New research damns Aussie banks
(23 February 2012 – Global) New research by one of Europe’s biggest banks; Societe Generale – suggests Australian banks have hiked interest rates to protect profit margins, not to cover higher funding costs as they insist.
But the Australian Bankers' Association (ABA) dismissed the study and said lenders may have to raise their rates again.
The study by Societe Generale shows nearly all funding costs for Australian lenders have fallen in the last six months.
And Societe Generale's head of strategy in Asia, Christian Carrillo, says the banks' claims about rising costs are dubious.
'Research suggests that effectively pretty much every source of funding that they use in terms of domestic deposits, short-term funding onshore, long-term funding onshore, has actually gone down,' Carrillo said.
'There has been some widening in spreads between offshore funding rates and the rates that they use to hedge against, but if you take into account the overall rate they pay to fund overseas, even that has actually come down slightly.'
Carrillo said publicly available data from the Reserve Bank of Australia (RBA) and the Australian Prudential Regulation Authority (APRA) shows the banks' deposit rates have effectively fallen by more than the Reserve Bank's cash rate since early 2011.
'At the end of the day, I have to say given a choice between an analyst in Tokyo for Societe Generale and the Reserve Bank here in Australia, which analyses these things in detail, I think the Reserve Bank is a more credible determinant of what our funding costs are,' Munchenberg said.
'Well the reality is if costs of money remain high, if it even gets higher, then the banks may well look to pass some of those higher costs on,' Munchenberg said.
'They may well look to absorb some of those costs; there's a balance there that needs to be struck.'
The study by Societe Generale shows nearly all funding costs for Australian lenders have fallen in the last six months.
And Societe Generale's head of strategy in Asia, Christian Carrillo, says the banks' claims about rising costs are dubious.
'Research suggests that effectively pretty much every source of funding that they use in terms of domestic deposits, short-term funding onshore, long-term funding onshore, has actually gone down,' Carrillo said.
'There has been some widening in spreads between offshore funding rates and the rates that they use to hedge against, but if you take into account the overall rate they pay to fund overseas, even that has actually come down slightly.'
Carrillo said publicly available data from the Reserve Bank of Australia (RBA) and the Australian Prudential Regulation Authority (APRA) shows the banks' deposit rates have effectively fallen by more than the Reserve Bank's cash rate since early 2011.
'At the end of the day, I have to say given a choice between an analyst in Tokyo for Societe Generale and the Reserve Bank here in Australia, which analyses these things in detail, I think the Reserve Bank is a more credible determinant of what our funding costs are,' Munchenberg said.
'Well the reality is if costs of money remain high, if it even gets higher, then the banks may well look to pass some of those higher costs on,' Munchenberg said.
'They may well look to absorb some of those costs; there's a balance there that needs to be struck.'
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