Financial Schools Reviews

Analysts are forecasting that Australia’s largest lender CBA will lift its mortgage lending rates by as much as 30 basis points over and above any official tightening in interest rates enacted by the Reserve Bank of Australia in the next six months.

On Wednesday, investment bank Morgan Stanley in a note to clients said CBA had to lift its lending rates by 50 basis points over the course of the next year if it wished to offset higher costs of funding and preserve full year 2011 earnings margins.

Morgan Stanley banking analyst Richard Wiles says that CBA would find it difficult to raise its lending rates by 50 basis points, but did forecast two 15 basis point independent rate rises, with the first expected during this quarter and the second expected during the March quarter of 2011.

“In our view, regulatory risk will increase if major banks try to protect existing margins and return on equity in retail banking by making several ‘out-of-cycle’ home-loan rate rises during full-year 2011, our forecasts assume just 30bp of ‘out-of-cycle’ rate rises,” he said.

CBA’s other big four rivals have all committed to holding their interest rates steady this month, after the central bank kept the official cash rate on hold at 4.5 per cent. Many market ana

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() - The Philippines central bank is on Wednesday scheduled to release August figures for bank lending and money supply, headlining an otherwise light day for Asian economic activity.

Bank lending is expected to rise 9.4 percent on year following the 8.9 percent annual expansion in July. M3 money stock is tipped to rise an annual 8.9 percent after surging 10.2 percent in the previous month.

Finally, the Chinese stock markets remain closed for the week-long National Day holiday. They will re-open on Friday.

() - A report released by the Institute for Supply Management on Friday showed a notable slowdown in the pace of growth in the manufacturing sector in the month of September, although activity in the sector still expanded for the fourteenth consecutive month.

The ISM said its index of activity in the manufacturing sector fell to 54.4 in September from 56.3 in August, but a reading above 50 indicates continued growth in the sector. Economists had been expecting the index to fall to a reading of 54.8.

Norbert J.

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Australian banking major ANZ is thought to be considering the possibility of engaging in a full acquisition of Korea Exchange Bank (KEB), which would require the lender to raise as much as $3 billion in fresh equity.

The lender is currently conducting due diligence on acquiring a 57 per cent stake in the Korean bank, which is owned by Export Import Bank of Korea, and Private Equity Firm Lone Star.

Victor German, an analyst with Japanese investment bank Nomura says he expects ANZ to have to raise at least $1.6 billion, and would be very surprised if the lender was not considering bidding for a full 100 per cent stake in KEB.

“Under the new Basel III rules, ANZ would need to raise about $1.6bn for a 57 per cent stake and about $3bn for a 100 per cent stake, If ANZ is successful, we believe it would look to increase its stake over time. F

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One of the worst features of credit cards is what is known as negative payment hierarchy. An example of this if the borrower undertakes a balance transfer to a zero balance account, the interest on the balance transfer is zero, whilst if the borrower uses the same card to make a new purchase, that purchase will attract interest.

Negative payment hierarchy is when credit card companies use any payment made to pay off debt which is accruing at low or zero interest, whilst the debt which carries higher interest continues to accrue charges at the higher rate.

Australian banking major NAB is seeking to end its practice of negative payment hierarchy, and has flipped it on its head by allowing its borrowers to pay off their higher interest debt first.

Negative payment hierarchy is an industry wide practice according to NAB personal banking group executive Lisa Gray.

“This will no longer be the case for NAB customers, credit card transactions attracting the highest interest rate will be paid off before the lower interest rate, helping to reduce the overall interest cost to our customers.” Ms. Gra

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