Australian Banks play hardball to remain profitable

Be in no doubt. Australia’s big four Banks will tough out any criticism from the Prime Minister and Treasurer down to keep their profits at record highs, financial crisis or no financial crisis.
The case in point is that mortgagor homeowners are suffering more than they should because in the last eight months, the Reserve Bank has cut official interest rates by 425 basis points and our banks have passed on only 385 basis points.
A stable and secure banking is important to support the Australian economy, jobs, business activity and investment, our banks need to ensure they remain well-run and profitable, even if that means making unpopular decisions, says Australian Bankers' Association chief executive David Bell.
But the reality is that the strong Australian economy has protected the banks from the World financial crisis, because mortgage borrowers have kept their jobs and not become bad debts on mass for the banks, which in turn would have crippled the banks as their security would not have matched their loans outstanding.
The banks seem to think they are the saviours here, and are increasing their margins at the expense of their customers, says Rick Adlam from Mr Mortgage. Independent economists and commentators agree that Australia is weathering the current global economic downturn better than any other advanced economy. What has that got to do with the Banks? They seem to want to take credit where credit isn't due.
The IMF is predicting a 1.4 per cent contraction for the Australian economy which compares very favourably with the US economy, which is expected to slide by 3 per cent, and Britain which is expected to contract by 4.1 per cent. Forecasters and commentators also agree that the stability and security of Australia's banking system has played an important part in our economy's resilience, but the banks seem to want to overplay this into a self backslapping exercise. They may have played some part, but they were not the core reason. In fact the Banks that have got into trouble were the one's who bought into valueless US mortgage derivatives, offloaded by wobbly US Banks! That's why we are not getting the full benefit of the official RBA rate cuts.
And it's not the only recent crisis in which Australia has fared well.Just a year ago there were around 20 AA-rated banks in the world. Today, there are just eight and Australia has four of them - not a bad result when our country is just 2 per cent of the world economy. Australian Banks need to continue to make sound commercial decisions to ensure the long-term stability of Australia's banking system, which is in the interests of customers, shareholders and the Australian economy. This is not aligned with increased profits that they are reporting.
They don’t need to be increasing their profit margins in a recession at the expense of their customer base and especially high debt carriers like mortgage borrowers, says Rick Adlam at Mr Mortgage. And their needs to be a level playing field for the small regional banks and non bank mortgage lenders.