ANZ leaves rates on hold while 1,000 jobs set to go.
Just as house prices have outstripped wages in the past decade or two, the value of mortgages have outstripped domestic funding sources. This has seen Australian banks supplement lending from international credit markets. CLSA’s Brian Johnson told the Weekend AFR, “On a global basis the cost of funding for banks has gone up remarkably and continues to incrementally rise.”
The other problem facing banks is the premium they are paying domestic depositors. With international credit markets volatile and expensive since the GFC, banks have aggressively competed for domestic deposits and according to the ANZ now pay about 100 basis points more for deposits over the RBA’s official cash rate.
ANZ has broken away from the RBA and will now set home loan lending rates independently on the 2nd Friday of each month. Yesterday, it announced rates are on hold for this month with the standard variable home loan rate standing at 7.32 percent.
The rate decision comes on the same day of news up to 1,000 jobs could be slashed from the ANZ as mortgage lending slows. UBS analysts indicate mortgage growth in Australia is now at levels not seen since World War II. Australian households have effectively hit the debt ceiling. ANZ’s Australian CEO, Phil Chronican said “Obviously we need to get our cost growth to where our revenue is headed and revenues are under a lot of pressure.”
» As cost pressures grow, ANZ cuts jobs to protect profits – The Australian, 14th January 2012.
» BANKS PLAN STAFF PURGE: Thousands of jobs to be lost – The Daily Telegraph, 10th January 2012.
January 14th, 2012 at 3:09 pm
“Just as house prices have outstripped wages in the past decade or two, the value of mortgages have outstripped domestic deposits held with banks. This has seen Australian banks supplement lending from international credit markets.”
This causality is incorrect. The banks do not collect deposits then lend the deposits. The banks create credit, which creates deposits, and some of these deposits get spent OS so the banks need to borrow back the deposits that get spent OS.
January 15th, 2012 at 8:41 am
Peter, is it fair to say that with our CAD, that the banks have to borrrow overseas because thats where the deposits end up?
its just a macro balancing act I think..
January 15th, 2012 at 9:43 am
This is another bloody debacle of government/banking system:
- The banks get bailed out with taxpayer subsidies by way of government guarantees on deposits and borrowings, covered bonds, etc. Without these subsidies, the banks would most likely have collapsed and other more responsible entities would have commenced banking operations and would be lending prudently by now. “Too big to fail” is another word for systemic corruption within the club (politicians and bankers alike)
- The CEOs of the banks pay themselves millions to do nothing but lie to the public and act that their positions require intelligence – banking licences are simply a licence to print money (no intelligence required)
- Kevin Rudd/Wayne Swan/Julia Gillard throw a sucker punch into the face of battlers (for the sake of the banking system) luring the battlers into more debt with first home owner boosts
- The same battlers now have their jobs on the line at ANZ because the CEO wants to go to his shareholders (mostly the banking elite) to pay out more record breaking profits. Profit is not kept in the banking system, it’s mostly paid out every year in the form of dividends, that’s why they need continual bailouts, their balance sheets are weak (not strong as claimed)
- The response of Bill Shorten is that the job losses are “unfortunate”. It sure is unfortunate that Labor literally gave the money to the banks with absolutely nothing given in return such as interest rate margin limits, employment stability for the thousands of mortgaged battlers who work for these massive organisations, the flowing of credit to the productive parts of the economy such as small business, guarantees to lend prudently, share ownership, the list goes on. A complete and utter Labor fail perpetuated by the likes of Bill Shorten who label it “unfortunate”. Let’s take Bill Shorten’s income away and see how “unfortunate” it is for his family.
- Bank decisions to make employees redundant is short term and will assist in the collapse of the Aussie Ponzi housing bubble. The irony is the banking system/bank CEOs will most likely get the bailout while the punters will get higher taxes, public spending cuts and years of bankruptcy – look at Europe!