‘No major relief’ in sight as pressures persist: Bank CEO

Following the release of MyState’s full-year financial results, CEO Melos Sulicich told the media that he does not expect funding cost relief anytime soon, with bank bill swap (BBSW) rates remaining elevated.

MyState Bank and several other lenders — including Macquarie Bank, AMP, ING, Bank of Queensland, Heritage Bank and Auswide Bank — have announced increases to their mortgage rates over the past few months, with most attributing their decision to a rise in wholesale funding costs.

“BBSW spreads increased substantially from November last year, and particularly February through until May,” Mr Sulicich said.

“They’re still sitting at pretty high levels and they’re quite volatile at the moment. That’s obviously impacting funding costs and you’ll see across the industry that most smaller players have done some loan book repricing as a consequence of that.

“At the same time, the lending market is still very competitive, and so back book/front book variances are more pronounced than they have been for quite some time.

“I expect both of those things to continue. I don’t see any major relief coming through in BBSW or funding costs, so that impacts our securitisation funds and any other wholesale funding that we’ve got.”

The MyState CEO also claimed that he expects the net interest margins of lenders to continue falling, with several banks, including Commonwealth Bank, reporting declines in their full-year results.

Mr Sulicich added that MyState plans to offset such costs by increasing deposit funding and home loan originations through an enhanced digital platform.

“We’ve also got very fierce competition for new lending, so my view is that net interest margins are going to continue to fall, and so it’s more critical for banks like us to be able to deal with and originate customers online and in real time,” the CEO said.

“[MyState] will launch some new deposit accounts in the forthcoming period, with an aim to attract more retail deposits.

“We will also roll out the ability to originate mortgages online from about September, October.”

 [Related: Bank CEO laments ‘unfair’ banking landscape]