National Australia Raises Business Rates as Funding Costs Riseby
Some borrowing rates rise by as much as 29 basis points
National Australia cites economic and regulatory environment
National Australia Bank Ltd. raised some business lending rates citing increased costs in a move that may spur competitors to follow.
The nation’s largest lender to businesses increased its short-term borrowing rates by between 8 basis points and 29 basis points though it left its benchmark and long-term rates intact, it said in an e-mailed statement Tuesday.
Australian lenders raised a record A$20 billion ($14 billion) last year and are passing on the cost of holding more capital to borrowers to protect net interest margins and return on equity. Interest-rate increases by lenders may undercut the Reserve Bank of Australia’s efforts to keep borrowing costs low as it seeks to bolster the economy, according to Shane Oliver, head of investment strategy at AMP Capital Investors Ltd.
“The increase by National Australia is just another argument for the Reserve Bank to cut rates, not today, but in the near future,” Oliver said by phone. “When mortgage rates went up last year, the Reserve Bank said it did not have much flow-on effect because business rates were intact. With that starting to move up, we have de facto monetary tightening and all things being equal, that’s not what the Reserve Bank wants to see.”
The move by National Australia, which reported its lowest ever net interest margin for the year ended Sept. 30., follows an increase in mortgage rates by the biggest banks for property investors in July and owner-occupiers in November.
“We need to ensure we are getting the balance right between serving our customers and shareholders while considering the broader economic and regulatory environment,” Antony Cahill, group executive for product and markets at the Melbourne-based bank, said in the statement.
The cost of funds for Australian banks has started increasing. Commonwealth Bank of Australia last month sold five-year Australian dollar bonds at a yield of 115 basis points over the swap rate. That compares with a spread of 80 basis points for similar paper from National Australia and Australia & New Zealand Banking Group Ltd. in May.
Business credit nudged up to 6.3 percent in December, though it is still below the 6.6 percent growth in October, central bank data show.