CBA Chief Says Banks Need To Balance Need To Make Money Along With Customer Needs

Post by NeilMc on February 11, 2010 · Under Australian Economy, Business News, Company News, banking, home loans, interest rates, mortgages · Comment 

Ralph Norris, chief executive of Australia’s largest mortgage lender CBA, says that when a bank considers an increase in lending rates, it must first balance the requirement to make money along with customer needs.

“There’s nothing worse than a bank that can’t make money,” Mr. Norris said, after the lender announced a 54 per cent surge in first half cash profit to $2.94 billion.

CBA’s profits growth was fuelled by the lenders net interest margin, which has been raised to its highest level in three years.

“We’ve got to balance the needs of shareholders with those of our customers,” Mr Norris said.

The lender exceeded the official interest rate increase in December, raising its standard variable home loan rate by 37 basis points, after the central bank tightened interest rates by 25 basis points.

Mr. Norris claims that the additional increase in interest rates enacted by itself and rivals helped prevent the central bank from having to lift rates again in February.

Mr. Norris added that mortgage borrowers had faced lower rate increases relative to other types of borrowers, in particular businesses which have had to endure higher interest rate increase relative to the RBA rate hikes.

“Home owners have been advantaged there’s been an increase in the margins of the business book.”

Mr. Norris says he believes that interest rates were likely to continue increasing, because competition for funding was high, and keeping wholesale funding costs at levels seen prior to the onset of the financial crisis, whilst retail deposit competition amongst banks were pushing up deposit rates.

“Our forecast is for higher cost of funding,” he said.

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