Commerce Bank

ERIC JOHNSTON

A MEETING of the AMP board this month mapped out the options for the wealth giant if, as widely expected, National Australia Bank emerged with AXA Asia Pacific.

One of these is a defence strategy aimed at ensuring AMP remains the so-called ”fifth pillar” of the nation’s financial services market, should a big-four bank begin circling.

The logical poison pill in any takeover attempt would be for AMP to try to turn the game on its head and make a play for a regional bank. Such a move would result in AMP becoming too large for a big-four bank to digest, both in terms of pricing and likely competition hurdles.

The aim of the banks over the past decade has been to diversify into wealth management, so it should not be too much of a stretch for a wealth manager to buy into a mid-sized bank.

Among the most obvious targets for AMP would be Bank of Queensland, given the regional lender’s willingness to enter into a partnership. And at the same time, a deal is affordable and its share registry is largely wide open.

Other candidates include the banking arm of Suncorp Metway, although its new chief executive, Patrick Snowball, has said he is keen to retain the business, which is largely focused on the Queensland market. Bendigo Bank, while attractive with a national footprint, is regarded as less likely, given cultural differences.

AMP is no stranger to lending and transaction accounts, having operated a small banking business for the past two decades. The chief executive of AMP, Craig Dunn, has talked up a greater strategic focus on its banking business to position itself a alternative to the big four lenders.

Of the eight non-executive directors on AMP’s board, three, including the chairman, Peter Mason, and director Paul Fegan, come from a banking background. When it comes to AMP, ANZ is widely regarded as being the best placed to make a takeover offer for the wealth giant.

Any deal would transform ANZ into a dominant player in the financial services market, but it would come at a cost.

On Axiome Equities calculations, ANZ would have to pay about $16.5 billion for AMP for the acquisition to be mildly dilutive, but this would mostly be financed by a monster $10 billion capital raising.

Citizens Electoral Council of Australia sent us the followings:

Media Release  14^th of January 2010. To defeat the Money Power and guarantee Australia’s economic future:

Re-establish a true national bank

CHRIS ZAPPONE

PETER MARTIN ECONOMICS CORRESPONDENT

CUSTOMERS angry at the big interest rate rise imposed by Westpac are leaving the bank, according to Australia’s largest mortgage broker.

AFG said a ”large proportion” of its business last month came from Westpac customers switching to other lenders in protest at the bank’s outsized rate rise in December.

AFG would not reveal the number of customers it switched but said anti-Westpac sentiment pushed refinancing to a high for the year and made the Commonwealth Bank its largest source of mortgages, replacing Westpac.

”There are people who are fed up with Westpac and are making a stance,” the AFG sales manager, Mark Hewitt, said.

People did not typically think it worthwhile to change lenders if their rate exceeded the market by 20 basis because rates could change again, he said.

”But in this case people are making a protest. It’s hard to switch banks but when you feel strongly about something you tend to endure a bit of pain to get your point across.”

Westpac disputed the AFG analysis. A spokesman said growth in new lending remained strong. Asked why it should remain strong when Westpac’s rates were well above those of other lenders, he said the bank offered a good discount to ”premium customers” and other benefits such as no credit card and account-keeping fees.

Westpac had not noticed an ”abnormal level” of refinancing last month. AFG might merely have been logging more inquiries from disgruntled customers.

Westpac’s decision to increase its variable rates by 45 basis points, compared with the Reserve Bank’s 25-point rise has opened the biggest gap between the rates of the big banks.

A National Australia Bank mortgage is now 0.27 points cheaper than a Westpac one, representing a saving of $50 a month on a $300,000 loan.

The consumer group Choice said the move by AFG customers was welcome, but only a start. ”There’s a public appetite for switching and some pioneers are already doing it. But they are going to be necessarily small in number until it is made easier to switch and borrowers know the interest differential will be maintained,” a spokesman, Christopher Zinn, said.

Customers who want to switch to banks with which they do not already have an account will need to prove identity, using documents such as driver’s licences and passports. They will also need to produce bank statements and group certificates to establish savings and earnings records and obtain or pay for a property valuation. They will need to provide other documents on request, such as rates notices and child support agreements.

Mr Zinn said: ”It needs to be much simpler in terms of the costs and paperwork. The Government’s bank-switching package wasn’t enough.”

The AFG figures reveal the near death of fixed-rate mortgages, with the proportion sold by AFG falling to a record low of 2 per cent last month, down from 22 per cent two years before.

Loan volumes slid in October, November and December after the Reserve Bank’s rate rises. The average mortgage size hit a record of $414,200 in NSW.

No festive season gifts from the RBA as interest rates are boosted 25 basis points to 3.75 per cent.

Families that are feeling the pinch will need to tighten the purse strings even more, with the RBA topping up the rates before Christmas.

The Reserve Bank of Australia today raised the official interest rate by a quarter of a percentage point to take the cash rate to 3.75 per cent.

This is the first time that the central bank has increased rates for three consecutive months since rates were first announced by the RBA in 1990.

Don’t be fooled by the banks
Click here to keep an eye on who is offering the best home loan rates.

Economists were divided as to whether the RBA would raise rates. ANZ chief economist Warren Hogan says economic conditions are favourable despite the recent debt problems in Dubai.

“Despite the volatility in financial markets in the past week or so, the domestic economy is doing exceptionally well,” Mr Hogan said.

“All the economic data we’ve seen in the past month has not only reinforced that but probably been stronger than most were expecting.”

Mr Hogan says the troubles in Dubai which sparked losses on global sharemarkets are nothing to be too concerned about as the exposure to domestic markets appears minimal.

“It really is a short-term news-type event,” he said.

“The magnitude of the problems there, while significant, it’s really is nothing compared to what we went through a year ago.”

Has the RBA acted too quickly?
However, other economists have warned that the RBA’s rush to increase rates may be heavy-handed given the uncertainty surrounding the global economic recovery.

“This is a particularly fragile phase of the recovery where the Government and the Reserve Bank risk getting it wrong if the balance and timing of fiscal and monetary stimulus is not calibrated appropriately”, said Rod North, MD of Bourse Communications.

“Following the recent increases in the cash rate in October and November by 25 basis points and another increase today of a further 25 basis points, it is still too early in the cycle to begin an aggressive rate hike. More time is needed for recovery as part of the economic healing process”, he said.

PETER MARTIN

WESTPAC has been hit by further resignations from its Community Consultative Council after it raised its mortgage rate by almost double the Reserve Bank’s recent rate rise – just one day after a round-table discussion about financial hardship.

Meanwhile, the head of the Australian Competition and Consumer Commission, Graeme Samuel, told the ABC he was not sure he would allow Westpac to take over St George if the application came before him again.

Rod Masson, the acting national secretary of the Finance Sector Union, and the president of the ACTU, Sharan Burrow, wrote to Westpac on Friday citing ”insincerity” and saying it was ”galling” that the bank’s retail chief had consulted the council about financial hardship less than a day before announcing a near-doubling of the Reserve Bank’s rate rise.

”The meeting was chaired by Peter Hanlon, the executive who less than 24 hours later announced the double hike,” Mr Masson said. ”We discussed the impact the Reserve Bank hikes would have on people who had lost their jobs and suffered reduced hours.

”We will stay in the ANZ and the National Australia Bank’s stakeholder forums, but not Westpac’s – not after this.”

The Finance Sector Union and the ACTU are the second and third groups to have withdrawn from the Westpac Community Consultative Council after the consumer group Choice, which left about two years ago. Continuing council members include the Smith Family, Mission Australia and the St James Ethics Centre.

”Westpac is disappointed,” said a spokesman, David Lording. ”But we respect that sometimes opinions diverge.”

Mr Samuel told the ABC’s Inside Business that banks such as Westpac faced less competition and found it easier to push up rates. While his decision to allow Westpac to acquire St George last year was the right at the time, he was not sure it would be right today.

John Rolfe, Consumer Affairs Reporter – Daily Telegraph

NATIONAL Australia Bank has attacked its rival Westpac in announcing it will increase its home loan rates by the same amount as the Reserve Bank _ 0.25 percentage points.

Westpac has been attacked by customers and politicians after raisings its variable mortgage rate by 45 basis points on Tuesday, following the RBA move.

NAB is the only major to announce its intentions since the shock Westpac hike.

A short time ago NAB issued a statement saying one of its customers with an average-size $300,000 loan would repay $51 a month less than a Westpac customer with the same borrowing.

Lisa Gray, Group Executive NAB Personal Banking, encouraged Westpac customers to “take a fresh look at NAB”.

“We are determined to be competitive, to offer our customers a better deal and attract new customers to NAB. Today we are sending a message to customers at Westpac, and the other banks, that NAB can offer them a better deal,” Ms Gray said.

“IT’S disgusting, isn’t it?”

Schoolteacher Catherine Sutton is standing where the extra bedroom should be when she delivers an assessment that neatly sums up how millions of homeowners will feel after the over-the-top rate rise by Westpac.

There is no extra bedroom or family room because the banks have taken them with their gouging.

“We have had to hold back on the renovations,” Mrs Sutton, 36, said.

“We count our pennies now, pay the mortgage and make sure the kids are fed.”

As children Lily, 8, and Charlie, 5, chase the family dogs around the backyard of their Orange home, their father Chris explains that it will be a tighter Christmas.

Courtesy of the banks.

“It limits us in terms of what we can do on holidays,” Mr Sutton, 37, said.

The Suttons, both schoolteachers, would like to switch lenders but the fees are too high and all the majors are as bad as each other anyway. “They’ve got you over a barrel,” Mr Sutton said.

Never mind the greediness of the big banks, the repeated rises from the Reserve are pain enough. “It makes it hard to get into a regular pattern of budgeting and saving,” Mr Sutton said.

Mortgage repayments are likely to push many recent homebuyers toward the brink in 2010 as rates rise beyond the expectations and budgets of many.

A Daily Telegraph survey of new entrants to the housing market – conducted before the central bank raised rates for an unprecedented third month in a row yesterday – has revealed many buyers under-estimated the extent of future RBA action.

Forty of the 100 property buyers surveyed said they expected official rates to rise by no more than 1 per cent by December next year.

Following yesterday’s 0.25 per cent increase, the survey suggests these buyers are budgeting for only three quarter-point moves in 2010. However, interest-rate futures predict as many as five more 0.25 per cent rises.

Perhaps of more concern is that even if rates do rise by just 1 per cent, more than half of the respondents said that repaying the mortgage would become a difficulty.

About 40 per cent admitted over spending their buying budget.

Nearly 90 per cent had anticipated the RBA would lift rates yesterday.

But only 17 per cent thought monetary policy action was warranted.

Close to two-thirds said the RBA was out of touch. And 90 per cent believed commercial lenders had the ability to offer better deals to borrowers.

Geoffrey Newman – The Australian

• Satisfaction levels down for big banks
• Credit unions, building societies higher
• ANZ customers most happy, NAB the least

ALMOST one third of customers remain dissatisfied with the service they receive from the big banks, while credit unions and building societies enjoy a much higher level of approval.

Only 71.7 per cent of customers said they were satisfied with the service across ANZ Bank, Westpac, Commonwealth and National Australia Bank, according to Roy Morgan Research.

ANZ’s customer base was the most satisfied and NAB customers the least, although the difference was small.

The research follows a study by financial comparison group Infochoice showing consumers could save $6.1 billion a year in bank costs by switching from the big four to cheaper services at their smaller rivals.

Infochoice said apathy was mostly responsible for customers’ unwillingness to switch banks along with “a flight to perceived quality” during the global financial crisis, despite the Federal Government guaranteeing the deposits of all Australian banks and credit unions.

The highest satisfaction rating in the Roy Morgan research was achieved by building societies (87.9 per cent), followed by credit unions (86 per cent). Even foreign banks beat the big four.

Dutch-based ING was the best of the overseas banks with 84.2 per cent of its customers satisfied.

Sentiment towards most banks improved slightly this year after falling last year. Satisfaction was lower among customers who earned more than $90,000 a year.

This group accounted for only 8.7 per cent of all bank customers but was relatively more important to the banks because of higher levels of ownership of financial products, particularly credit cards, investment loans, superannuation, home loans and life insurance.

They averaged 11.4 financial products per customer compared with the average of 7.3.

The percentage of customers satisfied at NAB fell to 61.6 per cent in the wealthy group while at Westpac it was 69.1 per cent. The latter improved its rating six percentage points over the past 12 months.

The research comes as banks again risk earning the ire of their customers after the big four all increased fixed rates on home loans in the past week ahead of an expected decision by the Reserve Bank next week to lift the official cash rate for a second straight month.

staff writers - news.com.au

• Shutting branches a ‘massive mistake’
• Exec says Westpac has become faceless

A BOSS at one of the big four banks has admitted its two-decade policy of shutting branches has cost it – and consumers – dearly.

In a classic mea culpa, Westpac group executive Peter Hanlon said removing customer-orientated bank managers and centralising operations was a massive mistake.

He said the banks had failed to care adequately for customers by morphing into an automated and faceless service that account holders were increasingly fed up with.

“Closing branches has been a complete failure. We have closed branches in places we simply should not have closed them. This is an admission we made a mistake,” Mr Hanlon told The Daily Telegraph.

In attempt to redress those mistakes, Westpac has revived a key role long thought extinct – the true bank manager focused on local customers and their communities.

Chasing the short-term dollar

Mr Hanlon told news.com.au that banks had “misunderstood” the balance between customers and shareholders over the past decade.

“Quite often we get caught up in world of short-term profits because of our half-yearly reporting cycle, without actually understanding that shareholders are interested in long-term returns,” he said.

“I think what’s happened over a number of years we’ve been too short-term focused.”

Mr Hanlon said the focus on “short-term cost-cutting” had led to a reduction of service.

“Banks have done a range of things in the name of profitability.

“No one can argue with that, because we have closed hundreds and hundreds of branches, and we have shrunk our workforce by tens of thousands, so it’s undeniable that we’ve reduced services,” he said.

Australia “not cookie-cutter towns”

Mr Hanlon said Westpac had hired 400 new bank managers this year, telling them to be more hands-on, giving them more autonomy, and requiring them to be more active in their local communities.

“Over the last 20 years we’ve taken away the capabilities of bank managers to get involved in any lending decisions, we’ve taken away their ability to hire their own people, we’ve even taken away their ability to sponsor the local bowls club,” Mr Hanlon said.

“The bank managers now decide who they hire, when they open and close, they decide where their sponsorship dollars go, they decide on what to do with specific customer inquiries.

“I want us to be respected again. I want bank managers to be respected members of the local community and I think the work people like me have done over the last 20 years, while not on purpose, has engineered the drop in respect of the local branch manager.

“Australia is not a country of cookie-cutter towns and cookie-cutter suburbs, so why continue to have a cookie-cutter approach to banking?”

The bank has also committed to opening at least 200 new branches in the coming years, many in locations where Westpac closed its doors barely 10 years ago.

Protecting customer details

Meanwhile, draft laws to prevent people’s bank details from being sent overseas without their written permission were tabled in the Senate yesterday.

Family First Senator Steve Fielding said Australians did not want their personal information “booted offshore” when they talked to a bank employee in an overseas call centre.