Funding costs vs consumer expectations
Banking analysts don't expect banks to pass on all the Reserve Bank's May rate cut despite recording profits.
James Hickey, Deloitte partner, and co-author of the Deloitte Australian Mortgage Report speaks to Joe O’Brien at ABC 24 of the balancing act the banks have to undertake around the cost of funding and consumer expectations.
He explains how Australian banks are large complex institutions that have to consider the offshore and onshore cost of funding, in particular the volatility of those markets and continued margins squeeze. In response to questions Hickey said the banks need to weigh up those exigencies carefully, considering the return on capital which despite commentary around substantial profits is well within the narrow 15% – 20% margins of substantial organisations.
As some of Australia’s largest business all these elements need to be weighed up and agreed on, to assist the decision as to what to pass on to the consumer in terms of mortgage rate reductions and when.
Watch his interview to hear more.