Two of Australia’s biggest banks have announced 25 basis point interest rate increases on home loans, moving in lock-step with the Reserve Bank of Australia’s (RBA) rate hike.

Commonwealth Bank (CBA) will raise its interest rates on standard variable loans to 6.86 per cent on March 5 and ANZ Banking Group Ltd will increase on the same day to 6.91 per cent.

The announcements came after the RBA raised the official cash rate by 25 basis points to 4.00 per cent on Tuesday - the highest level in a year.

Three of the big four banks copped a public backlash in December for imposing bigger interest rate rises than those of the RBA, especially Westpac Banking Corporation.
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Grains marketer AWB Ltd has completed the sale of its Landmark Financial Services $2.3 billion loan book and $300 million debenture book to ANZ Banking Group Ltd.

AWB managing director Gordon Davis said on Monday that the completion of the transaction simplified AWB’s business and would significantly cut the company’s debt.

Mr Davis said AWB would incur a $62 million pre-tax one-off loss on the sale and restructuring costs in its results for the half year ending March 31, 2010.

AWB also said that Landmark had finalised an exclusive referral relationship deal with ANZ.
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Australia’s big four banks, which control about 85 per cent of the mortgage market, have wasted no time in matching the central bank’s interest rate rise with 25 basis point increases to variable home loan rates.

ANZ Banking Group Ltd was first off the mark after the Reserve Bank of Australia’s (RBA) announcement, saying in a statement on Tuesday that its standard variable home loan rate will rise to 6.31 per cent as of Monday November 9.

The Melbourne-based bank will also raise interest rates on a range of deposit products by 35 basis points and rates for credit cards and business lending will increase by 0.25 of a percentage point.

“Funding costs remain high and despite improvements in credit markets the average cost of wholesale funding is increasing which is continuing to place considerable pressure on mortgage margins,” ANZ chief executive for Australia Graham Hedges said in the statement.
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All eyes will be on asset quality, margins and surplus capital as signs that the bad debt cycle has peaked and margins are set to expand as interest rates rise, when the big banks begin to report their annual results this week.

All of Australia’s big banks are now cashed-up with strong balance sheets after a raft of capital raisings over the last 12 months.

The raisings were in reaction to escalating bad debts, losses from toxic conduit assets and funding pressures in the wake of tight credit markets.

While analysts differ over whether bad debts will peak in the September 2009 half or in early 2010, all point to surplus capital that may be returned to shareholders during 2009/10 if a large bad debt buffer is no longer needed.
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The ANZ Bank has promised not to slug its 800,000 home borrowers with variable interest rate rises above official moves by the Reserve Bank.

The pledge, made by chief executive Mike Smith in an interview with the Herald Sun newspaper, follows warnings from Treasurer Wayne Swan that independent rate increases by the major banks could not be justified in the current economic climate.

The paper says the ANZ is the first of the big banks to confirm it will not deviate from the RBA rate cycle until it becomes clear that Australia has recovered from the global economic downturn.

“I would be reluctant, frankly, to do anything until we really have to,” Mr Smith said.
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Australia’s big four banks are reviewing their standard variable mortgage interest rates after the Reserve Bank of Australia unexpectedly increased the overnight cash rate by 25 basis points to 3.25 per cent.

“We’re reviewing our rates,” Commonwealth Bank of Australia Ltd spokesman Steve Batten said.

Spokespersons from ANZ Banking Group Ltd, National Australia Bank Ltd and Westpac Banking Corporation also said interest rates were under review.

The big four banks together hold about 85 per cent of Australia’s home loan market, according to Australian Prudential Regulatory Authority figures.
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Teenagers on MySpace are being offered a reloadable prepaid Visa card to securely spend their money online.

The card from ANZ Bank is the first of its kind in Australia, targeting social networking site users.

MySpace spokesman Nick Love said the card would give under 18s, who aren’t eligible for credit cards, more freedom and security to make purchases on the internet.

“(They can) spend their own money on items such as concert tickets and clothes,” he said.

Teens can also use the card to buy prepaid phone credit through the site.
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Global credit agency Fitch Ratings has affirmed the long-term rating of ANZ Banking Group Ltd as AA-minus after the bank spent $US550 million ($A687 million) to acquire some of Royal Bank of Scotland Plc’s (RBS) Asian businesses.

Fitch said ANZ will retain its long-term issuer default rating of AA-minus, with a stable outlook, due to the relatively modest impact on the bank’s capital position.

ANZ, already Australia’s biggest bank in Asia, announced on Tuesday it will buy RBS’s retail, wealth management, commercial and institutional banking businesses in six countries, with the largest operations from Taiwan.

The businesses will increase ANZ’s operating income by about five per cent and are expected to add to earnings per share within two years of the deal being completed, the bank said.
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Australia’s banks could begin hiking interest rates on variable mortgages before the central bank raises official rates, if funding costs stay high, the head of the nation’s fourth largest bank says.

ANZ Banking Group Ltd chief executive Mike Smith also on Wednesday said he could not rule out making an offer for the banking arm of Suncorp-Metway Ltd, although plans to acquire the business “were not on the radar” at present.

Mr Smith said wholesale funding costs may determine whether the big four lenders - Westpac Banking Corp, Commonwealth Bank of Australia Ltd, National Australia Bank Ltd and ANZ - raise their variable rates before the RBA initiates its own increase, which economists say could occur in early 2010.

“I think that funding costs and the official rate is irrelevant,” Mr Smith told reporters after delivering a speech at an Australian British Chamber of Commerce function in Sydney.
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The Commonwealth Bank of Australia Ltd has slashed exception fees across a range of accounts, leaving ANZ Banking Group Ltd as the only big four bank not to have reduced the penalty.

ANZ chief executive Mike Smith says a review of the bank’s fee structure is underway but an announcement about any change is still weeks away.

“It’s going to be a matter of weeks not years, so it’s not going to be that long,” Mr Smith said on Wednesday.

ANZ is the only one of Australia’s big four banks still considering changes to unpopular penalty fees after the Commonwealth Bank announced on Wednesday that it would reduce exception fees.
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Australia’s major banks are reviewing their charges on overdrawn accounts in a bid to stay competitive after National Australia Bank (NAB) abolished its fee.

NAB will axe its $30 overdrawn charge from all of its personal savings accounts and personal transaction accounts from October 1.

The move is also aimed at appeasing customers, with NAB receiving more complaints about the fees than anything else.

An overdrawn fee is paid when withdrawals from a bank account exceed the available balance, giving the account a negative balance.
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ANZ Banking Group Ltd is to shed as many as 248 full-time equivalent positions in a major restructure of its mortgage lending businesses in each state and the Northern Territory.

The positions affected are in addition to the 500 job cuts announced by the bank earlier this year in other parts of the group.

The latest round of job cuts involve mainly back-room operations in ANZ mortgage facilitation centres in Sydney, Brisbane, South Australia, Western Australia, Northern Territory and Tasmania.

The back-room operations will be centralised to Melbourne.
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Angry bank customers have found a new place to deposit their anger.

They are hitting the world wide web instead of their bank branch and are venting online about sloppy service and interest rate rises.

A new Nielsen Online study reveals social networking sites such as Twitter are booming with people publicly expressing their displeasure.

The study measured consumer-generated media, or “buzz”, around the big four banks and found online discussion spiked following specific incidents related to banks.
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ANZ Banking Group Ltd chief executive Mike Smith says he remains confident in the bank’s bid for the Asian assets of the Royal Bank of Scotland (RBS).

And, if successful, the deal would be earnings per share (eps) accretive within three years, he said.

“In the short term, there will be a slight negative affect (on eps) and in the medium term, I mean about three years,” Mr Smith told reporters in Melbourne when asked when eps would become accretive.

“I am confident there will be quite a few opportunities (in Asia), ” he said, adding that there would also be further acquisition opportunities in Australia.
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This is a defining moment in Australian banking. Two of the big four banks have opted for aggressive mortgage lending to capture market share. The other two are opting for safety. Time will tell which strategy was right.

Business Spectator financial services

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