UBS analysts say rates should rise independently
(8 September 2010 – Australia) Analysts at UBS have said that Australia’s banks should raise rates independently of the Reserve Bank before the end of the year.
According to the analysts raising rates would soften the impact of rising funding costs, which the bank’s claim hurts profitability.
UBS’s head of investment strategy and consulting in Australia, George Boubouras said that the banks potentially should look at increasing mortgage rates outside the RBA between now and Christmas, saying it would be the prudent thing to do from a shareholders perspective.
Mr Boubouras said that Australia’s banks needed to increase rates on mortgages beyond the central bank's pace to maintain margin expansion.
Last time the banks moved independently of the Reserve Bank they came under intense public and media scrutiny, as well as from the nation’s politicians.
Last month the Commonwealth Bank of Australia said that the bank’s funding costs had risen 1.22 percentage points.
The bank attributed the rise to higher deposit rates and funding costs.
According to the RBA, domestic banks rely on offshore and local bond sales for 28 percent and 19 percent, respectively, of their total funding.
UBS’s head of investment strategy and consulting in Australia, George Boubouras said that the banks potentially should look at increasing mortgage rates outside the RBA between now and Christmas, saying it would be the prudent thing to do from a shareholders perspective.
Mr Boubouras said that Australia’s banks needed to increase rates on mortgages beyond the central bank's pace to maintain margin expansion.
Last time the banks moved independently of the Reserve Bank they came under intense public and media scrutiny, as well as from the nation’s politicians.
Last month the Commonwealth Bank of Australia said that the bank’s funding costs had risen 1.22 percentage points.
The bank attributed the rise to higher deposit rates and funding costs.
According to the RBA, domestic banks rely on offshore and local bond sales for 28 percent and 19 percent, respectively, of their total funding.
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