Monday, February 13, 2012

Short memories. We kept the banks afloat, and this week they'll...


One bank takes the heat, then another

December 2009: WESTPAC lifts rate 45 points instead of Reserve Bank’s 25. Cites the price of bananas. Other banks follow.

November 2010: COMMONWEALTH lifts rates 45 points after the Reserve lifts 25. Other banks follow.

November 2011: NAB cuts rates only 20 points after Reserve cuts 5 points.

February 2012: ANZ lifts rates 6 points after Reserve Bank leaves rates flat. Westpac follows, others consider positions.


Westpac 7.46% (from 7.36%)
ANZ 7.36% (from 7.30%)
Bank of Queensland 7.36% (no change)
Commonwealth 7.31% (decision imminent)
National Australia Bank 7.22% (decision imminent)
Reserve Bank 4.25% (steady)

Standard variable mortgage rates, Reserve Bank cash rate. February decisions

Borrowers are in for further pain this week with the Commonwealth and National Australia Banks each expected to launch separate reviews of their mortgage and business rates ahead of announcing multi-billion dollar profits.

Westpac and the ANZ defied the Treasurer and lifted variable rates 0.10 and 0.06 percentage points late Friday despite a decision by the Reserve Bank to hold its cash rate steady.

On Wednesday the Commonwealth Bank will report a first half year profit expected to be $3.49 billion, up 4.9 per cent. On Thursday Westpac will announce a first quarter profit expected to be of $1.55 billion and on Friday the ANZ will announce a first quarter profit expected to be steady at $1.45 billion.

The ANZ has asked to meet finance union representatives today amid fears it is preparing to unveil details of planned jobs cuts.

Treasurer Wayne Swan warned the Commonwealth and NAB to consider the consequences of moving saying they could lose business to other lenders offering rates “a full percentage point lower.”

"Just as many angry Westpac and ANZ customers would have been looking very closely over the weekend at other lenders offering rates a full percentage point lower than ANZ and Westpac’s, so too does any other bank that follows suit risk seeing their customers walk out the door," he told The Age.

Westpac’s decision to announce its rate hike Friday “as the 6pm news was rolling” would offend a lot of people.

But when asked what he could take, Mr Swan said “Let’s be very clear, we have not in this country over the last 25, 30 years regulated interest rates”.

Shadow Treasurer Joe Hockey said Mr Swan’s “soft lettuce” response gave the Commonwealth and National Australia banks licence to move as well.

Mr Swan said it was “up to Mr Hockey to explain this week why he opposed our ban on mortgage exit fees and sided with the big banks over Australian families”.

The National Australia Bank is now pricing mortgage rates an unusual 0.24 points below Westpac, almost the equivalent of an official Reserve Bank rate cut worth $48 per month on a $300,000 mortgage.

Although it has promised to continue to offer the lowest rate among the big four, NAB has not ruled out lifting rates to take them closer to the other three... A spokeswoman told The Age Sunday that as part of its commitment to having the lowest rate it “regularly monitors competitors' rates."

The Commonwealth Bank said rates were “continually under review”.

CLSA banking analyst Brian Johnson said the Commonwealth and NAB would “likely lift standard variable mortgage rates by a similar margin”. The loans they sold through mortgage brokers now barely covered the cost of capital.

ANZ Australian chief Phil Chronican said his bank’s 0.06 point increase wasn’t enough to cover costs. “Six points certainly doesn’t in any sense recover the margin pressure we’ve had, but we also needed to be mindful that customers were going to look at other banks,” he said.

The ANZ’s meeting with the Finance Sector Union today comes amid speculation it will be the most aggressive of the majors in cutting jobs. The union has previously claimed as many as 900 ANZ jobs are at risk.

An ANZ spokesman said the bank regularly met the union and had “nothing to announce at this time”.

Consumer group Choice pointed to the “coincidence” of the big four announcing bad news in turn. Westpac was the first to announce an outsized rate increase in 2009, the Commonwealth in 2010, the NAB the first to announce an incomplete cut in 2011, and the ANZ the first to announce an extra hike in February.

“It might be random, it might be telepathy, it might be by design, but it confirms too many preconceptions,” said campaign director Christopher Zinn.

AMP Capital chief economist Shane Oliver said the rate hikes would pressure the Reserve Bank to cut its cash rate next month in an attempt to bring retail rates back down. The Reserve targeted retail rather than professional rates.

In today's Sydney Morning Herald and Age


Michael West - Banks: deep pockets, short arms and shorter memories

Michael West - Reserve kept Bankwest afloat: litigator

Mark Bouris and Christopher Joye - Scrap the big four’s ‘protected species’ status

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