they're blaming everyone but themselves."

Both CBA and Westpac exploited an historic opportunity in the financial crisis to establish clear leadership in the residential home-lending market.

They pursued organic growth by targeting the flood of first-home buyers, brought on by the government's stimulus program, as well as acquisitions, with CBA's absorption of Bankwest and Westpac's takeover of St George Bank.

But Mr Norris's comments signal that relations between the industry and NAB, which is trying to carve out new territory as a trusted, community-minded lender, have become openly hostile.

The battle began last month with NAB finance director Mark Joiner's charge that the industry was earning "super profits" on its mortgage book.

Mr Joiner's allegation came at a particularly delicate time, with the resources industry reeling from Kevin Rudd's super-profits tax proposal, and other industries wondering if they, too, would be targeted.

NAB's numbers man said the 2008 transition to a new global capital accord, known as Basel II, had halved the amount of capital required to be held against a home loan, doubling the return on equity to about 45 per cent.

He targeted CBA and Westpac for their home-lending bias, with mortgages accounting for more than 60 per cent of the Sydney banks' balance sheets compared with less than 50 per cent for NAB.

"Australia should have a balanced economy; not a big skew to mortgage or business lending," Mr Joiner said.

NAB chief executive Cameron Clyne also said that claims of industry super profits should not be built around perceptions of "raw" profit numbers.

But he still welcomed a debate on the issue if the community wanted one.

Mr Norris said yesterday it was "rubbish" to suggest that CBA had ignored business credit in favour of mortgage lending.

CBA, he said, had "significantly outperformed" the banking industry last year in lending to the small and medium-sized business sector.

"The market grew by 0.5 per cent and we grew by 9 per cent," Mr Norris said. "I don't know where that rubbish is coming from, because the facts certainly don't support it."

Mr Norris also strongly rejected Mr Joiner's argument about industry returns on equity.

The relevant measure, he said, was not return on regulatory capital; it was return on economic capital. "It's very hard to sustain the argument that we're making super profits," he said.

Read the full story at The Australian.