Rates could rise before RBA
August 5, 2009Australia's banks could begin hiking interest rates on variable mortgages before the central bank raises official rates, if funding costs stay high, the head of the nation's fourth largest bank says.
ANZ Banking Group Ltd chief executive Mike Smith also on Wednesday said he could not rule out making an offer for the banking arm of Suncorp-Metway Ltd, although plans to acquire the business "were not on the radar" at present.
Mr Smith said wholesale funding costs may determine whether the big four lenders - Westpac Banking Corp, Commonwealth Bank of Australia Ltd, National Australia Bank Ltd and ANZ - raise their variable rates before the RBA initiates its own increase, which economists say could occur in early 2010.
"I think that funding costs and the official rate is irrelevant," Mr Smith told reporters after delivering a speech at an Australian British Chamber of Commerce function in Sydney.
"I think that banks will have to raise rates if their funding rates get higher.
"If that's out of cycle, that's out of cycle. It could happen."
Earlier this year the federal government criticised the big four bank for not passing on all of the cuts made by the RBA been since September last year.
The central bank has lopped 425 basis points off the cash rate, leaving it a 49 year low of three per cent.
Mortgage rates have also fallen, but by not as much.
The RBA now appears to have come to the end of its easing cycle, with the cash rate expected to start rising in early 2010.
Meanwhile, Mr Smith said he could not rule out a possible acquisition by ANZ of the banking arm of Suncorp-Metway, which is valued at around $2.5 billion.
"They (regional banks) actually form an important function in the Australian banking system within Australia," he said.
"But I think further consolidation would not necessarily be a great thing.
"But you never say never, but, you know, right now it's not on the radar."
In October last year, Suncorp-Metway said it had received several approaches from parties interested in buying its banking and wealth management arms, but so far no deal has eventuated.
Analysts have suggested the wealth management business has a value of around $2.4 billion.
ANZ on Tuesday sealed a $US550 million ($A687 million) deal to buy some of Royal Bank of Scotland Plc's Asian businesses, after raising a total of $4.7 billion from a share placement and share purchase plan in May and July, respectively.
Mr Smith said recent comments by the Australian Competition and Consumer Commission (ACCC) would not deter him from pursuing a possible deal.
In May, ACCC chairman Graeme Samuel warned the competition regulator would run a fine tooth comb over any mergers or acquisitions involving financial institutions before giving approval.
"No," Mr Smith said when asked if Mr Samuel's comments would influence him.
"But it takes two to dance and you have to be willing partners."
