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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Commonwealth Bank of Australia Ltd (CBA) has increased first half cash profit by 54 per cent after bad debt charges declined and the country’s biggest lender had strong volume growth across the business.

Chief executive Ralph Norris said it was a very good result, leading to an improvement in the interim dividend, and expressed optimism about the outlook for the Australian economy.

“Today’s result demonstrates the resilience of our business model and the underlying strength of each of our businesses,” he said in a statement.

“As a result we are entering 2010 in a strong position.”

CBA’s cash net profit for the six months ended December 31 jumped to $2.943 billion from $1.906 billion in the previous corresponding period.
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The ANZ Bank, Commonwealth Bank and ING Direct have been named as finalists for the Mortgage and Finance Association of Australia’s (MFAA) prestigious Lender of the Year Award, in the 2010 MFAA Excellence Awards.

The annual Award - to be announced at the MFAA Excellence Award’s night-of-nights on 12 March - is one of the industry’s most sought after honours.

To reflect the importance the MFAA places on monitoring lenders’ service performance in relation to the broker channel, MFAA accredited members were invited to vote online for the Lender of the Year in January 2010.

To ensure this is simply not a ‘popularity vote’, each lender was ranked against a set of seven criteria by all eligible voters. The top three scoring lenders became the finalists, and the overall top scoring Lender, the winner, will be announced at the Excellence Awards Dinner at the Westin in Sydney on Friday 12 March 2010.
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Home loan growth is likely to slow in 2010 after a surge in 2009 led by first-home buyers, as interest rate rises make borrowing less attractive.

The value of bank home loans jumped 17 per cent to $910.5 billion in the 12 months to 31 December 2009, according to figures released by the Australian Prudential Regulation Authority (APRA) on Friday.

Over the year, Commonwealth Bank of Australia and Westpac were the biggest beneficiaries in terms of market share growth, as each bolstered their status as Australia’s biggest and second largest home loan lender, respectively.

But APRA’s figures also showed total deposits grew by a mere 0.7 per cent over the year, suggesting the banks have some way to go to become less reliant on offshore and wholesale funding markets.
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A move by major banks to lift their interest rates higher than the central bank’s rises may mean official rates are left on hold in early 2010, Commonwealth Bank of Australia (CBA) chief executive Ralph Norris says.

The Reserve Bank’s 25 basis point rate rise to an official cash rate (OCR) of 3.75 per cent in December was followed by Westpac’s controversial 45 basis point rate hike for home loan borrowers.

CBA lifted its standard variable rate on home loans by 37 basis points, ANZ lifted its rate by 35 basis points while National Australia Bank (NAB) matched the Reserve.

Mr Norris said the banks’ controversial moves may result in the Reserve leaving rates on hold when it next meets.

“I think given the fact that there have been interest rate increases over and above the (official cash rate) then I think it is a possibility that we might not see an increase in February,” he told Sky Business.
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Commonwealth Bank of Australia (CBA) has warned that it may increase interest rates because of additional costs associated with proposed rules that require a greater proportion of liquid assets to be held on bank balance sheets.

CBA chief executive Ralph Norris told AAP the introduction of new liquidity rules by the prudential regulator will force the bank to hike interest rates by up to seven basis points.

“I think at this stage we’d be in the category of four to seven (basis points),” Mr Norris said when asked for CBA’s estimate on the additional costs required.

CBA’s estimate is in line with analysts’ expectations but tilts higher than the five basis points estimated by the Australian Prudential Regulation Authority (APRA), whose proposed tightening of the Australian bank liquidity regime has drawn uniform criticism from bank chiefs.
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By Jill Fraser for Lending Central

Last week we ran Part One of an interview with the Commonwealth Bank’s Executive General Manager, Third Party Banking, Kathy Cummings in which she expressed her opinion about the bank’s relationship with brokers.

Today we run the conclusion of the interview.

KC: What needs to be emphasized is that many of the changes are being driven by regulation. Regulation is going to dictate that brokers have to do a certain amount of professional development. Every year they will have to do about 30 hours of training. They’ll have to be licensed and if they’re under an aggregator and the aggregator holds a license that’s another line of accountability and the shifting of commitment back to the broker.

The whole industry is shifting.

LC: How do you see it changing?
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By Jill Fraser for Lending Central

Kathy Cummings, Executive General Manager, Third Party Banking, Commonwealth Bank recently sat down with Lending Central and outlined her views on the relationship between brokers and the CBA.

KC: Brokers in Australia are in a very good position. They have strong businesses and strong business partners.

(In comparison) look at the broker industry in the UK, which is in tatters, the broker market in New Zealand, which is in poor condition and the fact that there are no brokers any more in the US.

LC: How do you explain complaints from brokers about being discriminated against by banks, including the CBA?

KC: Those comments are very immature.

The CBA is the biggest supporter of brokers in this market and brokers should value that.
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Financially devastated clients of failed investment firm Storm Financial are supporting a lawsuit by the company’s owners against the Commonwealth Bank.

Storm principals Emmanuel and Julie Cassimatis last week launched a $17 million claim against the bank for losses in their personal investment portfolio.

They have accused CBA of negligence and breach of its contract for failing to provide accurate account statements regarding the value of their portfolio.

Storm Investors Consumer Action Group (SICAG) co-chairman Noel O’Brien said if the couple were successful it would set a precedent for future legal action by affected clients.

“It will set a precedent for the rest of the members,” he told AAP.
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Commonwealth Bank of Australia Ltd (CBA) chief executive Ralph Norris says the country’s biggest lender is well placed to improve its financial performance in 2010.

However, he warned that the current financial year would present challenges and in response CBA would maintain its conservative settings.

“We recognise that we are well placed to continue to strengthen our business franchise and improve our financial performance and returns,” Mr Norris told the company’s annual general meeting in Perth, according to a filed transcript.

“However, the 2010 year will present challenges for your group and its customers and the outlook is by no means clear.
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Commonwealth Bank of Australia Ltd says it cannot guarantee that increases in interest rates for home lending rates won’t exceed those made by the central bank.

All big four banks have said that variable mortgage rates may have to rise faster than the Reserve Bank of Australia’s rate increases because of funding pressures.

“If we have to move standard variable above the OCR (overnight cash rate) then we will have to do that,” chief executive Ralph Norris said in a phone conference after releasing the bank’s September quarter earnings update.

“We’ve seen significantly higher levels of term deposit rates.

“If you look at wholesale margins, they’re still significantly up over where they were two years ago.”
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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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Commonwealth Bank of Australia Ltd (CBA) has matched the central bank, increasing its standard variable mortgage interest rate by 25 basis points.

The bank’s standard variable rate will rise to 6.24 per cent as of Monday November 9, from 5.99 per cent, Sydney-based CBA said in a statement on Tuesday.

The Reserve Bank of Australia (RBA) increased the overnight cash rate by 25 basis points to 3.50 per cent on Tuesday - the second increase in the space of a month.

CBA group head of retail banking services Ross McEwan said the bank’s wholesale funding costs remain high.

“Funding pressures and market interest rates continue to be significant issues for financial institutions and today’s increase reflects the costs being experienced,” he said.
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Storm Financial victims are calling on banks to pull their heads out of the sand and settle claims for loans that were struck by “con men”.

The Commonwealth Bank of Australia (CBA) has settled claims for 53 out of more than 2,000 clients who took out loans with failed financial planners Storm Financial.

Law firm Slater and Gordon announced the breakthrough on Wednesday evening, but lawyer Damian Scattini said it was only the beginning.

“So far so good, but we’re not popping the champagne … it’s only 53 (clients) of over 2,000, so we’re a long way from home,” said Mr Scattini, whose firm is representing the Storm victims.

“They’ve got a sustainable future now that they didn’t have before.”
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Commonwealth Bank of Australia (CBA) has paid a $100,000 fine from the corporate watchdog for an alleged failure to disclose a hike in its 2009 bad debt forecast ahead of a controversial $2 billion capital raising.

CBA on Wednesday said that while it agreed to pay the penalty imposed by the Australian Securities and Investments Commission (ASIC), that payment was not an admission of liability.

Nor could the bank’s agreement to pay be taken as a finding that CBA had contravened the Corporations Act and its continuous disclosure rules.

ASIC had alleged CBA failed to notify the Australian Securities Exchange (ASX) after it became aware that its full year loan impairment expense (LIE) to gross loans and acceptances ratio to June 30, 2009 would rise by a material amount.
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