NAB opens the door to big rate rises

Yesterday’s fee cut announcement from NAB opens the door to further increases in rate margins for the banks.

Moving standard variable mortgage rates up by more than the RBA’s rate hikes was politically difficult for the big banks before yesterday, but now looks a virtual certainty.

“The fee reductions will help smooth the path (and thus increase the probability and scope) for further margin expansion,” wrote analyst Ben Koo in Goldman Sachs JBWere Afternoon Market Report yesterday.

“The changes will help reduce the risk of regulatory intervention.”

The Bank of Queensland result highlighted that margins for the banking sector are on the rise, said Koo.

Although Personal Banking Group Executive Lisa Gray said the bank would not be acting to recoup the cost of cutting fee revenue, she did not categorically rule out rate rises.

“At this point in time we don’t anticipate having to raise rates outside of the RBA’s cycle,” she said yesterday.

Source: The Sheet