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ANZ Unrepentant on Credit Card Interest Rates
National Australia Bank Executive Director for Australia hit out at excessive media coverage of credit card interest rates, suggesting that unsecured credit card lending was merely a sideshow when compared to larger lending portfolios in residential and corporate lending.
Mr, Fahour said the economic benefit from NAB’s 100-basis point cut in mortgage and business lending rates, announced on Tuesday, would be far greater than the impact of a cut in credit card interest rates. Mr. Fahrour’s main argument centres on the fact that the nation’s credit card debt of about $40 billion was dwarfed by $1 trillion in outstanding home loans and $500 billion in business lending.
“Cards are a sideshow to divert attention from what really matters, and that’s mortgage and business lending rates. Credit cards, which account for 2 per cent of (bank) outstanding balances, don’t take up much of my time because I’m focused on the 98 per cent of balances that make a real difference to the economy.” Mr Fahour said
Of the Big Four Australian Lenders, only CBA and NAB passed on the full extent of the 100 basis point cut in official lending rates to their customers. Both ANZ and Westpac past most of the cut to their customers selectively, but certainly not all of it.
Politicians from across the board criticized the move to keep some part of the Reserve Bank of Australia’s official cut in lending rates from customers. Banks were accused of gouging not just from home owners but also from small business, farmers and credit card holders.
Treasurer Wayne Swan who has been highly critical of banks policy in passing on rate cuts to their customers said again, that banks had no good reason not to pass on cuts in full, even to their card holders.
ANZ immediately after the treasurers statement cut the rate on a number of its cards by 100 basis points. CBA did the same though its cut was only 40 basis points but applied to all its cards. Westpac’s head of retail and business banking, Peter Hanlon, said the bank was not embarrassed by its decision to only reduce variable home-lending rates by 80 basis points.
“Our funding costs are not going down; in fact, the weighted average of our funding costs is actually increasing,” he said. Margins on deposits, which account for half of our funding, are shrinking dramatically, which is a cost increase for us.”
Mr. Hanlon said Westpac, which cut its business lending rates by a similar amount on Tuesday, had taken a balanced approach to all its customers.
Funding volatility is what banks have been claiming for the last 3 months when they refuse to pass on the entire extent of any official rate cut to their customers.
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