RBA report shows banks more profitable now than 2007

Monday June 22, 2009

Banks in Australia are performing well financially despite the economic climate with a recent report showing that the major banks are in fact more profitable now than before the global financial crisis.

The Reserve Bank of Australia released a report last week that concluded that banks profits in Australia were higher now than before the financial crisis based on a key measure of profitability, the banks' domestic average net interest margin (NIM). According to this measure, Australian banks recent profitability had offset any declines that were felt when the economy began to slide.

The improved data comes from the half year to March 2009 where the average net interest margins for major banks was nine basis points higher than in the six months preceding. At this time, the net interest margins are averaging at 2.27 per cent which is reportedly slightly higher than just before mid-2007 when the Global Financial Crisis is meant to have commenced.

News of Australian banks profitability comes at a time when banks are increasing their interest rates on mortgages.

National Australia Bank - Fixed home loans raised by as much as 40 basis points with fixed rates to between 5.09 per cent for a one-year loan to 7.79 per cent for a 10 year term.

Commonwealth Bank - blamed high costs of term funding before raising its standard variable home loan, fixed home loans and Residentially Secured Better Business Loan by 10 basis points.

Westpac-owned St George- raised interest rates as follows:

• One year fixed mortgages by 10 basis points to 5.44 percent
• Two year fixed mortgages by 20 basis points to 5.94 percent
• Three year fixed mortgages by 50 basis points to 6.49 percent
• Four and five year fixed mortgages by 50 basis points to 7.14 percent

The banks have cited funding costs as the main reason behind this increase in interest rates, despite the Reserve Bank of Australia rates remaining steady since April 2009. However, the RBA did show the traditional links between banks funding costs and the cash rate which are meant to be indicators of the condition of the financial market.

Compare your banks home loan rates with some of the best on the market here...

Back to News Index | Back to Home