Commonwealth Bank CEO Ian Narev today explained the reason why the official cash interest rate cut wasn’t passed on in full to home loan customers.
After releasing the bank’s full year results, including a $9.45 billion cash profit, Narev acknowledged the community interest in the interest rate decision.
The big four banks were widely criticised last week for only passing on about half the 0.25 percentage point cut in cash rates to 1.5%. The banks instead also increased some rates on deposits.
The federal government announced that the bank CEOs would be brought before parliament to explain themselves.
Narev described the decision as one balancing the interests of depositors, borrowers and shareholders.
“Our very reason for being is to balance between the interests of people who want to give us money to save and people who want to borrow money from us and our shareholders who give us the capital we need to survive,” he says.
“As a result of our decision we gave people a chance to earn more from their deposits, pay less from their home loans and we gave our shareholders to best chance of keeping a strong dividend
“That’s how you balance interests. That’s how you stimulate an economy.”
Later, during a presentation to analysts, he used the following slide to illustrate his point:
On Tuesday, ANZ CEO Shayne Elliott also described the decision as a balance between the interests of depositors and borrowers.
“We came to a balanced outcome of passing half of that rate cut onto our mortgage borrowers in particular and small business but also being able to afford to keep a little bit so we can afford to increase the rates that we pay for depositors,” he said.
Here’s Narev explaining the decision:
— CBA Newsroom (@CBAnewsroom) August 10, 2016