SHANE WRIGHT ECONOMICS EDITOR and AAP, The West Australian May 3, 2012
The Commonwealth Bank will cut its standard variable home loan interest rate by 40 basis points, the second of the big banks to move after the Reserve Bank slashed the official cash rate by 50 basis points on Tuesday.
The CBA cut is bigger than the 32 basis point cut announced by NAB yesterday.
CBA’s cut takes its standard variable rate to 7.01 per cent, compared to NAB’s 6.99 per cent after its cut yesterday.
Westpac today initially refused to comment on its interest rate as it revealed a near $3 billion net profit for the first half of the financial year, a reduction of 25 per cent.
But chief executive Gail Kelly later said the bank would announce its rate tomorrow and hinted that any cut that cut would be smaller than the Reserve Bank’s reduction.
She said funding costs rose in the most recent three months.
CBA said its new lower rate would take effect on May 11.
A spokesman for the bank said CBA’s other lending rates and deposit account rates were under review.
“In making this decision, the group has continued to balance the interests of its 1.8 million home loan borrowers with those of its 11 million depositors, and those of its shareholders, who include 800,000 Australians who own its shares directly, and millions more Australians who own shares through pension funds,” the bank said.
Federal Treasurer Wayne Swan rounded on the NAB’s decision, saying it was an insult to Australians with a mortgage or small business operators.
“NAB and all the major banks are booking huge profits, so customers shouldn’t hesitate to ditch any bank that takes them for a ride with decisions like this,” he said.
WA credit union Unicredit, with just 10,000 members, has passed on the full 50 basis-point cut, taking its variable standard rate to 6.1 per cent.
Unicredit chief executive Steve Targett said the credit union was small enough to make a quick decision, unlike the big four which had to take into account other issues including their shareholders.
“They have to worry about the board, the shareholders, how it might play with the public while we really just have to worry about our members,” Mr Targett said.
“We don’t have the big overheads that the big banks also have. And we’ve also got room to take on new customers.”
Westpac’s net profit for the six months to March 31 stood in contrast to the $3.96 billion the bank posted in the previous corresponding period.
Westpac blamed a rise in bad debts and costs associated with setting up the Bank of Melbourne for dragging its profit lower.
Chief financial officer Phil Coffey today said he would not comment on whether the bank would cut its home loan rates.
The big four banks have complained in recent months that higher funding costs associated with borrowing money from financial markets have prevented them from passing on interest rate cuts.
Analysts had forecast a $3.11 billion first half profit from Westpac.
The bank said that while there had been significant uncertainty and volatility in the first half due to the European debt crisis, some stability had returned to financial markets.
However the bank warned while there were signs of improvement in Europe and the United States, the global recovery remained fragile.
Australian consumers also remained cautious, preferring to save money and pay off debt.