The appearance of antagonism between the big banks is a piece of theatre that is likely to come to an end once the election is over.

The Age - 28th Jul 2010 - ERIC JOHNSTON

The appearance of antagonism between the big banks is a piece of theatre that is likely to come to an end once the election is over.

FORGET the war between the big banks. The real battle will be between banks and borrowers after the election.

But there's nothing better, as far as the major banks go, than for them to leave us with the impression that it is cut-throat out there. Especially when a federal poll is looming. And to the Banks' glee, many have swallowed it.

Ask business customers of banks about the so-called "maintaining the rage" and "hitting out" going on between the big four and you'll get a different response, particularly when many of those same banks have raised interest rates for business at a faster pace than home loan rates.

Indeed, a recent study by the New South Wales Business Chamber shows that ANZ, NAB and Westpac are today charging business a higher rate than at this time three years ago despite official cash rates having fallen 1.75 percentage points over that period.

The appearance of a rift between the banks has been growing since NAB's head of business, Joseph Healy, warned that some of the Sydney-based banks were taking the easy way out by lending too much to the housing market, at the expense of the small and mid-sized business market, prompting executives from NAB and Commonwealth Bank to hit back.

An executive at a mid-tier lender yesterday said the comments in the past few weeks were "simply about positioning in the business lending market".

"As smaller players stand, it would be nice to choose when and where we're going to go on pricing  we don't have the option to go into another area or segment," the executive said.

New figures from DBM Business Financial Services show businesses at the smaller end of the scale are finding it tougher to deal with their banks.

Businesses with turnover up to $5 million were less satisfied with their main bank in May than they had been in previous months, the DBM figures show. However, satisfaction is starting to improve among medium and large business customers.

Banks are as politically savvy as any big city mayor. So expect the appearance of hostilities to heat up, especially around August 11.

This is when Commonwealth Bank is scheduled to hand down its full-year profit  all $6 billion of it, which the banking lobby does not want to catch the attention of Canberra.

Just a few months ago, the banks were singing from the same song sheet when it came to resisting tough global regulation. The lobbying effort went into overdrive when it came to regulators eyeing off taxes and looking at a crackdown on remuneration.

Meanwhile, each bank has been adept at attributing to higher funding costs the need to raise lending rates by more than increases in the Reserve Bank's official cash rate. The banks moved quickly when it seemed that fees and charges could be a ripe target for reform. To avoid the prospect of being hit with a "social dividend" during the election, the big banks went all social on us.

Bear in mind that the big four have come out of the global financial crisis in a much stronger position than they went in, using their position to snap up weaker rivals, from banks to mortgage brokers.

Measures such as the deposit and funding guarantee, although necessary to stabilise the sector, have served to underpin the natural advantages the big banks already had over their international rivals.

At the peak of the financial crisis the big four were writing more than 90 per cent of the nation's new mortgages, compared with about 60 per cent before the crisis. However, their real grip on the market had been closer to 100 per cent after taking into account all the indirect lending they were funding on behalf of non-bank lenders and mortgage brokers.

So all this talk of a bitter dispute comes as a swathe of top-rated banking analysts have forecast the big banks will seek to push up interest rate independently of the Reserve Bank after the election.

Morgan Stanley's Richard Wiles reckons standard variable interest will increase by 10 to 15 basis points "sooner rather than later" as the big banks reprice $725 billion in Australian home loans.

Analysts at Macquarie Equities and RBS have also raised the prospect of repricing mortgages.

Remember Australian banks waited about two months after the 2007 election before making a series of out-of-cycle interest rate rises on mortgages. On that basis, November is shaping up as the best month for a ceasefire in the so-called bank war.