Westpac Executives Come Out Swinging In Defense Of Rate Increase

Post by Sharat on December 8, 2009 · Under Australian Economy, Business News, Company News, banking, home loans, interest rates, mortgages · Comment 

Senior executives of Big Four bank Westpac, including chief executive Gail Kelly have strongly defended the lenders decision to raise its interest rate out of synch with the increase in official interest rate, arguing that Westpac is not the “Jetstar of banking”.

After a week of intense criticism from the Federal Government including Treasurer Wayne Swan, the Westpac chief finally broke her silence on Monday and moved to defend the decision to raise Westpac’s standard variable mortgage rate by 45 basis points, 20 basis points in excess of the hike undertaken by the Reserve Bank of Australia.

Mrs. Kelly, responding to criticism whilst refusing to be drawn into a war of words with the Treasurer, said that politicians completely understand the new environment of rising average bank funding costs.

Mrs. Kelly added that whilst the Federal Government had an intense desire to see the banks maintain their strength and remain open for business during the financial crisis, Westpac had responded by growing its home loan book by $30 billion in 2009.

“I think the politicians really do understand this new environment. They can see the evidence before them that funding costs have gone up materially.” Mrs. Kelly said.

Westpac’s head of retail and business banking was the executive who went on the offensive on Monday however, saying: “We don’t have a price-leading strategy; we’re not the Jetstar of banking”

Mr. Hanlon says that 70 per cent of mortgage borrowers choose their lender based on service, whilst only 30 per cent choose based on price, and cited that as the reason behind Westpac being able to increase the size of its mortgage portfolio by double the rate of growth in the wider banking sector, in spite of charging an average of 17 basis points in excess of rivals this year.

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