Where’s the competition in banking that the banks and their industry mouthpiece say is intensifying?

The NAB, Commonwealth and Westpac are all leading the way in competing with big cuts to fixed home-loan rates in anticipating that the Reserve Bank might be about to cut interest rates.

And they have cut some fees and charges and want us to believe they are warm, fuzzy and pro-customer.

But that’s at the margin, the real story is that our banks are getting a bit fatter, and more profitable (which can be a good thing in times of stress).

Despite weak lending, cuts in fees and charges and volatile interest rates, the three banks to have updated the market this week all have one thing in common.

They all have lifted their most important measure, the net interest margin in either the latest quarter (NAB) or full financial year (Bendigo and the Commonwealth).

Like the NAB and Bendigo and Adelaide Bank, the CBA managed to push through a boost to net interest margins, a key driver of profit. The latest result saw average net interest margin of 2.19%, which compares to 2.13%.

The NAB lifted its net interest margin to 2.32% from 2.23% in the six months to last March (a comparison wasn’t given with the third quarter of last year).

“Approximately half of this increase reflected the accounting treatment of Treasury activities. The balance was a result of repricing through the March half year and some pricing and funding cost changes in the quarter,” NAB said.

Bendigo Bank said on Monday it improved its NIM to 2.17% from 2.12% in the 2010 financial year.

Every little bit counts, so its no wonder these three banks have reported solid rises in profits for the latest reporting periods.

For this we can blame the extra margins added to last November’s interest rate rise. Some of it has stuck to the bank profit margins.

And the CBA managed to boost dividends for the year 10% to a fat $3.20 a share.

So where’s the competition?