CBA raises variable rates by 0.45%

[ermen]

I find this ironic.

Most people here have no qualms about pushing on rent increases to tenants but complain (fairly so) when banks pass on increased rates. Looking at it from the point of the tenant, the landlord is already making 20%+ equity IRRs so they should be able to afford to absorb increased rates!

Not sure if many people here dropped their rents when rates plumetted 2 yrs ago?

Lastly, the headline profit number of CBA is irrelevant - what's more important is their ROE (which I have not looked into)

 

[Sunfish]

Not sure if many people here dropped their rents when rates plumetted 2 yrs ago?

I was wondering if they would drop their rents if they benefited by a tax windfall?

 

[pickle pickle]

May I make a clear and unequivocal statement here?

"Australia" doesn't owe mortgage holders a damn thing!!

They are simply one side of the saver/borrower interaction. As a retiree I understand that savers have rights too.

But the CBA is only increasing the interest rates for savers in line with the reserve bank. That argument would have some merit, if they increased the savings interest rates by the same as they have lifted the mortgage rate.

Deposit holders do not gain any real advantage by CBA moves. Arguably in the short term share holders will gain, however in the long term, I can see these moves biting the banks in the backside with increase government regulation.

 

[gronk007]

2008a 18.5% Roe
2009a 14.9% Roe
2010a 16.9% Roe

 

[Intrinsic_Value]

I find this ironic.

Most people here have no qualms about pushing on rent increases to tenants but complain (fairly so) when banks pass on increased rates. Looking at it from the point of the tenant, the landlord is already making 20%+ equity IRRs so they should be able to afford to absorb increased rates!

Not sure if many people here dropped their rents when rates plumetted 2 yrs ago?

Lastly, the headline profit number of CBA is irrelevant - what's more important is their ROE (which I have not looked into)

haha spot on mate.
When it comes to rent increases, all the messages just focus on
"well if they didnt buy all those dodahs, they would be able to buy a house, so stop whinging"

 

[Intrinsic_Value]

2008a 18.5% Roe
2009a 14.9% Roe
2010a 16.9% Roe

so therefore the banks are still behind their 2008 level, lots more catching up to do there

 

[Aaron Sice]

a rising tide floats all boats.

something for CBA to remember.

 

[sash]

I think they call those Tsunamis.

a rising tide floats all boats.

something for CBA to remember.

 

[Intrinsic_Value]

a rising tide floats all boats.

something for CBA to remember.

exactly, another reason why i understand the strategic move of the banks.
better to write less loans with better margins in the system, than write loans of loans with skinny margins.

 

[gfreer]

Bank Profiteering

Big banks are a protected species with guarantees in place (what about paying back taxpayers now that the danger has passed). Cumulative bank profits for Big Four was $2b in 2000. Ten years later and they are each hitting this number each quarter! Bring on the competition from non-bank lenders like we had in the early 90's. CBA chief may be guilty of collusive practices it has been claimed...by recently signaling to other CEO's his intention to raise rates beyond any RBA cash rate hikes.

 

[Intrinsic_Value]

Big banks are a protected species with guarantees in place (what about paying back taxpayers now that the danger has passed). Cumulative bank profits for Big Four was $2b in 2000. Ten years later and they are each hitting this number each quarter! Bring on the competition from non-bank lenders like we had in the early 90's. CBA chief may be guilty of collusive practices it has been claimed...by recently signaling to other CEO's his intention to raise rates beyond any RBA cash rate hikes.

mmmm ok let me see, didnt the banks have to pay for the right to use the govenment guarantee??????

guarantees do not relate to the loans, only to deposit guarantees, shareholder capital can still be wiped out.

10 years ago what was the price of property relative to bank profits back then? can anyone see a similarity??????

Of course CBA is probably engaging in collusive practices (its called collective game theory), but prove it.

 

[pickle pickle]

Volume also effects profit. I doubt the CBA will loose too many customers (unless the NAB increases only by .25% and start really pushing that point), however they are nearly at the brink of the public and banks may face threats to there margins by legislation. Maybe a super profit tax?

It's like the CBA is daring the government to do something. Well if they push too hard, they just might. In the long run most will probably be worse off (especially shareholders) if the government does act, but it's nearly getting to the stage where the government is going to have to be seen as doing something.

If nothing happens after this increase beyond the RBA rate, if the banks increase by more than the RBA rate next time, I'll be very suprised if the government doesn't act. It's starting to look like a game of chicken.

 

[redwing]

But what can he do? Three fifths of five eigths of bugger-all!

He can bleate and berate and dat's bout it

WBC last time, CBA this time; one makes a move and cops some grief then the others follow suit when the anger subsides... next time it maybe one of the other majors who takes the big step first

 

[MikeF]

I really wonder how many CBA borrowers/home owners this will now tip over the edge and whether the bankers have thought this one through?

 

[Intrinsic_Value]

I really wonder how many CBA borrowers/home owners this will now tip over the edge and whether the bankers have thought this one through?

if this single move tips people over the edge then better it happens now, than later.
If borrowing conditions are really that tight, then its a good thing that peoples cards are forced at this stage rather than later on.

 

[Intrinsic_Value]

they are nearly at the brink of the public and banks may face threats to there margins by legislation. Maybe a super profit tax?

It's like the CBA is daring the government to do something. Well if they push too hard, they just might. In the long run most will probably be worse off (especially shareholders) if the government does act, but it's nearly getting to the stage where the government is going to have to be seen as doing something.

If nothing happens after this increase beyond the RBA rate, if the banks increase by more than the RBA rate next time, I'll be very suprised if the government doesn't act. It's starting to look like a game of chicken.

Regardling your last paragraph, i am not sure that the banks will continue to increase much above RBA rates, they needed this additional rate increase. If new borrowing costs continue to stabalise for the banks, they might just hold to roughly (within a few basis points) RBA future rate increases.

As you said its a game of chicken, they have a lot to loose if they just continuously increase above RBA rates.

In regards to your other paragraphs, yes shareholders stand to loose, but so do borrowers (through restricted supply) and so does the government (through seriously p***sed off voters).

Again as you stated its one big game of cat and mouse.


For the record, i very much question that future returns on bank shares will look anything like their last 15 years performance.

 

[pickle pickle]

I really wonder how many CBA borrowers/home owners this will now tip over the edge and whether the bankers have thought this one through?

If you mean how many people will be forced to sell because of CBA decision. Well, hopefully not too many, however if we are at the point where CBA's decision will force many people to sell, that would of happened with the next interest rate rise.

If you mean, how many people will switch lenders, then I'll say not too many, unless the NAB only rise at .25% and start marketing that point (they also only raised .25% the last time banks increased by more than the RBA).

The bigger threat to the CBA and all banks by there moves is the government. They better have a plan to stop higher government regulation.

 

[Loose Change]

Some insight into how the banks grew their profits after GFC.

http://inside.org.au/reining-in-the-banks/

ugh home loan interest rates are below pre-crisis levels, the mark-up over the Reserve Bank cash rate, which was 1.80 per cent for decades, jumped to 2.90 per cent – raising the standard variable mortgage rate to as high as 7.40 per cent – in September 2010.

Let’s compare this with Canada, which was also relatively unaffected by the crisis. There, the mark-up for mortgage loans is 1.95 per cent. Canadian banks borrow from the same international market as Australian banks, so why do Australian banks need a mark-up of 2.90 per cent?

Banks took advantage of their own customers by reducing deposit rates, but when it came to reducing their wholesale funding costs the major banks dipped into the pockets of all Australians. Taxpayers provided a wholesale funding guarantee at a fee of only 0.70 per cent – one of the lowest rates among OECD countries. Simultaneously, the Reserve Bank reduced the official rate to as low as 3 per cent. The banks were quick to reduce deposit rates but not lending rates. No wonder the major banks increased their operating profit by $11 billion during the crisis period of September 2008 to September 2009.

I agree, this higher borrowing costs claim is wearing a bit thin.

 

[pickle pickle]

Regardling your last paragraph, i am not sure that the banks will continue to increase much above RBA rates, they needed this additional rate increase. If new borrowing costs continue to stabalise for the banks, they might just hold to roughly (within a few basis points) RBA future rate increases.

As you said its a game of chicken, they have a lot to loose if they just continuously increase above RBA rates.

In regards to your other paragraphs, yes shareholders stand to loose, but so do borrowers (through restricted supply) and so does the government (through seriously p***sed off voters).

Again as you stated its one big game of cat and mouse.


For the record, i very much question that future returns on bank shares will look anything like their last 15 years performance.

I agree with everything you have said. Pretty much excatly my points.

 

[Sunfish]

Originally Posted by Sunfish
But what can he do? Three fifths of five eigths of bugger-all!

He can bleate and berate and dat's bout it

WBC last time, CBA this time; one makes a move and cops some grief then the others follow suit when the anger subsides... next time it maybe one of the other majors who takes the big step first

They've been dancing to that tune since the '80s when WBC was technically bankrupt and had to whack on a lot of "charges" to get some dollars back in the coffers. Instead of having a competitive swipe at them, the other banks just adopted a similar course.

Of course no two banks ever adopted the same rise on the same day (that would be collusion!) but there was no way a punter could change banks and get a better deal. Nothing has changed.