Banks reluctant to pass on full 25-basis-point rate cut

Bank of Queensland has passed on only 20 out of the 25 basis point rate cut announced by the RBA today, an indication that other banks won't pass on the full rate cut.

The 20-basis-point rate cut brings BOQ's standard variable rate home loan to 6.71% p.a. effective from Friday, October 19, 2012.

"Given the continuing pressure on the cost of funding a 20 bps reduction is the best balance between our customers and shareholders,” CEO Stuart Grimshaw says.

“We are also conscious of pressure facing all of our customers, including those with home loans and those with deposits, and believe the 20 bps cut also strikes a fair balance between the two.”

Ken Raiss, director at national accounting, property and wealth advisory group Chan & Naylor, anticipated the issue of Whether or not the banks would pass on the full rate cut pre-announcement.

"The rate cut is to stimulate demand and confidence, something which is unlikely to happen unless it is passed on," he says.

“Bank rates need to reflect the true economics of the economy,” says Raiss.

“Banks must align their rates official cash rates and increase availability to loans.”

Meanwhile, Suncorp and NAB have been the standout lenders in terms of funding new mortgages over the past three months to August, according to analysis of the latest APRA banking figures by Nomura.

Queensland-based bank Suncorp has grown its mortgage book by 11.1% between July and August to $32 billion (more than double the current annualised mortgage growth rate of 4.8%), while NAB has achieved impressive growth of 8.3% off a much larger book, which has grown to $186 billion.

ANZ has pulled back on mortgage lending recording growth of 5.4% over the August quarter – compared with annualised growth of 8.6%.

The Commonwealth Bank and Westpac remain the laggards in terms of new mortgage lending, with growth of just 4.2% each over the August quarter – below system growth of 4.8%.

The Commonwealth Bank’s mortgage book stands at $260 billion.

APRA counts Commonwealth Bank subsidiary Bankwest as a separate entity, with a $48 billion loan book, giving the Commonwealth Bank group a $308 billion combined mortgage book.

Westpac (including its subsidiary banks) has a loan book worth $293 billion.

According to Nomura analyst Victor German, the August APRA figures show that ANZ’s mortgage growth rate continues to converge with the average of the major banks.

However, he says NAB is continuing to gain market share, growing at one-and-a-half times the majors’ growth rate over the past three months.

“We believe this is positive for NAB’s longer-term profitability as long as funding is available.

“Both the Commonwealth Bank and Westpac continue to lose market share in mortgages as they defend their back book profitability,” he says.

NAB’s ability to grow its share of mortgage lending has been funded, in part, by its expanding deposits base.

The total value of deposits held by NAB are up by an impressive 16.5% over the past three months to $235 billion, ahead of the Commonwealth Bank (quarterly growth of 15.6%), Westpac (11.2%) and ANZ (4.7%).