The managing director of a regional bank says there is no need for the group to raise capital despite its decision to follow the majors in hiking variable mortgage rates.
In an address to shareholders yesterday, Bendigo and Adelaide Bank’s Mike Hirst said recent capital raisings by the big four banks will ensure that the group is better able to compete, as they have repriced to more reasonable rates relative to the amount of capital being applied.
“And there is an important point to note here,” he said. “Even though the majors now have to hold more capital against mortgages, they still hold less than 65 per cent of the capital required by standardised banks like us, for those same assets.
“This fact is borne out if one uses S&P’s Risk Adjusted Capital Ratio analysis as a reference point. It clearly shows that we have a higher capital ratio than the major banks.
“Given everything we know today, there is no imperative for us to raise capital in the absence of a large acquisition or new changes to regulation.”
Mr Hirst said an incentive also remains for Bendigo and Adelaide Bank to improve its risk management capability through achieving advanced accreditation for credit and other risks.
“We must continue to provide outstanding customer experience and be highly efficient if we are to maintain our value proposition,” he added.
Mr Hirst’s comments come after Bendigo Bank announced last week that its owner-occupied variable home loan rates would increase by 12 basis points to 5.68 per cent, and its variable investor rates would rise by 15 basis points to 5.91 per cent.
Adelaide Bank also announced increases to its standard variable rates by seven basis points for its Smart Saver loans, by 12 basis points for its SmartFit and Smart Save investor loans, and by 17 basis points for its SmartFit investor loans.