Bumper reporting season raises questions
(3 June 2010 – Australia) Australia’s largest banks have drawn unwanted attention after posting bumper results in the last round of reporting, leading to questions about abusing the global financial crisis to hike costs above their own expenses.
The Herald newspaper conducted an analysis of Reserve Bank figures and was able to reveal how much extra individual borrowers were paying after the financial crisis struck in 2007.
Borrowers with a three year fixed-rate home loan of A$300,000 were contributing A$75 to A$125 in extra bank profits on a monthly basis, the Herald reported.
In the most recent round of reporting for the first half of 2010, the big four announced profits before tax of A$14 billion, a new record even compared with pre-crisis results.
Christopher Zinn, spokesperson for Choice, a consumer advocacy group, said that it is well documented that the large banks have profited in one way or another from the financial downturn, including taking market share from smaller competitors, and increasing their lending profit margins.
The analysis conducted by the Herald was based on the Reserve Bank's most recent quarterly bulletin which showed that the big four banks had faced a 1.3 to 1.4 percent increase in their funding costs since the crisis, however fixed-rate mortgage borrowers on three-to-five year terms were are playing 1.7 to 1.8 percent above a benchmark rate, personal borrowers are paying 3.4 percent more and business borrowers are paying up to 2 percent more.
The analysis also revealed that the increases in costs faced by banks was more than offset by interest rate increases for their customers.
On the flip-side, the analysis provided by the Herald also showed that a A$300,000 variable interest rate home loan is subsidised by the banks to the sun of A$50 to A$75 a month.
The result occurs because the Reserve Bank's estimate of a 1.1 per ent increase in variable rate mortgage costs above a benchmark rate has lagged the increases in the banks' costs.
Borrowers with a three year fixed-rate home loan of A$300,000 were contributing A$75 to A$125 in extra bank profits on a monthly basis, the Herald reported.
In the most recent round of reporting for the first half of 2010, the big four announced profits before tax of A$14 billion, a new record even compared with pre-crisis results.
Christopher Zinn, spokesperson for Choice, a consumer advocacy group, said that it is well documented that the large banks have profited in one way or another from the financial downturn, including taking market share from smaller competitors, and increasing their lending profit margins.
The analysis conducted by the Herald was based on the Reserve Bank's most recent quarterly bulletin which showed that the big four banks had faced a 1.3 to 1.4 percent increase in their funding costs since the crisis, however fixed-rate mortgage borrowers on three-to-five year terms were are playing 1.7 to 1.8 percent above a benchmark rate, personal borrowers are paying 3.4 percent more and business borrowers are paying up to 2 percent more.
The analysis also revealed that the increases in costs faced by banks was more than offset by interest rate increases for their customers.
On the flip-side, the analysis provided by the Herald also showed that a A$300,000 variable interest rate home loan is subsidised by the banks to the sun of A$50 to A$75 a month.
The result occurs because the Reserve Bank's estimate of a 1.1 per ent increase in variable rate mortgage costs above a benchmark rate has lagged the increases in the banks' costs.
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