西太平洋银行提高房屋贷款利息
Westpac raises home loan ratesDate
October 14, 2015 - 2:07PM
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Clancy Yeates and James Thomson
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Westpac may lose customers with mortgage rate rise
Will the other banks follow Westpac and raise their owner occupier mortgage rates as well, and how can smaller lenders take advantage?
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Westpac is jacking up all of its variable home loan interest rates by 0.2 percentage points, a move it has blamed on rules forcing banks to hold larger loss-absorbing capital buffers.
The country's second biggest bank on Wednesday announced the change, which will increase headline owner-occupier rates to 5.68 per cent, and investor rates to 5.95 per cent.
The rate hike will take effect from November 20, and puts the spotlight on the home loan interest rates charged by the other banks, which tend to copy each other on mortgage rates. The changes apply only to Westpac-branded loans, not St George, Bank of Melbourne or BankSA.
Westpac's home loan rates for owner occupiers and investors will jump by 0.2% on November 20.
Westpac's home loan rates for owner occupiers and investors will jump by 0.2% on November 20. Photo: Erin Jonasson
Westpac said the changes were occurring because the bank was being forced to hold more capital, a buffer for absorbing losses.
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These rules have been introduced in response to global trends towards tougher regulation of banks, and the Financial System Inquiry's recommendation that the country's banks be made "unquestionably strong".
The bank also announced it was raising $3.5 billion in capital from its shareholders – taking the amount raised from investors by the big banks to more than $18 billion this year.
Westpac also released unaudited full-year results which showed profits had risen 3 per cent to $7.82 billion.
Westpac also released unaudited full-year results which showed profits had risen 3 per cent to $7.82 billion. Photo: Bloomberg
The chief of Westpac's consumer bank, George Frazis, said the increase was a response to the bank being required to hold 50 per cent more capital against mortgages.
Raising capital lowers the profitability of bank lending, putting pressure on banks to pass on some of the costs to customers where possible.
"As we have always said publicly, while Westpac is well placed to meet these changes, a significant increase in capital ultimately increases the cost of providing home loans to customers," Mr Frazis said.
Westpac will boost its capital reserves through a $3.5 billion capital raising.
Westpac will boost its capital reserves through a $3.5 billion capital raising. Photo: Darrian Traynor
"This is a difficult decision and one that is not taken lightly. We acknowledge that it does impact customers, even in an environment where interest rates remain near historic lows. We have sought to carefully balance the needs of our borrowers, depositors and our shareholders, as well as the competitive market we operate in. Increases in the cost of doing business inevitably influence business decisions, including price," Mr Frazis said.
An ANZ Bank spokesman said its interest rates were always under review, the Commonwealth Bank said it had not made a decision on interest rates. National Australia Bank has been approached for comment.
As part of the raising the group also released unaudited full-year results for 2015, showing cash profits had risen 3 per cent to $7.82 billion.
The capital raising will be in the form of a fully underwritten, pro rate accelerated renounceable entitlement offer, with a offer price of $25.50.
Westpac says this represents a 13.6 per cent discount to the company's closing price on October 13 of $30.44, once the price is adjusted for dividends.
Westpac also said it would pay a fully franked dividend of 94 cents for the 2015 year, up 2 per cent on the previous year.
But despite the increase in cash earnings, the bank's cash return on equity fell 57 basis points to 15.8 per cent during the year.
Cash earnings in the Australian bank rose 8 per cent, while the bank's net interest margin was unchanged at 2.08 per cent.
Chief executive Brian Hartzer said the result was driven by "a solid operating performance, supported by strong gains in customer numbers".
The capital raising will be at 100 basis points to Westpac's common tier one equity capital ratio, and take its CET1 capital ratio to 14 per cent.
Westpac says this raising places its capital ratio "within the top quartile of banks globally".
"Capital raised responds to changes in mortgage risk weights that will increase the amount of capital required to be held against mortgages by more than 50 per cent, with the increased regulatory required to be applied from July 1, 2016," the bank said in a statement.
The increase in mortgage rates would also help meet the capital requirements, the bank said.
UBS and Merrill Lynch are handling the capital raising.
Read more: http://www.smh.com.au/business/banking-and-finance/westpac-raises-home-loan-rates-20151013-gk8fmt.html#ixzz3oX2dUmCI
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