A squeeze on interest margins and higher costs hit credit unions’ profits in 2009 as they felt the brunt of the big banks’ pricing power.

Despite putting up a fight for retail deposits and growing their home loan books, the profit margins of Australia’s 100-plus credit unions fell 2.2 per cent to 13.2 per cent during calendar 2009.

Figures from a report by the Australian Prudential Regulation Authority released on Tuesday showed credit unions’ net interest margins (NIM) shrank by 0.5 per cent to 2.5 per cent over the 12 months to December 31, 2009.

Building societies’ NIM remained flat at 2.3 per cent.

Credit unions’ cost to income ratio climbed 3.6 per cent to 80 per cent, while their aggregate return on equity fell 1.9 per cent.
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The financial market response to the minutes of the Reserve Bank of Australia (RBA) board’s latest monetary policy meeting was a marginal step back from the possibility, already seen as less than 50-50, of an interest rate hike next month.

Late on Monday, the futures market had given rate rise about 40 per cent chance.

But in the wake of the release of the minutes of the RBA’s March 2 meeting, at which the cash rate was raised to 4.00 per cent from 3.75 per cent, the implied probability of a rise has been pared back to about 30 per cent.

The minutes suggested the RBA was in less of a hurry to jack the cash rate up than previously thought.
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Australasia’s largest real estate and property group, Ray White, has reported a 20 per cent improvement in its residential and commercial sales results in Australia and New Zealand for February, 2010.

Ray White Chairman Brian White said preliminary figures showed the group in February achieved total sales of $2.310 billion, compared to $1.934 billion in the corresponding month in 2009.

“After a slow start to the year we have had a very strong month in February,” Mr White said.

“The market appears to be absorbing the interest rate rises we have had although we are not quite experiencing the sort of gains that we were achieving towards the end of 2009.”
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The Reserve Bank of Australia (RBA) has left its options open for the April 6 board meeting.

In the minutes of the monetary policy meeting on March 2, the RBA said board members concluded that recently available evidence “had confirmed that it remained appropriate to move gradually towards normal levels, and that it was timely to take another step in that direction”.

There was nothing in the minutes, released on Tuesday, to suggest it be timely to do it again on April 6, however.

The use of the word “gradual” suggests the central bank may be in no hurry, and may wait until May, timing the move for right after the March quarter consumer price index data in late April to highlight the centrality of inflation in its decision-making process.
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Three more banks could face investor concern over flawed mortgage outsourcing deals with Perpetual Ltd that give rise to confusion over who has the legal authority to complete the transactions.

An analyst says that Perpetual could lose as much as 10 per cent of its revenue if all three banks, National Australia Bank, AMP Bank Ltd and Bendigo and Adelaide Bank - in addition to ANZ Banking Group Ltd - drop their business with the fund manager over the flawed contracts.

Perpetual on Monday confirmed that National Australia Bank’s (NAB) HomeSide mortgage lending unit, AMP Bank and Bendigo and Adelaide Bank Bank outsourced the processing of mortgage applications to its mortgage services business.

Credit Suisse analyst Arjan Van Veen said in the unlikely event the banks broke their outsourcing contracts with Perpetual over the issue, Perpetual’s total revenue would drop by 10 per cent.
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New data showing weak lending finance is evidence of an economy slowing after the government stimulus has worn off and could spare borrowers an April interest rate rise, economist says.

Total personal finance commitments fell 1.5 per cent in January, seasonally adjusted, to $6.921 billion, from $7.028 billion in December, the Australian Bureau of Statistics (ABS) said on Monday.

The fixed loan component of the data fell 2.1 per cent, its fifth straight monthly fall since August 2009.

Fixed loans - or loans of a fixed amount - make up 46 per cent of total personal finance commitments.

CommSec economist Savanth Sebastian said the data pointed to a slowing economy and could be enough to stay the Reserve Bank of Australia (RBA) from raising the cash rate from four to 4.25 per cent.
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By Jill Fraser for Lending Central

A bitter court dispute involving Global Mortgage Equity Corporation (which owns Mortgage House of Australia Pty Ltd) and 45 per cent shareholder, Zoltan Tomanovic has ended.

The case was dismissed on Friday, 5 March with GMEC being awarded costs and the reimbursement of company loans that had been advanced to Tomanovic interest free by GMEC majority shareholder and Mortgage House managing director Ken Sayer.

The dispute, in which Tomanovic accused Sayer of failing to meet financial obligations under an alleged written agreement between the two men, threatened Mortgage House with liquidation. This would have meant 40 home loan centres in NSW, Queensland and Victoria and $212 million worth of mortgage assets up for sale.

Speaking exclusively to Lending Central Sayer admits that although he remained confident throughout the “tiff” he was relieved it was over.
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Mortgage provider RAMS Home Loans has joined with real estate data provider Residex to give property investors access to residential sales information.

Westpac-owned RAMS said the partnership would allow prospective investors to access Residex reports once they identify what suburb or suburbs they are interested in.

The reports include information such as median sale price, median rent, historical and predicted growth as well as a list of current properties for sale.
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Top industry performers were congratulated at the Mortgage and Finance Association of Australia’s (MFAA) annual Excellence Awards held at the Westin Hotel, Sydney, on Friday night.

“This special occasion gives our members, their colleagues and peers the opportunity to celebrate those this year’s industry high achievers,” said Phil Naylor, CEO of the MFAA.

There were 16 award winners on the night, four which were awarded to outstanding individuals and 11 awarded to top performing companies. The most prestigious award, Operator of the Year, was awarded jointly for the first time ever to Horizon Financial and Mildura Finance Limited who were judged as the best from 13 of the categories.

The MFAA congratulates all finalists and winners of the Excellence Awards.
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The Reserve Bank of Australia (RBA) says it is a “reluctant regulator” of credit cards while leaving the door open to force providers to reduce interchange fees.

In a speech on Monday RBA Assistant Governor Malcolm Edey said he was not in a position to predict what the RBA board’s next decision on credit card fee regulation would be, but he said good progress was being made in promoting competition.

“The Reserve Bank is a reluctant regulator,” Dr Edey told the Cards and Payments Australasia 2010 Conference in Sydney.

“We’d prefer to see fees being held down by competition than by direct regulation.

“We believe there’s been good progress in promoting competition over recent years.
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There are signs that consumer borrowing is rising in response to better economic conditions.

Of course, too much debt can be a bad thing, as the global finance crisis reminded us all.

But a willingness to take on debt can be an important indicator for the strength of the spending that drives the economy along, generating jobs and bringing unemployment down.

The latest credit card statistics from the Reserve Bank of Australia (RBA), released on Friday, are tentatively good news in that regard.

Total credit and charge card balances outstanding declined by 1.6 per cent to $46.152 billion in January from $46.912 billion in December.

But these figures are not seasonally adjusted - a fall is normal in January after the pre-Christmas spending binge in December has wound down.
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Greater Building Society says it will begin providing home loans at a lower rate than the big four banks, as it seeks to lure away regional customers.

Greater, which has the largest branch network of any building society in Australia, will start providing home loans from Monday and is establishing operations in Townsville as part of its expansion plans.

Greater chief executive Don Magin says people in regional Australia could benefit from having a home loan with Greater.

“We want people to know that there are large, safe alternatives like the Greater that can offer people very competitive rates, low fees and far better customer service than the banks,” Mr Magin said in a statement on Friday.
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The Mortgage & Finance Association of Australia (MFAA) has today expelled Accredited Mortgage Consultant, Mr Anh-Tuan Pham and the company of which he is Director, Freedom Finance & Property Group Pty Ltd, Footscray VIC, for misconduct.

The MFAA’s Disciplinary Tribunal stated, “Mr Anh-Tuan Pham of Freedom Finance & Property Group Pty Ltd engaged in dishonest conduct by manufacturing, and then submitting to a lender, income supporting documentation from a company of which he was a Director, for two individuals who were not in his employ, to enable those individuals to obtain finance.”

This conduct was contrary to clause 42 of the MFAA Code of Practice which states, “A Member must not engage in any acts or omissions of a misleading, dishonest, deceptive or fraudulent nature.”
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Property prices in Sydney’s inner and middle rings could rise by up to 10 per cent this year.

The Real Estate Buyer’s Agents Association of Australia (REBAA) said much depended on the effect of rising interest rates and tighter loan conditions.

But property prices will rise in key centres in Queensland, NSW, Victoria, South Australia and Tasmania, with Sydney in particular set to benefit from pent-up demand and increases of up to 10 per cent, it said.

REBAA president Byron Rose said that after a busy end to 2009, investors continued to show keen interest into 2010, with more buyers around than properties.

“We expect the current high levels of buyer activity to continue for the first half of the year,” he said in a statement outlining the association’s market predictions.
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Movements on credit card interest rates by the big four banks over two years show banks have kept 85 per cent of the net benefit gained from the Reserve Bank of Australia’s (RBA) interest rate cuts.

By March 1 the net impact of the RBA’s movements in the official cash rate over the last two years was a 3.5 per cent decline from the cycle’s high of 7.25 per cent in March 2008.

While banks passed on the majority of the RBA’s interest rate cuts to home loan borrowers, data from financial comparison website RateCity shows the big four kept 85 per cent, on average, of the net gains of the interest rate movements from credit card borrowers.

A comparison of movements in interest rates charged on both standard and low-rate personal credit cards over the past two years showed the net impact of rate hikes and cuts was an average drop of just 0.5 per cent.
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