Bank fee cut a marketing exercise
August 3, 2009
Westpac will take a $210 million hit on cash earnings in the 2010 year, as it cuts back some of its banking fees.
Australia's second biggest bank is hoping to appease retail customers and compete with its rival NAB, which last week abolished penalty fees on overdrawn accounts.
Westpac says its 'across the board' reductions in exception fees would apply from October 1 to both personal and business customers.
'This includes account overdrawn fees, outward dishonour fees and credit card missed payment and over the limit fees,' Westpac retail and business banking group executive Peter Hanlon said.
Wilson HTM's Simon Robinson says the earnings impact from the trimmed fees is insignificant and sees this more as a marketing exercise, as the banks jostle for position.
'The real issue with the banks is that they've raised significant amounts of capital.... and the reason for that is that bad and doubtful debt provisions have increased,' said Robinson.
'They've done the right thing in going to the market and raising their capital ratios... But if you look across the board... All the CEOs have still said times are challenging and the next six to twelve months will be challenging'.
'If things did deteriorate from here, they've got to ensure they're capital position is protected. That's why they've (raised so much capital)', said Robinson.
Last week Citi raised its recommendation on the big four banks to a buy and Simon Robinson says he agreed with the sentiment, but believes it's not yet time to 'aggressively buy the banks'.
