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Bank funding cost claims 'mathematically impossible'

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Australian Broker | 21 Feb 2012, 01:00 AM Agree 0
Repeated big four claims of rising funding costs have been rubbished by a major French bank
  • David | 21 Feb 2012, 10:09 AM Agree 0
    I suggest Mr Carrillo concentrate on his own bank and it's profitability. he is not exactly coming from a position of credibility given the state of the French economy and banking system.
  • Ian Jervis | 21 Feb 2012, 10:09 AM Agree 0
    Maybe Christian Carillo will get a Christmas card from Wayne Swan this year as he has certainly given Wayne some ammunition to shoot the banks with, whether it is right or not probably won't be of much relevance if there is some political mileage to be gained.
  • Garry | 21 Feb 2012, 10:20 AM Agree 0
    That's not surprising. The GFC gave the bank the perfect reason to start this process. Its the greatest lie ever perpetrated by the banks and the Govt is gutless when it come to standing up t the banks.
  • Country Broker | 21 Feb 2012, 10:44 AM Agree 0
    This is very telling the bank in question is in a position to cooent of funding costs out of europe where the big 4 claim the presure is coming from , in fact most of the funding is out of asia , some one has blow the whistle on the big 4 here , by the way who is JOHN working for his comments seem very big 4 orentiated !
  • Warwick | 21 Feb 2012, 10:52 AM Agree 0
    You can get any result you want just by picking the right times to compare. The real question is, is the margin on home loans excessive. I don’t think it is. The reality is they need enough margin to absorb shocks and cover costs and fluctuations in the cost of funds.

    The reality is also that any business charges as much as the market allows, there are at least 15 banks operating in Australia, plus a non banks, credit unions and building societies, taking the total to well over 100 possible lenders. If it was possible to significantly undercut the banks, it would have happened by now.

  • Tony Harris | 21 Feb 2012, 10:52 AM Agree 0
    It's sad that we have to have a foreign banker tell the media what we all should know is a fact, that over 60% of bank funding is done 'onshore' but all we hear about is the rising costs of overseas borrowings to justify banks raising mortgage rates
  • ozboy | 21 Feb 2012, 10:52 AM Agree 0
    I think this points to lack of transparency that the major banks have when explaining their funding options and costs. Until the banks do a better job of this then the media and others will play this game to suit their own needs. At the end of the day is there anyone here that can tell us exactly what any of the banks funding costs are? I can hear crickets!
  • ChrisC | 21 Feb 2012, 10:57 AM Agree 0
    Carrillo may/may not lack some credibility based on current French banking position but he may be right about the simple maths part - Aust Banks continue to be ranked among the most profitable in the world, they do have a massive chunk of the Aust market and therefore power, even funding some other bank and non bank lenders and owning others and they hold a higher concentration than ever of 'own funds' since the Govt guaranteed deposits in times where Australians are facing job losses and mortgagee sales - most businesses know they accept lower profit levels on hard times and fair to say a 2 tiered economy - mining and resources going strong but others are still hurting and failing - the Aust majors continue to break profit records on a regular basis so really are the cost of funds the reason to increase rates or is it really just because they can.
  • WhistleBlower. | 21 Feb 2012, 11:16 AM Agree 0
    CEO Steve Munchenberg is a well paid one-man-lobby-group - if he ever said anything out of step with bank-speak (i.e. a constant diatribe of WWII like propoganda) he would need to find a new job.

    Occam's razor (The theory) and a little bit of good old fashioned thinking is near enough to answer this question of whether 'funding is, or isn't' more expensive for our banks.

    FACT: Current deposits (above 60%) of bank cash requirements means that our gorgeous big 4 banks, don't need anywhere near what they used to borrow from off-shore... because, they have Aussie money to use - you and I call this funding source, customer deposits... or, savings!

    Part 1: Funding costs are higher if you use Aussie cash, and that's simply because Aunty Marge has her life savings with CBA earning 6 plus per cent.... and where they (the banks) can get away with it, less than 1 per cent (if Aunty Marge doesn't ask).

    PART 2: Now imagine you're a big institution in Europe, looking to put your money to work... but your economic zone is a basket case... and then you look alsewhere, let's say towards good ole Australia and Asia.... you would want to put your money into that place wouldn't you ???

    So that means (Occam's Razor) it's not our banks pleading on bended knee "please europe, can we have some money" it's actually Europe at OUR door, pleading with us, begging alomost for a safe haven... and it's OUR banks who are in the driving seat... so let's just get rid of this myth left over from GFC1 ... that was a WHOLE different ball game as it was a total-system-freeze... this next GFC will be a bit like watching the swell of an ocean, with money leaving the Euro zone and looking for 'safe havens'.

    So, when you read, hear or subscribe to what the banks tell you, and take it as Gospel (very branch Davidian, cult-like, Waco Texas style) you might want to also start arguing that the earth is flat, Elvis lives in Whyalla South Australia and is a fisherman and Steve Munchenberg is as unbias as Kim Jong Un, of that beautiful democracy just north of Seoul Korea... somewhere near the 52 parallel.

    The only thing I am 100% sure of is this - our banks made billions out of the last GFC, they manipulated the environment and politicians, undermined everyone else, gained preferential treatment and came through with bumper harvests... which means, that as this slow-burn GFC Mark II takes hold the big 4 here are about to do it all over again.

    What will be intersting to watch is just 'how' they exploit it to their advantage and 'who' (as in which financial services industry) will be obsorbed into them by how they manipulate (by so called reforms)scared politicians.

    Bill Murray said it best... "It's Groundhog day... again!".

  • Terry | 22 Feb 2012, 10:07 AM Agree 0
    some great comments here. but Banks being Banks nnver miss an opportunity to gauge a little extra profit and put a great spin on it to sell it to the public. to think that non banks will undercut the majors by any great margin is crazy. the want to generate huge profits also which means they will keep the status quo.
  • Mick | 22 Feb 2012, 11:57 AM Agree 0
    If Soc Gen believe there is money in mortgages why aren't they lending in Australia? In fact they withdrew funding and closed down their RMBS program....
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