Banks chase funds
(30 August 2010 – Australia) Over the next year Australia’s major banks will reportedly need to borrow up to A$140 billion from local and offshore markets to help fund their lending books.
As demand for credit continues to outstrip growth in deposits, Australia’s banks will come up against competition from other banks and governments from around the world that are also seeking to raise trillions of dollars from the bond markets.
The nation’s banks have already made a substantial head start on raising funds for 2011.
Global demand for funds, particularly the longer-term debt which is sought by banks, will keep banks under pressure to raise interest rates until at least the middle of next year.
The Age reported that the Commonwealth Bank is looking to raise A$50 billion over 2011, Westpac A$40 billion, and ANZ and NAB planning to raise somewhere between the A$20-A$25 billion mark.
Australia’s banks have acknowledged that their reliance on wholesale funds, which generate a little under half their funding needs, is a long-term structural issue for Australia.
Commonwealth Bank chief financial officer, David Craig, said that credit growth in this country is greater than our deposit growth, because we're growing in a strong economy.
That means our funding task is greater than the domestic capacity to fund us, Mr Craig added.
Banks have to fund offshore and of course we know that our global funding costs are increasing significantly and they're going to continue to increase, Mr Craig highlighted.
Competition for international long-term debt is tough and that will keep rates internationally high, Mr Craig warned.
The nation’s banks have already made a substantial head start on raising funds for 2011.
Global demand for funds, particularly the longer-term debt which is sought by banks, will keep banks under pressure to raise interest rates until at least the middle of next year.
The Age reported that the Commonwealth Bank is looking to raise A$50 billion over 2011, Westpac A$40 billion, and ANZ and NAB planning to raise somewhere between the A$20-A$25 billion mark.
Australia’s banks have acknowledged that their reliance on wholesale funds, which generate a little under half their funding needs, is a long-term structural issue for Australia.
Commonwealth Bank chief financial officer, David Craig, said that credit growth in this country is greater than our deposit growth, because we're growing in a strong economy.
That means our funding task is greater than the domestic capacity to fund us, Mr Craig added.
Banks have to fund offshore and of course we know that our global funding costs are increasing significantly and they're going to continue to increase, Mr Craig highlighted.
Competition for international long-term debt is tough and that will keep rates internationally high, Mr Craig warned.
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