Greedy banks raise credit card rates as official cash rate falls

Australian banks are accused of being greedy and taking advantage of the financial crisis and the Rudd Government' s shop message, as they slide up the credit card interest rate by up to 2% as official cash rate falls by a similar amount.

Research has revealed at least five card providers increased their interest rates in the past three months, even though the RBA has slashed the cash rate by 2 per cent since September.
According to financial data company Infochoice, GE Money and Wizard Home Loans had both increased credit card rates by 2 per cent or more since September, when the RBA began its series of rate cuts.
Bank of Queensland, Citigroup and Suncorp had also increased rates on some cards by up to 0.84 per cent.
Crucially, not a single credit card provider passed on the entire two percentage points of official cash-rate cuts announced since September.
Commentators said banks should be put under more pressure to ensure that interest-rate cuts are applied across the range of financial products, so the economy gets as much stimulus as possible.
So far the Federal Government has given away $10.4 billion in a massive financial giveaway, and the RBA has cut rates aggressively, yet part of the benefit of these measures is being wiped out by banks, which are keeping the savings for themselves.
"By not passing on the rate cuts, card companies are doing nothing to alleviate the debt burdens on Australian households so are limiting the effectiveness of monetary policy,'' TD Securities senior analyst Josh Williamson said.
"It could be banks are robbing Peter to pay Paul - using money from credit cards to help subsidise cuts to their mortgage rates.''
With the average credit card rate at just under 20 per cent, borrowers paying over the odds should switch as soon as possible - preferably to a zero per cent deal which will help them pay off the capital quickly.

Citigroup executives consider sale of all or part of bank

With Citigroup stock value plunging, top executives at the financial giant are considering the sale of all or parts of the company, the Wall Street Journal reported on its website.
The debate within the company is at a "preliminary stage," and officials said the company has "ample capital, funding and strategic direction," the daily said.
The sale option is one of a range of dire scenarios company executives were considering after Citigroup stock fell another 26 percent Thursday, after a 23 percent drop on Wednesday.
The company's board of directors is expected to meet Friday to discuss options to reverse the stock slide, people familiar with the situation told the daily.
Citigroup, a component of the blue-chip Dow Jones Industrial Average, has tumbled more than 70 percent since the start of the year, with the bank hit by hefty writeoffs linked to the US real estate crisis.
Chief Executive Vikram Pandit and other company executives have told colleagues they are frustrated and confused by this week's 50 percent stock decline, the daily said.
Citigroup stocks on Thursday closed at 4.71 US dollars, their lowest level in 15 years, despite Wednesday's announcement by Saudi Arabian investor Prince Alwaleed bin Talal bin Abdulaziz Al Saud that he would increase his holdings in Citigroup Inc. to 5.0 percent, adding that he supports the banking giant's management.
At 25.6 billion US dollars, Citigroup's value on the stock market is barely higher than the 25 billion dollar aid package the US Treasury extended it last month, in the framework of its 700 billion dollar bailout plan for stricken financial institutions.
Besides considering selling the company to another bank, Citigroup executives are also looking into selling parts of the company, including the Smith Barney retail brokerage, the global credit-card division and transaction-services unit, Citigroup's most lucrative and fast-growing businesses, the newspaper said.
They are also exploring the possibility of merging with a rival. Some analysts have pointed to Morgan Stanley and Goldman Sachs Group Inc. as potential suitors, market analysts told the daily.
Citigroup also want to make it more difficult for investors to place bets that the company's share price will fall, a strategy known as "short selling," and have been lobbying the Securities and Exchange Commission to reinstate a ban on the trading strategy imposed at the start of the stock market crash.
Citigroup on Monday announced it was slashing a near-record 50,000 jobs worldwide in further belt tightening to cope with the global financial crisis and heavy losses. At its peak last year, the company employed 375,000 people.
It was the second largest job-cut announcement on record, according to global outplacement consultancy Challenger, Gray & Christmas, tying with 50,000 job cuts by retailer Sears, Roebuck & Co. in 1993 behind the all-time largest the same year: 60,000 by IBM.

Citigroup heads south as it warns consumer loan losses rise

Citigroup stocks took a bath in the wake of its warning that losses in its consumer loan portfolio could rise between $US1 billion and $US2 billion each quarter from now through the first half of next year, according to chief executive Vikram Pandit's speech notes released on the banking giant's website.The notes reveal "buried" details about company's expectation that consumer credit losses will be substantially higher, said Bernstein Research analyst John McDonald, who alerted his clients to the disclosure.
Citi's consumer credit losses in its third quarter were $US4.6 billion ($7.1 billion), meaning the guidance in the speech notes suggests the bank's quarterly losses on the portfolio could reach $US10.6 billion by the second quarter of next year.
Shares of Citigroup, which plans to slash 50,000 jobs worldwide, had declined 9.5 per cent to $US8.05 with just under an hour of trading remaining on Wall Street.
A Citi spokeswoman declined to comment on Mr McDonald's report, and referred other questions to the 13 pages of speech notes released on the company's website.
Mr McDonald cut his price target on Citi shares to $US11 from $US20 based on the higher credit losses outlined in the speech notes. He also widened his fourth-quarter loss expectation to US61c a share from US41c and cut his 2009 earnings forecast to US22c a share from US63c.
Citigroup also revealed in Mr Pandit's notes its plans to change its accounting for a large portion of its risky, written-down assets. It will move about $US80 billion of the assets from its trading portfolio to either its held for investment, held to maturity or available for sale categories on its balance sheet.
Mr Pandit said $US80 billion in assets had been marked down appropriately and that the realised losses on the loans would be greater than the level they'd been marked down to already, according to the notes.
He said the purpose of the accounting change "reduces the earnings volatility that these assets could pose," and that it allows Citi to benefit from a return on equity from any upside to the assets.
Bernstein's Mr McDonald said the $US80 billion comprised most of Citi's $US88 billion in risky collatoralised debt obligations, leveraged loans, mortgage securities and auction rate securities.
Once the assets are moved out of Citi's trading portfolio, any future write-downs would no longer follow through Citi's income statement unless it sells them, or recognises an "other than temporary impairment charge" against them, he said.
However, Mr McDonald estimated that Citi would still have to write-down $US3.5 billion on the assets in its fourth quarter when it makes the accounting change.
Mr Pandit delivered a speech based on the notes and a slideshow, which was released on the company's website.
Mr Pandit told those at the employee-only meeting on Monday that the company's capital position was strong and it was moving ahead with restructuring plans, which include an additional 50,000 job cuts.
Citi reported last month a $US2.8 billion net loss in its third quarter; its losses over the last four quarters totalled more than $US20 billion.