Westpac Announcement1.12.09

 

   

Sydney

Media Release. 1 December 2009 For further Information Jane Counsel Media Relations 02 8253 3443 0416 275 273 [email protected] David Lording Media Relations 02 8253 5510 0419 683 411 [email protected]

Westpac increases rates Westpac today announced it was increasing its standard variable home lending rate by 0.45% reflecting continuing wholesale funding pressures and the Reserve Bank of Australia’s (RBA) 0.25% increase to the official cash rate. Westpac’s standard variable home lending rate will now stand at 6.76% per annum. Business loan rates will rise by 0.25%. The interest rate changes for home and business loan rates are effective on Friday December 4 2009. “The interest rate changes Westpac has announced today reflect the continuing cost pressures we are experiencing in wholesale funding markets as well as an increase in the official RBA cash rate. Both components, along with the higher rates we are paying on customer deposits, contribute to our increasing average funding costs,” Westpac Group Executive Retail and Business Banking Peter Hanlon said. “These changes are regrettable, however, Westpac has withheld passing on the full amount of the increased funding costs we have experienced to ensure we could continue to support our customers through the economic downturn. While it is now necessary for us to pass on some of these increased funding costs, we will continue to take a considered approach to managing the impact on our customers of the challenging funding environment we are experiencing”. The global financial crisis has led to both higher funding costs and changes in the way banks are funded. This has resulted in banks holding more capital, more customer deposits and a higher proportion of more expensive long term wholesale funding. “The changes to the way we operate our business are necessary to ensure that we can continue to support our customers in the long term. However, the changes also increase our average funding costs, as competition for deposits has materially increased and because raising long term funds is more expensive than raising short term funds. Longer term funding now accounts for around 65% of wholesale funding, up from around 30% just two years ago. “As a result, Westpac’s average wholesale term funding costs are approximately 80 per cent higher than a year ago,” Mr Hanlon said.

Lv 20, 275 Kent Street, Sydney NSW 2000 : T 02 8253 3443 : F 02 8253 1206 : westpac.com.au

 

In order to attract customer deposits, Westpac is offering rates on some term deposits at more than 3% above the official RBA cash rate including a one-year rate at 6.8%. In addition, Westpac will also pass on the 0.45% increase to online savings account Westpac e-Saver. “The interest rates Westpac is offering for both online savings accounts and term deposits are among the highest we’ve ever offered and reflect our strong commitment to lessening our reliance on volatile offshore term-funding markets,” Mr Hanlon added. Credit card rates will also increase by between 0.25%-0.35%. Following the 0.45% rate rise, repayments on the average $250,000 household mortgage will increase by approximately $71 per month. Mr Hanlon said that Westpac continued to be mindful of the impact of interest rate changes on small business owners which was why the bank was only passing on 0.25% to its business loans and had held off passing on any increase when the RBA increased the official cash rate in November. More than 80 per cent of our mortgage customers pay more than their minimum monthly repayments. Westpac has a range of mortgage options available to customers including splitting loans between fixed and variable rates as well as a number of competitive fixed rate mortgages. Mr Hanlon encouraged any concerned customers to discuss their banking arrangements with their local Bank Manager to ensure they have the right mortgage product to suit their individual requirements. Westpac also continues to support customers in financial difficulty through its Westpac Assist initiative and has a team of specialists able to provide personal assistance to help customers find the best possible way to regain and maintain control over their finances. Customers facing financial difficulties in relation to their Westpac loans or accounts can contact Westpac Assist on 1800 067 497. Ends.

Attachment A:

Average cost of term wholesale funding (bps)

(%) 80

200

Estimate1

Proportion of Term Funding(LHS)

180 Marginal cost of Australian term wholesale funding (RHS) Average cost of term wholesale funding (RHS)

60

160 140 120

40

100 80 60

20 40 20

Sep-11

Mar-11

Sep-10

Mar-10

Sep-09

Mar-09

Sep-08

Mar-08

Sep-07

Mar-07

Sep-06

Mar-06

0 Sep-05

0

This chart demonstrates how average funding costs are being impacted by rising wholesale funding and an increase in the proportion of term wholesale funding: • Higher new wholesale funding has increased materially following the GFC and while costs have eased they remain elevated • The volume of wholesale funding raised in the long term markets has increased from 30% to 65% over the last two years and is expected to increase further • As a result, Westpac’s average wholesale term funding costs are approximately 80 per cent higher than a year ago   

1 Estimates are based on a range of assumptions around lending growth, deposit growth and the cost of funding which may differ from actual outcomes.