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Another billion in bank charges
Katherine Jimenez | May 21, 2009
Article from: The Australian
BANKS gouged up to $1 billion more in fees from households and businesses last year as they received unprecedented support from taxpayers to help deal with the global financial storm.
Figures due to be released today are expected to show that fees are rising at the fastest pace for five years, with banks collecting between $11 billion and $12billion in fees last year, up from $10.5 billion in 2007.
The figures, to be released by the Reserve Bank, will expose the banks to another round of condemnation from the federal Government and consumer groups.
The sharp rise in fees came as banks benefited from a package of support from the Government to weather the global financial crisis. Figures in last week's federal budget revealed the banks had used a government guarantee on their wholesale funding - effectively borrowing the commonwealth's AAA credit rating - to raise more than $104.1 billion to shore up their balance sheets.
The big banks - Westpac, the Commonwealth, NAB and ANZ - have also benefited from the government guarantee over bank deposits, which has delivered them a flood of cash.
Despite the damage being inflicted on overseas banks, accounting firm KPMG says the big four posted a modest rise in pre-tax profit to $12.5 billion in the first six months of the 2008-09 financial year. A blowout in bad loans translated into a single-digit fall in cash profit for the big four for the period.
But they have massively increased their share of key markets, such as home loans, as smaller rivals have faltered in the face of funding pressures.
Fees have been rising steadily from $6.2 billion in 2000 to $10.5 billion in 2007, although the pace of growth has been slowing and fees have fallen as a percentage of bank assets.
The rise in fees last year came as the banks attempted to protect their profit margins. Citing continued high international funding costs, the banks have refused to pass on all of the 425-basis-point fall in official interest rates since September.
However, KPMG says the big banks' net interest income rose 11 per cent to $20.9 billion for the first six months of 2008-09, with margins increasing from 2.08 per cent to 2.14 per cent.
The Reserve Bank yesterday declined to comment, ahead of the release of the figures this morning. But Family First senator Steve Fielding said the likely rise in fees proved "the Government does need to step in and regulate this area".
"Giving the banks free rein clearly isn't working and ordinary Australians are paying through the nose," he said.
The Australian Bankers Association declined to comment.
Christopher Zinn, spokesman for consumer group Choice, said he was expecting the fee income of the banks to have increased.
"That's largely due to the fact that, in terms of home loans, they have snapped up a record amount of the market ... and because of the deposit guarantee. We would be interested to see ... where is the return to consumers from the increase in the amount of fees."
Katherine Jimenez | May 21, 2009
Article from: The Australian
BANKS gouged up to $1 billion more in fees from households and businesses last year as they received unprecedented support from taxpayers to help deal with the global financial storm.
Figures due to be released today are expected to show that fees are rising at the fastest pace for five years, with banks collecting between $11 billion and $12billion in fees last year, up from $10.5 billion in 2007.
The figures, to be released by the Reserve Bank, will expose the banks to another round of condemnation from the federal Government and consumer groups.
The sharp rise in fees came as banks benefited from a package of support from the Government to weather the global financial crisis. Figures in last week's federal budget revealed the banks had used a government guarantee on their wholesale funding - effectively borrowing the commonwealth's AAA credit rating - to raise more than $104.1 billion to shore up their balance sheets.
The big banks - Westpac, the Commonwealth, NAB and ANZ - have also benefited from the government guarantee over bank deposits, which has delivered them a flood of cash.
Despite the damage being inflicted on overseas banks, accounting firm KPMG says the big four posted a modest rise in pre-tax profit to $12.5 billion in the first six months of the 2008-09 financial year. A blowout in bad loans translated into a single-digit fall in cash profit for the big four for the period.
But they have massively increased their share of key markets, such as home loans, as smaller rivals have faltered in the face of funding pressures.
Fees have been rising steadily from $6.2 billion in 2000 to $10.5 billion in 2007, although the pace of growth has been slowing and fees have fallen as a percentage of bank assets.
The rise in fees last year came as the banks attempted to protect their profit margins. Citing continued high international funding costs, the banks have refused to pass on all of the 425-basis-point fall in official interest rates since September.
However, KPMG says the big banks' net interest income rose 11 per cent to $20.9 billion for the first six months of 2008-09, with margins increasing from 2.08 per cent to 2.14 per cent.
The Reserve Bank yesterday declined to comment, ahead of the release of the figures this morning. But Family First senator Steve Fielding said the likely rise in fees proved "the Government does need to step in and regulate this area".
"Giving the banks free rein clearly isn't working and ordinary Australians are paying through the nose," he said.
The Australian Bankers Association declined to comment.
Christopher Zinn, spokesman for consumer group Choice, said he was expecting the fee income of the banks to have increased.
"That's largely due to the fact that, in terms of home loans, they have snapped up a record amount of the market ... and because of the deposit guarantee. We would be interested to see ... where is the return to consumers from the increase in the amount of fees."
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