Rate hikes 'hard to justify': RBA
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BN
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17/12/2009 9:00:00 AM
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5
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The Reserve Bank of Australia has challenged bank rate hikes by pointing out that profits from lending have returned to pre-crisis levels.
According to the SMH, RBA governor Ric Battellino stated that the difference between interest rates charged to customers and funding costs - or the net interest margins - are now 20 bps above pre-crisis levels.
"With the economy and business climate now improving, the economic justification for wider margins on loans is becoming less compelling, so it would be reasonable to assume that, in a competitive banking sector, we should see margins level out soon," said Battellino at the Australiasian Finance and Banking Conference in Sydney.
Meanwhile Westpac's chairman Ted Evans defended the bank's rate rise of 45 bps above the RBA's December hike, insisting it was time for homeowners to bear some of the cost of funding.
Evans told members of the bank's annual meeting in Melbourne yesterday that it was not fair for small business owners to bear the brunt of rate increases in order than home loans could be subsidised.
Chief executive Gail Kelly indicated that interest rates will move even higher next year.
Related stories:
Westpac blames rate increase on expensive "bananas" - Westpac has compared itself to a banana smoothie maker in an animated video attempting to explain how the GFC forced its hand on interest rates.
Latest Comments
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5
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so then on
17 Dec 2009 05:45 PM
20 basis points above pre crisis levels, but they are still thieving an additional 150 basis points compared to pre crisis margins.
What lies will they come with next to justify their continued theft.
Remember when when there were armed robberies,now they rob us unarmed!
BBB on
21 Dec 2009 10:40 AM
This is an absolute attemptto shame all of the big 4 except the NAB and rightly so , it is opportunistic profit taking at its worst.
The RBA know exactly what the banks cost of funds are!!!
Could it be in regards to WETPAC that the bank actually had taken too big a market share in the last 12 months and they need to "balance the book" ??? It mat well be the case.
Angry B on
22 Dec 2009 02:45 AM
I wouldn''t get supportive of NAB too soon. Their mortgage book is only approx half the size of CBA or Westpac’s. NAB is the dominant business bank in Australia and has lifted business rates in some cases from margins of 0.75% over bank bills to 3.50% over bank bills. Luckily for NAB – it’s doesn’t make the news like home loans…
I settled a $1.2M construction loan with NAB last year and only got paid for the land (600k). It just happened to another broker I know 3 months ago. NAB’s justification – "they were allocated to a business banker". They also declined one of my deals and then contacted the client direct to re-write the deal (within the last 12 months).
Although they are trying to adopt the broker channel, NAB bankers are still monitored on profits on their portfolio. A broker deal gives a NAB banker negative growth in year one (after commission) - Therefore can reduce the bankers chance of getting a bonus. This provides NAB bankers a financial incentive to cut out the broker.
The rates might look good but it is a short term strategy. NAB needs to change a lot more than the interest rate to see a deal from me again...
In short: beware of cheap rates. NAB has a long way to go before it offers true value to the broker channel.
Melb broker on
22 Dec 2009 02:13 PM
Angry B, you are spot on. I have stayed away from NAB for the last 3 years due to the exact same reasons you mention. The sad thing is that it also extends to residential deals. In my opinion as soon as you write a deal with NAB/Homeside you better keep your clients out of NAB branches
Dave on
24 Dec 2009 01:25 PM
Angry B and Melb broker I too have faced these issue''s with NAB/HomeSide and it would appear we are not the only ones. It does make me wonder what they are going to do with the aggregator businesses that they bought. If I was with one of those 3 I would certainly be on my toes at the moment.