Putting the bite back into banking. What does a bank do after a 7% rise in its half-year profit and a tidy 6% rise in interim dividend for all its needy shareholders? Put up investor mortgage rates by 0.25% and owner occupiers by 0.12% — that was a small mercy for owner-occupiers. But it’s yet another example of weak-kneed banking leadership as the regional bank put profits in front of its customers. Bank of Queensland CEO Jon Sutton said yesterday the rate increase was the result of it balancing “growth, risk and margins over the long term”. No doubt the BoQ also claims it is customer-centric and puts those strange beasts, customers, first — first in line to be clipped, that is. The bank’s net interest margin rose 10 points to 1.97 cents in the dollar in the latest half year (the bank attempted to spin the figure by comparing it wrongly with the second half of 2014-15, which left the figure unchanged. That is not an apples with apples comparison with the first half of that year).

But here’s a reminder: in February, Reserve Bank governor Glenn Stevens said the recent rise in wholesale funding costs had not been sufficient to warrant banks increasing their lending rates independently of the central bank. Stevens said banks were still able to roll over debt at lower interest rates than they had paid several years ago. — Glenn Dyer

How to start a small steelmaker? Easy question (it used to be how to start a small Australian company, the answer, employ a Kiwi entrepreneur and give him a big one). After the collapse of steelmaker Arrium yesterday with at least $2.8 billion in debts, the question comes to mind. When the resources boom was at its peak it was worth just on $7 billion as it charged off into changing its iron ore mix so that it could push more iron ore into the booming Chinese market — as well as the resources boom. At last Friday’s close the market value was 99.5% of its peak, or just under $65 million. And that is how you start a small Australian steelmaker, with an iron ore export operation thrown in for nothing. And make sure the board isn’t very good, and a bit deaf to the people who count — banks and staff. — Glenn Dyer

RBA stability review. Arrium’s collapse and the bank bad debts means next Friday’s release of the first Financial Stability Review of this year from the Reserve Bank of Australia (there are two) will assume more importance than normal. The total Arrium debt of $4 billion-plus and the $1 billion-plus in bank loans to the stricken steelmaker from our big four banks means the central bank’s comments on bad debts will be closely examined by analysts and others. ANZ has already lifted its bad debts estimate from $510 million in the first half of 2014-15, to over $800 million. But that was up to a fortnight ago when it revealed it was adding another $100 million for exposures to some troubled resource borrowers, one of which is understood to be Arrium. Now Westpac, NAB and CBA will have to release their own higher figures. Remember bad debts are rising in the Kiwi dairy industry and the NZ reserve Bank wants the banks (our big four) to hold more capital against an expected continuation of this situation (it has already shown up in the NAB’s 2014-15 figures). Other points to watch for will be the continuing problems banks are having with classifying home loans between investors and owner-occupiers, and our old chestnut (but not for customers), weak bank culture and management. — Glenn Dyer

Cue China. Gloom or gloomier — China returns to the top of the global scare list next week with the release of March monthly and quarterly economic data, including the all-important GDP figure. All economic data are estimates — in China’s case that is very important to keep in mind. So next week, the timetable of estimates is: Sunday, bank loans; Monday, CPI and PPI (producer) inflation; Wednesday, Trade (and the performance of the export and especially import sides of the estimates); Friday, quarter-on-quarter GDP for the March quarter, industrial production, retail sales, urban investment (including the rebounding property sector). Monday week there’s house prices and later that week the yearly GDP figures. Things to look for for Australians: bank lending and whether it is going into property (and the size of the rebound in property investment and if the recovery in house price growth is continuing and widening across more of the country –keeping in mind this can only be a temporary help). Confidence levels seem to on the rise about China. Fool’s gold, again? — Glenn Dyer

Peter Fray

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