ANZ puts its case on margins

ANZ provided a fresh view of trends in its funding costs in a letter to the Sydney Morning Herald that explains the reasons for the banks decision to lift its variable home loan rate by six basis points from the end of last week.

Phil Chronican, ANZ's CEO Australia, wrote that "'the bottom line is that, taking into account's ANZ's funding mix of deposits and short and long-term wholesale funding, our funding costs are up 18 basis points over the past six months while ANZ's variable interest rates have risen by 12 basis points.

''In the six-month period from October 1, 2011, to March 31, 2012, the average cost of ANZ's A$75 billion stock of term wholesale funding increased every month, except in December 2011 when credit markets froze because of the European sovereign debt crisis and wholesale markets were closed globally.'

''ANZ's average cost for term wholesale funding increased by 15 basis points from 116 basis points above the … swap rate to 131 basis points>"

Chronican wrote that the difference between the Reserve Bank's overnight cash rate and the average amount that ANZ pays to depositors increased 28 basis points, from 0.41 per cent to 0.69 per cent.

Other bank chief executives have chafed at the content of much of the media debate over interest rates and margins in banking.

Speaking on Thursday Ian Narev, CEO of Commonwealh Bank said: "I can’t understand under what standards of journalism it can be okay to quote from Reserve Bank minutes ... that cites a couple of sentences that seem to support a case and ignore broad conclusions which are antithetical to the point that people are trying to make. I can’t understand how that can be good responsible journalism on the facts.

"Similarly, I can’t understand how it can be good coverage of the debate to say, well if for example five year covered bond is now pricing at 20 basis points less than it was in December but still ahead of where it was in September, let alone the fact, that under the regulatory environment you’re having to replace five year money with ten years money at a 40 basis points of spread, how that can’t be relevant to a debate about funding costs.

"So if we are going to carry on having these debates, and they are good legitimate debates to be had, all of us contributing to the debate need to be prepared to take the extra half hour, get the facts and print the facts and respond to them."