by Peter Switzer
The action takes Westpac’s standard variable rate of interest to 6.76 per cent and bumps up the repayments on a $250,000 loan by $71 a month. But hell, lots of people have borrowings bigger than $250,000!
Get this straight, the Reserve Bank was taking risks with the economy by raising rates by 0.25 per cent three months in a row, or 0.75 per cent, but now Westpac customers look like they will be forking out 0.95 per cent for choosing to do business with them.
Why I think this is greedy is this bank’s profits have been rising and so has its share prices. But more importantly, its share of business has been surging.
Even though Westpac now pays higher rates of interest on foreign money than it did three years ago, and these borrowings are maturing and being re-borrowed at higher rates, the bank is cornering the banking business in this country.
Have a look at these figures. APRA has shown in the six months to October regional and foreign banks’ lending fell by $43 billion while the lending for the Big Four banks expanded by $53 billion. And 80 per cent of this went to Westpac and the CBA.
Follow the leader?
I am really hoping CBA, NAB and ANZ choose to leave Westpac to hang out to dry as the most opportunistic bank but history says the banks will play follow the leader.
And part of the reason is that it’s a share price thing. However, if Westpac is the only one to raise rates by an amount bigger than the cash rate rise, then there could be a negative publicity effect, which could hurt Westpac.
The ball is now in the court of the other banks and then Westpac’s customers. Historically, customers have not voted with their feet and that’s why banks have got away with blue murder.
In the top 20
Our Big Four banks are in the top 20 safest banks in the world and part of their success has been helped by federal government policy — stimulus, regulation, permitting mergers/takeovers, deposit guarantees, etc. — the Reserve Bank's actions and customer, as well as taxpayer, support.
We all took on the GFC collectively and we got away with it better than any other Western economy but the banks start slugging consumers and business, they could hurt the recovery.
I have always suspected that the word “bank” is ancient Babylonian for “bastard” and now I am sure.
Important information:This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.
The Switzer Super Report is a newsletter and website for self managed super funds. With exclusive commentary from Peter Switzer and Paul Rickard the Switzer Super Report will help you maximise your after tax investment returns and grow your DIY Super. Click here for a free trial or subscribe today.
Published on: Wednesday, December 02, 2009blog comments powered by Disqus