CBA net profit of $5.6Billion

Interesting I think is that it does sound a lot of money doesn't it? Yet…….when you look at how much employment they create, the annual turnover of the business (which is what banks are) I put to you if you had a business that only gave back that % return on investment, would you think you were loaded, or would you lock the doors and go and work for someone else? Don't get me wrong – I despise the price gouging and margin increase banks wax lyrical about as 'cost of funds increasing etc etc, (yawn) but if you look purely at the % return on their annual investment – it really is not that much.

Bit simplistic no 8.

CBA market cap – approx 80b
Divide by share price of approx $51.5 = 1.553b shares
Dividend paid to shareholders $1.70 per share or $2.64b

So let’s say they are left with 3b after paying dividends.

They employ over 38,000 people with about 64% of staff being women.
$3b works out to less than 1.0% of the money they have out the door.

During the last couple of years CBA and Westpacs maket share for home loans has sky rocketed. They need to get more funds from overseas to fund the growth – or alternativly stop lending. Let’s all cross our fingers because if the second happens our house values would crash destroying the aust economy.

If the banks didn’t increase rates above the reserve. The reserve would have incresed rates futher (the banks simply did it for them).

I support the profits from the banks. The fact that CBA is lending more per month now than before the GFC is a far more valuable contribution to Australian households than people give them credit for.

Has anyone done the math to see where the banks would be if they hadn’t gone above the reserve???
Do you think they would still be lending if they were suffering from decliding profits ?

There are 4 reasons we are enjoying the sun when other countries are under dark clouds. These 4 reasons are ANZ, CBA, WESTPAC and nab.

Go the Banks!

I have to agree with Banker here (and not just because I am one).

IMO the 4 banks WILL raise rates independently of the RBA due to higher funding costs.

Whilst all the advertising, marketing, sponsorship etc goes into trying to impress the customer, the end game is shareholder returns and the margin squeeze coming over the next 6-12 months will put downward pressure on earnings. I don't see how they can avoid increasing margins unless offshore credit markets open up all of a sudden?

The only other thing I would say is that there is almost NO chance that NAB will raise their rates BEFORE the other banks, because of their "More Give, Less Take" policy and marketing – This is a long term market share play which would be completely ruined if they raised rates first now…

My 2c…

Elol,

what have you been sniffing. Most credit unions and non banks dont match the banks on price.
There is a small handful of no brand lenders that will however you only need to read a few posts to see how many people have been burnt by this style of lending. E.g. Rams, wizard, Ge, ING and challanger to name a few.

My burnt I mean; reserve increase of 0.25, banks going say 0.35 and GE 0.7% and more. RAMs still have clients paying over 8% on loans that were originally cheap but then boomed… Oh and let’s not forget after getting screwed the 10k plus exit fees for many clients even on variable.

You still can’t trust a non-bank. Not even they know where there getting their money from :- )

You say they only stuffed up cause of the GFC.

Do you think clients takng products with these non banks should be warned of the additional risk or raising funds with a smaller lender that relies wholly on securitisation?

Not sure if you work in the industry but the talk of the regulators removing early exit fees is not targeted at the banks. Many of the non banks have said removal of their deferred establishment fees would destroy competition as they won’t be able to compete with the majors on rate… They rely on exit fees and penelties to compete with the banks.

P.s. If you go on to resi website even their cheapest rat is higher than NAB, ANZ or CBAs once they give the standard 0.7% discount. Resi says they have no fees but that doesn’t include legal fees, valuation fee etc – the majors don’t usually charge these…

Just checked mortgage house. There no cheaper than the majors either. In addition to that they should be one of the lenders I listed above. Shame the existing customers dont get the same price as the new… If the banks did this it would be all over the news; get them in then jack the rate – yet keep the low rate advertising for new clients. dodgy.

Ps didn’t mortgage house almost go broke and get bailed out by someone in the last 12 months?

And im not sure about MH almost going broke. I know that the ceo was taken to court over some money owing to a former partner but it was all cleared from what i heard.   Banker answer me this. If these non banks or credit unions are so bad then why did most of them get bought out by the majors during this GFC. They wouldnt buy something if it wasnt good. Come on if it wasnt for the non banks and credit unions the banks would be charging over %10 with early fees of $10000 at least/ Its thanks to the non banks and credit unions that banks are starting to become more honest.

Not so simple. Almost all non bank lenders that raise funds from securitisation have bumped up rates for existing clients far more than the major banks. The new customers get offered cheap rates but existing clients get large increases. It's a cycle that was already in place before the financial crisis and the clients only stay put due to high exit fees – in some cases 10 times that of the major banks (based on average loan of 350k – 2% exit fee = $7,000 – versus major bank $700). Some non banks have had exit fees as high as 3% of the original loan.

This post (link below) is another one from today. If you havnt seen one of these each week or two on this site you havnt been reading the posts for too long…

https://www.propertyinvesting.com/forums/getting-technical/finance/4333345

Give some examples and websites. I would say your incorrect but happy to be proven wrong. Noting lets go with some reputable lenders and not no-brands know one has heard of… 

career banker yes. But not currently employed by a bank.

Firstly because they went broke. But not just non-banks. St George and BankWest also got in to trouble.

One thing is certain. If you took a loan with GE, ING, Origin , RAMS, Challenger, firstmac or any of the hundreds of mortgage managers that got funds from these lenders under 'white label' products (that is funded by these lenders but under the manager brand (e.g. RESI) – your interest rates went far higher than the major banks above the reserve.

Im still not sure how these lenders are allowed to re-enter the market with cheap rates say from NAB Advantage while their existing clients are still getting burnt – such as the posts today re AMS Mortgage Services (funding by GE). Now AMS like other non bank lender are pumping money out the door from different wholesale funders while existing customers have been shafted…

Where is the accountability from these lenders?

At least with a major bank your rates are usually indexed to the standard variable e.g. 0.7% below the standard variable rate. Could you imagine the major banks having a different standard variable for new versus existing clients??

Yes they are good for competition. But we need someone to keep the non-banks and the credit unions honest at the moment. How about issues such as the non-banks being against abolishment if exit fees. They are campaigning that they need these fees to compete with the banks???

Something you may not know:

Most banks have claw back for brokers commissions e,g, if the customer refinances within 12 – 18 months the brokers commission is clawed back.

Many non-bank have NIL claw back therefore the broker does not pay back commission if the loan is refinance. Instead the lender claws it back from the client by way of heavy DEF (deferred establishment fees).

How is it fair if the lender jacks there rate by 0.7% – the lender has handcuffed the client to the product, the broker maintains their commission and the customer gets screwed. GE were paying up to 1.5% upfront on these clients. The brokers that didn't rebate this back to their clients to get them out shoud be shot (in my opinion). Yet they are still lending to new clients and 'cheap' looking rates with the same dodgy rules and the same dodgy brokers / mortgage managers…

Where on earth would we be without the major banks at the moment???
Look at CBA and the storm crisis. They tipped in over 500M to clients that lost money. BOQ the second biggest lender in this debacle tipped in NIL – match by the non banks. At least the banks can afford to pay for their mistakes.

IF you were caught up in this mess you would rather be with CBA than any other lender. When rates went up above the reserve you were better off with the major 4 than any other lenders, if you needed to payout your loan early due to unforseen circumstances in the past couple of years you would have been better off with a major bank than any other lender (exit fees), if you were with GE or the old RAMS or any other non-bank and went back for additional funds; you would have been better of with a major bank than any other lender (how many non-banks stopped lending).

Number 8

Do you honestly think the banks should start giving up their profits???
Who will fill their space is Australia if they stop lending???

Sorry but the non banks in Australia at the moment are crap. IF we want real competition the only option Australia has at the moment is for a heavy weight such as the government to step in and support some of the non banks with lending.

Non banks on their own backs are simply too risky for me. Just look at how many people they've already burnt…

Banker

Eoli,

Lets start with no 1 – rate busters…

Some reviews from the net… worth noting I was telling people they were dodgy well before the financial crisis. This behaviour is not only a GFC instigated thing:

(souce – productreview.com.au )

Pros: None

Cons: Once you got the loan, you were trapped and locked. The exit fee will be 1.2% of your loan amount. So if you have a 300K loan, the exit fee is 3,600 for the first 3 years, not to mention you have already paid a huge application fee.

Overall: Very ugly product. No personal contact, higher interest rate even than the big 4! And they cheated their customer of keeping the rate 1% lower than the market. Disgusting.

Pros: offset account

Cons: Poor support, no face-to-face talk, slow response…

Overall: If you wanna be ripped off, go for it. I reckon they should re-brand to RateBastard. At first it seemed their interest rate is not high but for the last couple of years, they raised the rate not a little slower than the big four did. If that's acceptable, be careful of their hidden cost such as deferred establishment fee, etc. It would cost you an arm and leg if you discharge the loan in 5 years (eg, you want to change a house, sell it or switch to other banks). Say if you have a 400K loan, they will charge you 1.2% ie. $4800 for the exit fee, not to mention you would have already been ripped off $2640 (0.66%) of application fee upfront. Have you ever seen a loan with such high application fee? Yes, that's rate bastard. 

Also – lets look a little closer at the product:

As per their website:

RATE: 6.43% effective for new business from 16/04/10 (what about the older clients???)
HOW TO APPLY: online or phone only
MAX LVR: 80%
VAL FEE: $220.00 (metro)
DOC PREP FEE: $275.00
SOLICITOR COSTS: $350.00
Early Repayment Fee: 2.0% within first 5 years e.g. 500,000 loan will attract a $10,000 penalty if you move in 5 years – even if they jack the rate like they do to all existing clients.

My assessment – they are crooks… Why not go to NAB at 6.54%? NAB will even match the rate for a good deal!

The 0.1% difference equates to $300 per year on a 300k loan?
Is it really worth the risk?
How can you compare the advertised rate to the banks when their existing clients have had their rates put up to higher than the banks?

What happens if you need more money in 4 years and they are not lending (well actually they are but through a nother lender). You still pay break costs even if you refinance back through rate busters.

If anyone is reading this and thinks for a second any of the lender in Eoli's list have any credibility; DONT GET A LOAN WITH THESE LENDERS – STICK TO A BANK!

DONT USE THESE LENDERS – they are all the same lenders. Just different "mortgage managers'.

This doesnt make sense. We all know banks have gone above the reserve. Now your saying they are keeping rates low to get marketshare? Even if they do start lifting rates again – at least it is transparent. Not regular increase to existing clients to make a profit while still offering new loans to hook people with low rates?

Sorry Elio but these buys are simply dodgy and not worth the 0.1%. The 0.1% is not even a real figure – you'll be cheaper for 6 months! 

I'm all for competition but not blatent rip offs and dodgy preditors praying on the uneducated home loan seekers.