Something must give: ANZ Eric Johnston
October 7, 2010
.ANZ has warned that ''something has to give'' on interest rates, as chief executive Mike Smith left the door open for a repricing of mortgages even though the official cash rate remains on hold.
Mr Smith also responded to comments by Treasurer Wayne Swan that banks had no justification for pushing through out-of-cycle rises, saying this was a matter of opinion.
''He's quite entitled to his views as I am mine,'' Mr Smith said.
Advertisement: Story continues below The Reserve Bank's decision on Tuesday to keep the cash rate on hold was a setback for the big banks, which had wanted to increase mortgage rates by more than the RBA's rise to recoup higher funding costs.
Although some may be tempted to increase rates, most big banks, including ANZ, have indicated they are likely to leave them steady for now.
Westpac has gone a step further by saying it would defer any decision about interest rates until after next month's RBA meeting, which is scheduled for November 2.
In recent days, Mr Swan warned the banks they could not be justified in raising interest rates.
''(The bank's) profits at the moment are healthy, their net interest margins are back to the level that was last seen prior to the global financial crisis, and some of their liabilities are much less than they thought would have occurred some time ago,'' Mr Swan said.
But Mr Smith, speaking after a Australian Institute of Company Directors briefing yesterday, said funding costs were clearly putting margins under pressure. ''The fact of the matter is we're paying 160 basis points more for deposits than we were pre-crisis and we're only up 100 basis points for mortgages,'' he said. ''Something has to give at some stage.''
When asked if ANZ would increase its mortgage rates, he said: ''We just continue to monitor the situation.''
ANZ and National Australia Bank are not under as much pressure to raise rates compared with their bigger rivals. Both have a relatively modest mortgage portfolio, meaning the bulk of their earnings is generated from business loans.
Mr Smith also pointed to signs that business is starting to borrow again, ending the near two-year drought in demand for credit.
''We're beginning to see demand from the capex side, which is encouraging because that shows there is an increasing amount of optimism in the business community,'' Mr Smith said.
His comments came as ANZ detailed plans to pay a $4000 childcare allowance to employees as part of measures aimed at recruiting and retaining women. The plans will also include superannuation on all forms of paid parental leave.
Separately, Mr Smith said ANZ was going ahead with due diligence on South Korea's Korea Exchange Bank. But he declined to comment on whether ANZ would be forced to undertake a capital raising to help fund such a move.
ANZ has previously confirmed it is inspecting the books of Korea Exchange Bank to buy a 57 per cent stake, valued at about $4.5 billion at present market prices.
Source: The Age