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ANZ Chief Issues Stark Warning On Interest Rates
Mike Smith, chief executive of Australian banking major ANZ has issued a stark warning, suggesting that world’s bank will be forced to alter their business model in response to the “permanently” higher cost of banking.
Mr. Smith issued the warning whilst unveiling the latest set of ANZ results last week. ANZ’s third quarter underlying profits leapt 37 per cent.
Despite the great performance, Mr. Smith added a note of caution, saying that the costs of wholesale funding were now a permanent feature of banking a result of the global financial crisis.
“We have to face up to the fact that banks now have permanently higher costs of doing business, these include continuing pressures on wholesale funding costs and at the same time rates for deposits have never been higher compared to short-term wholesale rates. We also have to carry significant costs associated with the new international capital and liquidity requirements. The result is we simply to have think differently about our business. We need to change, we need to streamline our structures and do things in new and different ways.” he said.
Mr. Smith’s comments immediately started speculation that Australian lenders would raise their interest rates once the results of the election became clear.
ANZ’s warning followed similar comments from NAB and CBA, both of whom say that debt that have issued which is about to mature will have to be rolled over with more expensive current funding.
Analysts believe that lenders would increasingly try to shift the burden of higher funding costs on to their customers, by increasing mortgage and consumer lending rates, as well as increasing interest rates on business loans.
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ANZ Lifts Excessive Debt Burden From Pensioner
Australian banking major ANZ says it will eliminate $18,600 in debt racked up by pensioner on his credit card, after the lender began steadily increasing his credit limit over the last nine years.
Alec Stubbs, a 72 year old pensioner, who has lived on a pension for several years, receiving $485 a fortnight, had his credit card limit increased to $46,000 since 1991.
“It’s clear this customer’s credit limit should not have been increased to this extent, and due to the exceptional circumstances we have decided to clear this debt to ensure his family is not placed under any additional stress at this time,” ANZ spokesperson Stephen Ries told the Herald Sun.
Mr. Stubbs also holds a Commonwealth Bank credit card, whose limit has steadily climbed from $3,500 in 2003, to $25,000 in 2006.
CBA said through a spokesperson that the lender had ceased offering unsolicited limit upgrades to customers who live on welfare payments since 2007, with those type of customers who request a higher credit limit, required now to pass a financial test.
Mr. Stubbs wife only recently learned that her husband carried $36,000 in credit card debt, when opening his mail whilst Mr. Stubbs was in hospital receiving treatment for cancer.
“I nearly died,” she said. “How in the hell could they think a pensioner could really afford this? We are not secret millionaires. Even if he asked for this, don’t they check into people’s circumstances before they throw money around?”
Mr. Stubbs and his wife Pauline have maintained separate bank accounts throughout their 53 year marriage, which kept Mrs. Stubs being in the dark regarding the minimum monthly payments, which were often hundreds of dollars a month.
In August the federal government promised new measures that would mean credit card companies would not be allowed to increase credit limits without agreement from customers.
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NAB Endorses Credit Card Law Reform
Australian banking major, National Australia Bank, once again differentiating itself from its big four rivals over exception fees, says that credit card law reform would benefit consumers.
Lisa Gray, who runs the lenders personal banking division says that NAB has already implemented changes to its credit card portfolio, which are consistent with the federal government’s proposed changes to credit card laws.
Ms. Gray made her comments in response to the announcement made by current Prime Minister Julia Gillard, that a re-elected Labour government would seek to ban lenders from charging customers who exceed their credit card limit.
Under existing regulations, customers who exceed their credit limit can be hit with a $25 fee.
Labour is seeking to change this, so that lenders would be regulated in a way that would prevent them from allowing customers to over draw on their credit card without the prior explicit consent of the customer.
The government also proposes to ban unsolicited offers to extend credit limits. whilst NAB has already has already done away with its over-limit fee on credit cards and cut its late payment fee, Ms Gray said in a statement.
NAB said nothing however about whether it would also end the practice of unsolicited credit limit extensions.
“While further consultation would be needed, some sensible credit card law reforms would benefit consumers and banks offering the fairest and best value,” NAB said.
NAB’s position is at odds with its other big four rivals, with a banking lobby group suggesting that further regulation was unnecessary, since the vast majority of Australians used their credit cards responsibly.
In 2009 NAB distanced itself from its rivals by cutting exception fees, and undercut mortgage interest rates, as it sought to improve its market share, and build goodwill with its customers.
In 2009 NAB sought to differentiate itself from its rivals by cutting exception fees and undercutting interest rates on mortgages to improve its market share.
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Half Of All Australian Households Worry About Interest Rate Rises
Nearly half of all Australian households say they worry over the threat of looming interest rate rises, but only 20 per cent say they expect to have to carry increased debt levels in the next few months.
According to the results of the latest survey by Dun & Bradstreet, which polled consumer expectations across 1,205 individuals in Australia, nearly half or 49 per cent said they believed that interest rates would rise further, and the hikes would dent their finances.
The credit reporting agency completed the survey in June, one month after the Reserve Bank of Australia (RBA) lifted the official cash rate to 4.5 per cent, its sixth rise in eight months.
Households that include dependent children will feel more financial stress, with 55 per cent of respondents who have children, saying that the impact of rate rises would negatively affect their finances, compared with 43 per cent of households that do not have children.
The survey suggested that the stress from rate hikes would only translate into additional debt for just 20 per cent of households.
According to the survey, which examined future spending in September, nearly half of all individuals polled aged under 50 planned to use credit to pay for expenses over the period, whilst only a quarter of all Australians aged over 50 said they intended to do the same.
The RBA’s credit and charge card statistics for May 2010 showed the average credit card balance reached $3,248 in May, an increase of five per cent in 12 months.
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Australians Spend More On Charge And Credit Cards In May
Spending by Australians on charge and credit cards including advances increased in May according to the Reserve Bank of Australia, who said $19.631 billion was spent during the month.
The amount spent in May on charge and credit cards rose from $17.960 billion in April, whilst the number of transactions was slight higher to, at 131.035 million in May, up from 123.289 million in April.
The figures have yet to be adjusted for seasonality.
The value of transactions for the 12 months between May 2009 and May 2010 rose 10.5 per cent, which is far higher than the average growth rate of the previous five years of 6.8 per cent.
Total credit and charge card balances outstanding rose to $47.430 billion in May from $47.126 billion in April.
Compare with a year earlier, the total value of charge and credit card balances outstanding increased by 7.1 per cent, and represents a smaller rise than the average annual growth rate of 10.2 per cent in the previous half decade.
The average balance held by Australians on charge and credit cards rose by 5 per cent to $3,248 in May, for $3,092 a year earlier, and that increase was largely with the average annual growth rate of 4.9 per cent during the five years to May 2009.
Credit and charge card repayments rose to $19.833 billion in May from $18.806 billion in April.
Repayments improved with the annual rate at 10.2 per cent, compared with an average of 7.3 per cent in the preceding half decade.
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Australian Households Saving More
Australians are saving more with the level of household savings increasing during the June quarter. However credit card have usurped the mortgage as the main type of debt being carried by Australians for the first time in nearly four years according to the results of a survey.
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Australian Banks Collect Billions In Fees
Australian banks charged their customers a collective $12.7 billion in fees last financial year, which represents an increase of nine per cent from the previous year, according to new data from the Reserve Bank of Australia.
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Citibank Emirates Card Very Compelling Balance Transfer And Frequent Flyer Program
Global banking giant Citibank is currently running an extremely compelling offer on their Citibank Emirates card.
The Citbank card has a great deal on balance transfers, with a rough annual interest rate of 2.9 per cent, and perhaps the best feature is that card holders earn 3 Skyward Miles, which is the Emirates Airlines frequent flyer program for every $1 spent (normally is just 1.5 miles per dollar spent).
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Half A Million Claimants Expected In Largest Ever Class Action Law Suit Against Australian Banks
Nearly 40,000 bank customers have signed up to what looks like Australia’s largest ever class action law suit, with the initiator of the legal action saying it believes it will register as many as half a million claimants in its law suit seeking reimbursement of “exorbitant” exception fees.
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Five Tips For Borrowing Using A Personal Loan
Personal loans can be amongst the cheapest way to borrow, but we can’t help but stress how important what the reason you are borrowing the money for.
If you are looking to finance a new flat screen television or go on holiday, or any other luxury, a personal loan is not your best option. Fortunately the financial crisis has made most people more aware of their finances and changed the way they think about borrowing.
More people are saving to buy life’s luxuries, and we are far less reliant on loans and credit for our spending.
If you need the money for something really important, then borrowing through a personal loan, is far cheaper than through the use of a credit card.
Here are five tips for personal loans.
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