Australian banks were able to raise more than $160 billion on international markets through the federal government’s wholesale funding guarantee, Treasurer Wayne Swan says.

Mr Swan on Sunday announced that the wholesale funding guarantee, along with the guarantee for deposits over $1 million, would end on March 31.

The Financial Claims Scheme, which is a free guarantee for deposits up to $1 million, will continue until October 2011 and provide certainty for 16 million Australians over their bank deposits.

Mr Swan told parliament in a ministerial statement on Monday that the wholesale funding guarantee had been central to Australia’s response to the global crisis.

“It gave our banks continued access to global capital markets on competitive terms, allowing them to raise more than $160 million,” he said.
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Australia’s big four banks say they will hold standard variable home loan rates steady after the central bank shone the spotlight on bank mortgage rates as a major reason for leaving the cash rate unchanged.

The Reserve Bank of Australia (RBA) left the official interest rate unchanged at 3.75 per cent on Tuesday, surprising most economists, who had predicted a 25 basis point hike to four per cent.

RBA governor Glenn Stevens noted in his first statement for 2010 that last year’s out of cycle interest rate rises by some banks was a reason for leaving the cash rate steady in February.

“Lenders have generally raised rates a little more than the cash rate over recent months and most loan rates have risen by close to a percentage point,” governor Glenn Stevens said.

“Since information about the early impact of those changes is still limited, the Board judged it appropriate to hold a steady setting of monetary policy for the time being.”
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The federal opposition is being irresponsible by proposing to break up big banks to boost competition, the government says.

Opposition finance spokesman Barnaby Joyce says the concentration of banking interests has put banks in a position where they can raise interest rates by as much as they wish.

Westpac lifted its mortgage rates by 0.45 of a percentage point, almost twice the 25-basis-points rise in official rates handed down by the Reserve Bank of Australia last week.

Senator Joyce says divestiture laws could be introduced that would allow the government to break up merged banks if they abuse their market position.

Deputy Prime Minister Julia Gillard says Senator Joyce’s suggestion is irresponsible.
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Consumers can expect banks to continue breaking ranks from the interest rate decisions of the Reserve Bank of Australia (RBA), according to a leading mortgage broker.

The RBA this week boosted the official cash rate by 0.25 per cent to 3.75 per cent but Westpac, the Commonwealth Bank and ANZ all hoisted their standard variable rates higher than the central bank’s increase.

Loan Market Group Chief Operating Officer Dean Rushton said the unwelcome trend of banks breaking ranks from the RBA was likely to carry on during 2010.

“Major banks no longer seem to be moving in line with the RBA, which is a development of great concern to mortgage holders,” Mr Rushton said.

“Based on this development, it is imperative that the RBA now pause and assess the impact of its three consecutive rates rises.
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Westpac Banking Corporation has hiked its standard variable lending rate by almost double the amount of the central bank’s increase, shining a spotlight on the burgeoning pricing power of the major banks.

Australia’s second biggest home loan lender on Tuesday delivered a bigger than expected interest rate rise, announcing it will increase its standard variable home loan rate by 45 basis points to 6.76 per cent.

After the 45 basis point increase, repayments on a $250,000 mortgage would increase by about $71 a month, Westpac said.

The bank will also raise the interest rate it pays its online savings customers 45 basis points while interest rates on business loans will rise by 25 basis points.

Credit card interest rates will increase by between 25 and 35 basis points, Westpac says.
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Australia’s major banks are set to retain their double-A long-term credit ratings despite a sharp rise in credit exposures for the two biggest banks during 2008/09.

Global ratings agency Standard & Poor’s (S&P) said the long-term credit ratings of Australia’s major banks will not change in light of the agency’s new framework for assessing capital adequacy.

S&P’s survey of 45 large international banks included Australia’s big four banks and found the average risk-adjusted capital (RAC) score to be more than three per cent lower than the average tier 1 capital ratio.

Capital adequacy levels reflect whether banks have enough funds to cover their credit exposures.
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Prime Minister Kevin Rudd wishes retail banks would cut interest rates as quickly as they raise them in response to official cash rate moves.

The Reserve Bank of Australia (RBA) raised the cash rate by 25 basis points on Tuesday, its second consecutive monthly increase.

ANZ Bank matched the increase on its standard variable mortgage rate within minutes of the RBA decision, and the other major banks soon followed suit.

“I do note a contrast between, shall I say, the speed which interest rates are brought down on the part of the commercial banks and the speed with which they are put up,” Mr Rudd told Fairfax Radio Network on Wednesday.
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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 Big Four Banks have made a swift $17 Million dollar profit by passing on last week’s rate rises faster than rate cuts according to research by financial comparison website Mozo.com.au.

After the RBA raised official rates on October 3, the Big Four Banks all passed on the 0.25% increase to home loan customers within five or six days. But when the RBA cut rates in February and April this year, it took nine days on average for the Big Four to pass on the cut. And NAB didn’t pass on the last cut at all!

Rohan Gamble, managing director of Mozo said: “The banks want everyone to believe they have done the right thing by the Australian homeowner by only passing on the official 0.25% interest rate rise. But the fact that they moved much quicker on this rate rise than recent rate cuts shows the days of greedy bank profiteering are far from being over.
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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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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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Major banks are likely to increase their variable home mortgage rates regardless of any movement in official rates by the Reserve Bank of Australia, according to a leading mortgage broker.

Loan Market Group Executive Director John Kolenda said despite the RBA leaving the cash rate on hold at 3.0 per cent for the past three months, major lenders were considering a lift in their rates independent of any RBA decision.

Mr Kolenda said the Commonwealth Bank of Australia had already broken ranks recently by raising its variable rate by 0.10 per cent due to increased funding costs.

“While predictions remain of a further easing in the cash rate by the RBA due to rising unemployment, there is evidence the major banks will no longer be moving in line with these changes and a strong likelihood banks will not pass on part or all of any future RBA rate cuts,” he said.
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By Jill Fraser for Lending Central

Six prominent economists are urging the government to consider setting up an inquiry into Australia’s financial system - the first in more than a decade.

In the line of fire is the growing power of the Big Four banks and the diminishing competition in the banking sector caused by the demise of the non-banks and second tier banks.

In an open letter sent to the Prime Minister and Treasurer the six signatories ask whether real competition can emerge while consumers face significant costs in switching between financial institutions, and if a government-regulated securitisation market provides an opportunity to consolidate mortgage account standards and more effectively enable switching.
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Four Australian banks have been unveiled as the winners of the Australian Private Banking Awards for performance amongst high net worth customers.

Westpac, Commonwealth Bank, Macquarie Group and NAB all picked up awards, run by the Australian Private Banking Council.

This is the first time that the awards have been run.

Westpac Private Bank won the award for Outstanding Private Bank in the $10 million-plus high net worth client segment, with Commonwealth Private picking up the award in the corresponding category for $1-10 million.
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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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