Powered by MOMENTUM MEDIA
subscribe to our newsletter

Rate hike to ease ‘considerable pressure’ on margins: non-major

An Australian challenger bank says its decision to follow the majors in increasing mortgage rates will lift the ‘considerable pressure’ that capital requirements have had on margins.

Speaking to shareholders last week, Bendigo and Adelaide Bank chairman Robert Johansen explained the bank’s decision to increase variable mortgage rates. On 3 November the lender announced that it would raise its variable rates for both investors and owner-occupiers. 

“These increases followed the increases announced by the major banks which were justified as being necessary to support the increased levels of capital they are now required to hold,” Mr Johansen said.

“Our interest margin has been under considerable pressure for a long time as a result of the additional capital we were required to hold and these increases will assist in addressing this pressure.”

Mr Johansen highlighted that banking in Australia has enjoyed a long period of high returns on capital being generated for shareholders. However, he noted that the bank expects these rates of return to reduce over time.

Advertisement
Advertisement

“This seems inevitable in an economy where the risk free rate is at all-time low levels, and where around the world returns on capital employed in banks are much lower than in Australia,” he said. “We do need Australian banks to be, as the Murray report found, unquestionably strong to ensure ready access to international capital markets.”

The regional bank chairman conceded that Bendigo and Adelaide Bank is “a price taker in most parts of its business” and will not look to win business by offering the cheapest borrowing rate or the highest deposit rate.

“We do offer competitive rates and our ability to do that is strengthened by the reduction in the competitive disadvantages that non-major banks have suffered,” he said.

“We know that all our stakeholders – depositors, borrowers, employees and capital providers – need to earn fair and competitive returns.”

Bendigo and Adelaide Bank’s net interest margin contracted by four basis points over the 2015 financial year.

PROMOTED CONTENT


The lender’s recent rate rises of up to 17 basis points become effective on Friday.

Rate hike to ease ‘considerable pressure’ on margins: non-major
mortgagebusiness

Latest News

The RBA has studied the role of collateral in credit markets under stress, and has found that collateralised borrowing rose for some segment...

Auction volumes surged significantly over the December quarter across Australia, largely attributed to a “resurgence” in Melbourne, acco...

Loan conditions and collateral guarantees continue to be major stumbling blocks for small businesses looking to access financing, according ...

FROM THE WEB

Join a group of highly informed brokers.

Broker Pulse, a community-driven knowledge base of lender performance Reveal exactly which lenders are making life easiest for brokers and their clients by taking this monthly survey and joining a group of highly informed brokers who leverage these insights every month.

JOIN NOW
podcast

LATEST PODCAST: A new record in mortgage approvals

Do you expect to see strong uptake of the HomeBuilder scheme?

Website Notifications

Get notifications in real-time for staying up to date with content that matters to you.