These charts show how funding costs for banks are falling, even as home loan rates jump

The major banks have jacked up home loan rates for borrowers. The Commonwealth was the most generous only increasing rates by 0.15%, while Westpac hit borrowers the hardest, increasing home loan rates by 0.20%

Of course, the banks blame Australia’s prudential regulator, APRA, for the move. But as Business Insider explained last week it’s not about regulatory capital, it’s about shareholders.

And as pointed out today, the gap between the RBA cash rate and bank mortgage home loan rates is widening in favour of the banks. That means they are making more money on interest rate margins than at any time this century.

Against this backdrop it’s also interesting that Deutsche Bank reports wholesale funding costs for the big banks are falling again after recent rises recently the stock and other market ructions.

Analysts Andrew Triggs and Anthony Hoo said in a note released Friday that:

Over recent weeks we have seen an improvement in major bank CDS spreads, which has partially reversed the deterioration seen last month. While global uncertainty remains, including concerns stemming from China, negative sentiment appears to have settled slightly. Bank bill-OIS spreads have not changed vs last month, and remain well below the levels seen early this calendar year. Meanwhile AUD/USD cross currency basis swap spreads are close to their low points of the last few years. Overall we expect wholesale funding costs to remain a tailwind to margins in 2H15.

Indeed Triggs and Hoo highlight that the Major bank CDS (credit default swap, the market’s view of the likelihood a bank will default on its debt) has actually fallen 14 basis points to 87 in the past month and that these spreads “remain fairly low when compared to the range seen in the past 5 years.”

CDS and OIS (overnight index swap, which factors cash rate movement risk) are nowhere near the total of a major banks funding mix. But a lower CDS level generally means investors are happy to take a lower interest rate on bank debts across multiple markets. It implies cheaper funding.

That all adds to the “tailwind to margins” comment Triggs and Hoo make.

Loosely translated, that’s analyst speak for: the banks will be making even more money.

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