NAB, Commonwealth & St George join in cutting rates
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The National Australia Bank (NAB), Commonwealth Bank and St George joined Westpac and ANZ today by announcing rate cuts to their standard variable rates.
All major banks have now passed on the full 100 basis point cut to consumers.
NAB and Commonwealth have slashed their rates to 5.74% while St George have lowered their rate to 5.89%, the rate changes are effective from 13 February.
NAB and Commonwealth were at pains to point out that future interest rate cuts by the RBA may not be passed on in full to consumers as the demands and pressures on bank margins continue.
Westpac and ANZ first to cut
Westpac became the first of the banks to cut rates after the RBA announced a cut of 100 basis points to reduce the cash rate to 3.25%.
ANZ followed shortly after announcing a full cut of 100 basis points just like Westpac.
The ANZ and Westpac have lowered their rates to 5.91%. The ANZ announced the cut will take effect from 13 February and further cuts will be passed on subject to funding costs.
As at the time of posting the Commonwealth Bank and NAB have not announced a rate cut..
Commonwealth Bank snatch Wizard from NAB
The Commonwealth Bank have masterfully pulled off an amazing last minute deal to purchase Wizard from under the nose of NAB.
The National Australia Bank had all but sealed the deal when the Commonwealth Bank becked Aussie Home Loans sealed the deal. The Commonwealth will pay $26 for Wizard, a far cry from the near $500 million paid by exiting owner GE Money only 4 years ago.
The deal secures Commonwealth Bank the $2 billion worth of prime residential mortgage’s and offers the potential for another $2 billion worth should they exercise the option.
Aussie Home Loans will buy Wizard’s brand and existing retail distribution network.
GE Money have announced plans to exit the Australian and New Zealand lending market to focus on their core business.
Australian Banks interest rate margins expand
With RBA interest rates now at 4.25%, the same rate that was in place in 2002 it is easier to make an assessment of the margins being charged by the Australian banks.
In 2002 the average standard variable interest rate offered by the big four banks was 6.07%. The current average standard variable rate is 6.82%, an increase of 0.75% from the levels of 2002.
The banks will put this down to the global financial crisis and while funding costs have indeed increased it also reflects an amount of margin creep.
It is estimated that about 90% of all lending is currently being done through the big banks while has heavily impacted the smaller lenders and the lack of funding options has rendered the smaller lenders to be unable to compete in the current environment.
Hence these small lenders have had to increase rates as they are unable to source funds as cheaply as the big banks. This has impaired the local lending market and once again given the banks the upper hand once again against the consumer.
Big Australian banks create $2 billion car fund
The big Australian banks Commonwealth Bank, ANZ Bank, Westpac & the National Australia Bank will setup a special fund to provide financial support to the local car industry.
The domestic car financing market has been hit hard recently by the withdrawal of major car financiers including GE Money which has forced a number of businesses to consider bankruptcy.
The announcement by the treasurer Wayne Swan today revealed the $2 billion trust will provide liquidity to car dealers through securing eligible loans. The fund will commence on 1 January 2009 and will be secured by the government for 12 months.
St George cut variable rates by 0.85%
St George Bank today announced plans to cut their standard variable home loan by 0.85% to 6.89%, the rate change takes effect from 8 December 2008.
St George became the latest bank to fail to pass on the full 100 basis point cut made by the Reserve Bank yesterday. Only NAB and the Commonwealth Bank passed on the full rate cut, Westpac and ANZ passed on 0.80% and 0.83% respectively.
ANZ & Westpac drop rates by less than RBA cut
Both ANZ and Westpac have reduced their standard variable rate to 6.91% after ANZ announced a reduction of 0.83% and Westpac 0.80% as the RBA cut rates today by 1%.
The ANZ rate cut takes effect from 12 December.
Both banks failed to match the full cut by the Commonwealth Bank and National Australia Bank who announced earlier today a cut to their standard variable rates to 6.74%.
NAB cut fixed home loan rates
NAB announced plans to cut their one year fixed interest home loan by 1% to 5.59%. The change takes effect on 1 December 2008.
The cut lowers the one year fixed introductory rate to 4.99% and the two year fixed home loan rate that also had a 1% cut to 5.59%.
The interest rate reduction from National Australia Banks comes ahead of the expected 1% cut from the Reserve Bank of Australia next week.
Commonwealth Bank hit 3.5 year lows
The Commonwealth Bank today hit a three and a half year share price low over broker downgrades and concerns about debt provisioning after being caught up in a number of corporate collapses.
Several major brokers have downgraded the Commonwealth Bank in recents days as concern has grown that that they are not as safe as previously expected.
Previously the ANZ and National Australia Bank were considered high risk while Westpac and the Commonwealth Bank were considered lower risk. But in recent days the National Australia Bank has undertaken a $3 billion capital raising and funds have started to flow from the Commonwealth Bank into NAB.
The Commonwealth Bank is also burdened by having to raise in the vicinity of $14 billion to replace BankWest funding. The Commonwealth will be able to secure the funding but in the current climate this could be at a considerable premium.
In another negative the Commonwealth Bank is also trailing it’s rivals with a tier 1 capital ratio of 7.6% compared to the recently increased National Australia Bank at 8%.
NAB seek $3 billion capital raising
The National Australia Bank has cashed in on the market to seek up to $3 billion in capital to shore up it’s capital requirements and balance sheet.
The capital raising is at a share price of $20, which is a discount to the current share price.
It has been reported that demand from institutions has been strong and that the capital will take away the need to underwrite their dividend reinvestment plan for 2008.
The NAB will offer shares to retail clients at the institutional price up to a package of $10,000.
The additional capital raised will increase the NAB Tier 1 ratio to 8% which would be very well received by the market.