Westpac Banking Corp raised its key mortgage rate, the first of the nation’s biggest banks to decide passing on higher funding costs is worth the risk of further reputational damage.
Its variable standard home-loan rate for owner occupiers are to rise 14 basis points to 5.38 percent, the Sydney-based lender said in a statement yesterday.
The move reflects “a sustained increase in wholesale funding costs,” the bank said.
Westpac shares extended gains in Sydney after the announcement to close 2.7 percent higher — the biggest advance in more than two months.
Shares of the other big banks — Australia & New Zealand Banking Group Ltd, Commonwealth Bank of Australia and National Australia Bank Ltd — also rallied on the news.
Westpac’s move — and the potential the other big banks would follow — pushes the prospect of the Reserve Bank of Australia raising official rates even further into the distance.
The central bank has said it looks at the level of interest rates paid by households rather than its own cash rate, which has stood at a record-low for two years, when deciding policy.
The Australian dollar dropped after the announcement and was down 0.4 percent to US$0.7304 as of 4:33pm yesterday in Sydney trading.
The currency had been little changed on the day before the release.
The three-year government bond yield dropped 5 basis points.
Short-term domestic funding costs reached a two-year high last quarter even as the central bank held its benchmark rate at 1.5 percent.
Australian banks, which are reliant on offshore borrowing to fund their loan books, are also facing higher costs overseas as the US Federal Reserve raises interest rates.
“We now believe wholesale funding costs will remain high for the foreseeable future,” said George Frazis, head of Westpac’s consumer bank.
“Given the step change in our funding costs, we have made what we believe is the appropriate decision: to balance the interests of all of our stakeholders,” he said.
The increase in funding costs has come at an inopportune time for the big lenders, who are trying to restore their reputations in the wake of a series of scandals that led to a wide-ranging inquiry into misconduct in the financial sector, which in turn unearthed further wrongdoing.
While some smaller lenders have raised mortgage rates, Westpac is the first of the big banks to do so.
In addition to funding costs, margins are under pressure from increased competition, the necessity to invest more in technology and the slowing housing market.
The increase would add A$35 a month to the interest cost of an A$300,000 loan, Westpac said.
DECOUPLING? In a sign of deeper US-China technology decoupling, Apple has held initial talks about using Baidu’s generative AI technology in its iPhones, the Wall Street Journal said China has introduced guidelines to phase out US microprocessors from Intel Corp and Advanced Micro Devices Inc (AMD) from government PCs and servers, the Financial Times reported yesterday. The procurement guidance also seeks to sideline Microsoft Corp’s Windows operating system and foreign-made database software in favor of domestic options, the report said. Chinese officials have begun following the guidelines, which were unveiled in December last year, the report said. They order government agencies above the township level to include criteria requiring “safe and reliable” processors and operating systems when making purchases, the newspaper said. The US has been aiming to boost domestic semiconductor
Nvidia Corp earned its US$2.2 trillion market cap by producing artificial intelligence (AI) chips that have become the lifeblood powering the new era of generative AI developers from start-ups to Microsoft Corp, OpenAI and Google parent Alphabet Inc. Almost as important to its hardware is the company’s nearly 20 years’ worth of computer code, which helps make competition with the company nearly impossible. More than 4 million global developers rely on Nvidia’s CUDA software platform to build AI and other apps. Now a coalition of tech companies that includes Qualcomm Inc, Google and Intel Corp plans to loosen Nvidia’s chokehold by going
ENERGY IMPACT: The electricity rate hike is expected to add about NT$4 billion to TSMC’s electricity bill a year and cut its annual earnings per share by about NT$0.154 Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) has left its long-term gross margin target unchanged despite the government deciding on Friday to raise electricity rates. One of the heaviest power consuming manufacturers in Taiwan, TSMC said it always respects the government’s energy policy and would continue to operate its fabs by making efforts in energy conservation. The chipmaker said it has left a long-term goal of more than 53 percent in gross margin unchanged. The Ministry of Economic Affairs concluded a power rate evaluation meeting on Friday, announcing electricity tariffs would go up by 11 percent on average to about NT$3.4518 per kilowatt-hour (kWh)
OPENING ADDRESS: The CEO is to give a speech on the future of high-performance computing and artificial intelligence at the trade show’s opening on June 3, TAITRA said Advanced Micro Devices Inc (AMD) chairperson and chief executive officer Lisa Su (蘇姿丰) is to deliver the opening keynote speech at Computex Taipei this year, the event’s organizer said in a statement yesterday. Su is to give a speech on the future of high-performance computing (HPC) in the artificial intelligence (AI) era to open Computex, one of the world’s largest computer and technology trade events, at 9:30am on June 3, the Taiwan External Trade Development Council (TAITRA) said. Su is to explore how AMD and the company’s strategic technology partners are pushing the limits of AI and HPC, from data centers to