Comm Bank nets $1B on margin increases

The Commonwealth Bank stands to make an astonishing $1 billion in extra annual interest revenue by increasing its home loan margins over the last two years, according to data crunched by banking comparison website Mozo.com.au.
Over the last two years, including yesterday’s 45 basis point gouge, the Commonwealth Bank has increased its standard variable home loan rates by a total of 57 basis points over official cash rate movements.
According to the latest APRA monthly banking statistics, the Commonwealth Bank has a total of $248 billion in housing loans in Australia. Assuming 75% of these loans are variable interest rates, the annualised effect of the bank’s 57 basis point increase is $1B in extra revenues.
If ANZ, NAB and Westpac follow the Commonwealth Bank’s lead and increase home loan rates by 20 basis points above the Reserve Bank, the Big 4 banks stand to earn a combined total of $3.7 billion in extra interest each year1.
Rohan Gamble, managing director of Mozo said: “These figures show that it is absolutely time for increased regulation of the banking industry to finally put an end to the merciless gouging of Australian home loan customers.
“If the Big 4 banks are forced once and for all to end their cynical interest rate profiteering and keep rates in line with the Reserve Bank, either through increased regulation or competition, Australian mortgage borrowers will be billions of dollars better off each year.”

Commonwealth Bank’s interest rate profiteering over the last two years:
* April 2009 – Increased home loan margins by 15 basis points by only passing on 10 bps of the Reserve Bank’s 25 bp cut * June 2009 – Raised home loan rates by 10 bps even though the Reserve Bank didn’t. * December 2009 – Increased margins by 12 bps with a 37 bp increase in home loan rates compared to the Reserve Bank’s 25 bp rate rise * November 2010 – Increased home loan margins by 20 bps, raising rates by 45 bps compared to the Reserve Bank’s 25 bp rise