Gareth Hutchens June 08, 2012
ANZ's move put pressure on the other banks - but Westpac resisted. Photo: Glenn Hunt
The ANZ Bank took the lead by matching the Reserve Bank's rate cut this week but its main rivals - Westpac, Commonwealth Bank and National Australia Bank - all failed to follow.
ANZ stuck to its routine of resetting interest rates on the second Friday of each month, and this time all the other big banks opted to wait for the Melbourne-based bank's move before revealing their own plans.
As it turned out, the ANZ is the only major lender to pass on the full 25 basis-point cut announced by the central bank on Tuesday, trimming its standard rate to 6.80 per cent, effective from next Friday.
All three other rivals kept back a portion of the cut.
Westpac's standard variable lending rate will drop 20 basis points to 6.89 per cent, effective from June 18.
Commonwealth Bank lowered its variable interest rate by 21 basis points to 6.80 per cent, also from June 18. (There are 100 basis points in a percentage point.)
In an evening announcement, NAB was last to go, declaring it would cut its variable mortgage rate by 21 basis points to 6.78 per cent, effective from June 15. The bank claimed the rate was the lowest among the major banks for 35 months.
Anything less than the 25 basis-point reduction is likely to draw the ire of customers and politicians alike, particularly when all the major banks are generating record profits. For their part, the banks say intensifying competition for savings and higher funding costs on overseas markets have combined to raise their own costs.
By contrast, deposit holders are less welcoming of lower interest rates, with many pensioners in particular reliant on income from savings to bolster their incomes. The banks have so far released little information about how much they plan to cut deposit rates.
NAB, for instance, only noted that after the May interest cut by the central bank of 50 basis points, the average interest paid to NAB term deposits was 2.05 percentage points above the RBA's cash rate. That gap over the cash rate had widened from just 0.32 percentage point prior to the global financial crisis, NAB said, in making a case that its funding costs are on the rise.
ANZ matches RBA
ANZ earlier become the first of the big banks to cut its lending rates, surprising investors and customers alike by passing on the full RBA rate reduction made on Tuesday.
ANZ's new rate of 6.80 per cent will be effective next Friday.
Treasurer Wayne Swan, who has been calling on the big banks to pass the rate cut on in full, said the ANZ decision put pressure on the other banks to follow suit.
"ANZ passing on the full rate cut great news for ANZ customers – lots of pressure on other banks to give their customers a #FairGo too," Mr Swan tweeted.
"So the heat is really on the other banks, and if they don’t do the right thing we’ve made it much easier for their customers to walk down the road and get a better deal, Mr Swan said in a later media statement.
While Westpac withheld some of the rate cut, small business borrowers will enjoy the full 25 basis-point reduction, the bank said.
ANZ has taken a hit in recent months in consumer satisfaction surveys for its stance on rates, falling to third place among the big banks in a Roy Morgan Research survey after leading the rankings for years.
It is the first time since the ANZ began its monthly rate announcement policy in January that it has passed on cuts in full. Last month it cut its lending rates by just 37 basis points, while the RBA shaved half a percentage point off the cash rate.
Twice this year, in February and April, it lifted its rate - both times by 6 basis points - even though the RBA kept the official rate steady.
The 0.25 percentage point decrease will save customers about $13.50 a week for the average home loan of $280,000, while small businesses will save $6.25 a week for the average business loan of $130,000.
Westpac calculates the average mortgage holder with a $300,000 loan will save about $41 a month after today's reduction take effect in 10 days' time.
NAB also lowered its standard variable lending rate to businesses by 21 basis points, but delayed the cut until June 18.
ANZ CEO Australia Philip Chronican said: "Funding costs remain elevated as a result of the deteriorating economic situation in Europe and strong competition for deposits.''
Mr Chronican cited the gross domestic product figures from this week which showed strong growth in Western Australia compared with the eastern states.
"Although there was strong economic growth data this week, we know that several major states and many of our customers are not directly benefiting from the strength of the resources sector."
The Bank of Queensland took only minutes to decide on Tuesday to pass on 20 of the 25 basis-point reduction to its customers. ING Direct matched the BoQ's move yesterday.
Since the RBA began cutting interest rates by 125 basis points from last November, the major lenders have typically withheld part of each reduction - or, in one month, lifted their own rates unilaterally.
The banks have batted back criticism by politicians such as the Treasurer and the public, saying they have a duty to shareholders to adjust rates based on their own higher funding costs.
In May, the big four banks passed on an average of 37 of the RBA's super-sized 50 basis-point cut.
The May reductions included 37 basis points by both ANZ and Westpac, while the CBA cut the most - 40 basis points. NAB narrowly held on to its claim of offering the lowest standard variable interest rate on mortgages of 6.99 per cent when it lowered its lending rate by just 32 basis points.