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ANZ Holds Mortgage Lending Rate Steady But Plans Staff Cuts
Mortgage holders who borrowed from Australian banking major ANZ can breathe a sigh of relief as the lender said it would hold its variable mortgage rate, however employees of the bank are not so lucky as they await news over a possible cut in jobs.
Last week, the Finance Sector Union confirmed that the lender has plans on axing hundreds of positions over the following six moths.
Leanne Shingles, communications officer for the Union, in an interview with news.com.au said that whilst ANZ had indicated there would be a number of job cuts, did not specify exactly how many, or where they would be cutting.
Some reports suggest as many as 1000 jobs would be cut at the lender.
Ms. Shingles said there was “no justification” for lenders cutting back on staff after posting record profits during the previous year.
“Whenever there is a need or a perceived need to cut costs the first thing that employers or industry do is cut jobs. There are other ways of cutting costs but it’s always workers that cop it first.” She said.
Leon Carter, president of the union, said the news was alarming, and is worried that many more jobs were at risk.
“Whilst they don’t have a final number, it’s clear that the number of jobs that will disappear will be in the hundreds, and we would say many hundreds, not just one or two,” he told AAP.
Mr. Carter warned that job cuts could occur at the other major lenders.
“Our thinking here is, the same cost pressures that are applying to ANZ also apply to the other three,” Mr Carter said.
“If the community and the government stand by and say that an acceptable response to that pressure is to slash jobs, then nobody wins, in fact everybody loses.”
Mr. Carter said it was not acceptable for profitable big businesses such as ANZ to cut employees at the first sign of cost pressures.
Major Australian Banks Likely To Cut Thousands Of Jobs
Australia’s biggest lenders are likely to cut thousands of jobs nationally as they seek to consolidate record earnings from last year.
Amidst a backdrop of soaring funding costs and slower growth in mortgage lending, ANZ, Westpac and CBA have devised plans to reduce expenses according to the Daily Telegraph.
CBA’s plan, with an intriguing code name “Project 35”, seeks to achieve a cost to income ratio at its retail banking division of 35 per cent by next year. According to banking analysts reducing the ratio to that level from its current rate of 38.7, will mean a loss of at least 600 jobs.
In August last year, CBA announced a record $6.4 billion in profits for the year. Rival NAB delivered a record $5.5 billion, whilst Westpac also produced a record $7 billion. ANZ also reported a record profit of $5.36 billion.
Gail Kelly, chief executive of Westpac in the past has said it is likely that employee numbers are probably going to “trend downwards” whilst admitting that the lender currently has no firm plans to cut staff, many analysts are of the opinion that Westpac will likely cut as many as 1600 jobs over the course of the year.
In 2008 rival ANZ restructured its banking unit, with the axing of 1000 jobs, with unnamed sources at the lender saying that a similar restructuring is likely, with the loss of a further 1000 jobs.
Leon Carter, the national secretary for the Finance Sector Union said it would not be acceptable for the major lenders to implement cost cutting programs designed to lower costs by firing staff.
“In our experience, whenever they mention the word `costs’ all they do is focus on the staff costs,” Mr. Carter said.
Mr. Carter says he intends to seek reassurances from the major lenders that no jobs will be cut.
According to banking analysts, wages represent as much as 60 per cent of the annual $32 billion in costs incurred by the major lenders every year. Currently Australia has experienced the slowest rate of growth in mortgage lending since the Second World War.
Hopes are running high that the central bank will engage in another round of easing in interest rates next month.
Major Lenders Experience Strong Growth In Retail Deposits
According to the assistant governor of the Australian central bank, the big four lenders in the country are no longer depending so heavily on wholesale funding markets for their needs, and have chosen instead to raise their finance using the more traditional method of retail deposits since.
Guy Debelle RBA Assistant Governor says that the major lenders have experienced an annual 11 per cent growth rate in their retail deposits, which is in excess of the growth in credit, which has remained flat at 5 per cent.
Mr. Debelle did warn the lenders not to rely exclusively on one source of funding and have a diversity of sources.
Mr. Debelle encourage the lenders to examine covered bond options for fund raising which Australia allowed in October to enable the banks to diversify their funding sources, and which have a major effect on the cost of funding.
Last week ANZ and Westpac both issued covered bonds in the US, raising $2.25 billion between them. The Federal government approved the issue of covered bonds in October, but capped the amount that could be raised using this method at 8 per cent of the total balance sheet, designed to ensure that banks maintain a diversified source of funding.
“A world where the only source of funding available is secured is just not sustainable,” Mr Debelle said.
CBA is expected to issue its maiden covered bond denominated in Euros, whilst rival NAB is also widely expected to follow suit shortly.
“Any pricing gain obtained from issuing covered bonds is likely to be offset to some extent by a demand from unsecured debt holders for more compensation in the future.
“So I see the role of covered bonds as primarily broadening the potential investor base rather than a means of reducing overall funding costs for banks,” Mr Debelle said.
One analyst offered a contrasting opinion, agreeing that whilst covered bonds will give Australia’s major lenders access to a whole new category of investor and expand their funding options, the ability to issue such bonds will not reduce their cost of funding.
The analyst said whilst it would however provide help to regional lenders, credit unions and building societies, by reducing their funding costs and providing diversity of funding.