ANZ CEO Shayne Elliott has defended the bank’s decision not to pass on all the RBA’s cut in official rates to home owners, saying he has five times more depositors than borrowers.
He cited this when explaining why the bank, along with the other big banks, didn’t pass on the full rate cut when the RBA dropped the official cash rate by 0.25 percentage points to 1.50%.
The ANZ cut its standard variable home loan rate by 0.12%, less than half the RBA’s cut last week. Instead, the banks increased the rates offered for deposits. The ANZ upped its one-year term deposit rate by 0.60 of a percentage point to 3% a year.
“It’s interesting to note, we have five times as many depositors as we do borrowers,” Elliott said today when releasing the bank’s quarterly update.
“We need to get that balance right because without those really valuable deposits, we don’t have any money to lend out.”
The bank today posted a 3% drop in cash profit to $5.2 billion for the nine months to June.
The failure of the banks to pass on the full cut caused a political storm with the federal government announcing that the CEOs of he big four banks would be brought before parliament to explain themselves.
Today Elliott described the bank as an intermediary, making sure depositors keep money in the bank and don’t take it out into other investments.
“The RBA cash rate is an important ingredient when we look at that formula and think about what the right number is on both sides — deposits and borrowers — but it’s certainly not the only ingredient,” says Elliott.
“It’s important, we absolutely took it into account and that’s why 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.”