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CBA Likely To Be First Major Lender To Raise Rates Independent Of RBA
An analyst with JP Morgan says he believes that at least one of the major Australian lenders is likely to raise its interest rates independently of any rate hike initiated by the Reserve Bank of Australia.
JP Morgan’s Scott Manning says he believes that comments passed by CBA last month, whilst reporting full year earnings suggest it will be at least one of the major lenders to raise rates out of step with the central bank.
Ralph Norris, CBA’s chief executive at the time complained that the lender was experiencing an erosion of margins, and could not guarantee that the bank would not raise rates unilaterally, and independent of the central bank, going so far to say that such a guarantee would be inappropriate.
“Our view is that if you look at the position of the presentation of margins through the Commonwealth Bank result, as well as some other disclosures around the importance of the broader economy, that would suggest they may be positioning for an out of cycle rate rise, but certainly the timing and quantum of that is yet to be determined.” Mr. Manning said
The other major lenders will be focusing on profitability according to Mr. Manning, which will prove more critical than even achieving lending growth in the year that follows in light of the fact that the cost of overseas funding has become prohibitive.
“You get the same amount of profitability uplift from modest re-pricing of your loan book as opposed to adding to your funding burden and going out to try and grow your loan book. So we don’t think Westpac and CBA will look to pull the growth lever in the domestic lending book. Managing the profitability is, I think, more likely.”
According to the latest report on the mortgage industry authored by both JP Morgan and Fujitsu Consulting Australia, Westpac and CBA have both maintained their dominance and market share in the home loan market for the half year ending July, after both lenders managed to increase their market share in the previous year.
CBA holds the largest share of mortgages with 26 per cent, Westpac accounts for 24.3 per cent, National Australia Bank Ltd has 13.1 per cent and ANZ Banking Group Ltd 12.9 per cent.
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