THE DISTILLERY: Rates reaction

Jotters analyse ANZ's out-of-cycle rate hike, and predict Crown is set to deal management a harsh hand.

Given that the big four banks wouldn’t hesitate to fatten their lending margins if Greece toppled over, two of them haven’t yet followed ANZ’s lead and the one that did, Westpac, did so just as Friday’s evening news was going to air, there’s still a lot to talk about this Monday morning. The Sydney Morning Herald’s Malcolm Maiden looks beyond the posturing about a mere six basis points to the potential for a Greek disaster, while The Australian’s John Durie points out just how little six basis points is in the context of the mortgage holder’s fortnightly bill and the bank’s recent margin pressure. Elsewhere, The Age’s Adele Ferguson reveals that Crown is about to axe a number of manager positions in a bid to refresh its outdated management structure.

The Sydney Morning Herald’s Malcolm Maiden says the curious thing about the ANZ rate hike decision is funding pressures have actually eased lately, though the bank still thought it could justify an increase of 15 basis points. The question is, will funding pressure continue to subside, or will the European debt crisis flare again?

"While Greece remains in the EU and the euro, there is no currency to devalue to reflect its economic plight. A bargain basement currency would boost Greece's international price competitiveness, laying the groundwork for an export-led recovery, and for many Greeks that sounds better than the pain Europe's ‘rescue’ is promising. Which way does it go? Pass. But if Greece's rescue fails, borrowing costs will leap, right across the global financial system. ANZ's and Westpac's rates touch-up might rile, but they are a catch-up, and also insurance.”

The Australian’s John Durie says ANZ boss Mike Smith has wisely decided to enter the new world of independent rate moves with a small step – six basis points – rather than something that would actually recover his bank’s recently increased costs.

"In profit terms, the six-basis-point move on home loan and small business rates, assuming other things being equal, adds ‘just’ $68 million profit to a bank which last year had an underlying profit of just over $5 billion. New home loans will still be sold at a loss and, on a back book of some $163 billion, the recovery is not huge. Everything is relative and to most of us $68 million is not small change and neither is an extra $13 a month when we are already paying more for lighting, rates and every other household bill.”

The Age’s Adele Ferguson reveals that Crown is poised to kill hundreds of management positions as part of a restructure to meet increased competition from Singapore and Sydney’s Star City.

"It is believed that up to 300 managers in the casino's table games division, including supervisors, pit bosses and operational managers, will be informed as early as this morning of the changes. Most of the affected managers are expected to be offered positions in the new structure. The 1000-plus dealers will not be affected by the management overhaul. Indeed, the company is believed to be about to lift the number of dealers. The restructure is aimed at modernising some of the more archaic management structures that dominate Australian casinos and that date back 40 years.”

The Sydney Morning Herald’s Jessica Irvine uses a rather wry observation about our apparent concern for the high Australian dollar – so similar to those worries we had for the drought – to illustrate that a strong currency does have its benefits.

"Remember during the drought how we all prayed for rain for the poor farmers, but in the privacy of our own – albeit somewhat browning – backyards we just lapped up all that glorious, uninterrupted sunshine? (Seriously, how good does a mini-drought sound right now?) Well, the same is true with the Australian dollar. In public, we fret furiously about the impact of a higher currency on the competitiveness of our export and import-competing industries such as manufacturing, tourism and education services. But in the privacy of our own homes, we're busy booking holidays to exotic locales and snapping up online bargains on shoes and gadgets as if every day were Boxing Day.”

Turning back to ANZ’s interest rate move for the rest of this morning’s commentaries. The Australian’s Richard Gluyas is still getting some mileage from suggesting that the Reserve Bank would keep interest rates on hold and the banks would have to fatten their margins without shelter. The Herald Sun’s Terry McCrann gives the bank bashers a good bash, while The Age’s Michael West gives those bashing the bank bashers a good bash. The Australian’s Glenda Korporaal reminds readers that if Mike Smith can take a bullet in Argentina while working for HSBC – which he did – he can cop the political heat for an extra six basis points. The Australian Financial Review’s Chanticleer columnist Tony Boyd offers the most comprehensive picture of the scene, while The Sydney Morning Herald’s Michael Pascoe makes sure not to suggest collusion when he points out that the big four banks have taken turns fattening up their margins (and then copping the bad publicity).

The Sydney Morning Herald’s Ross Gittins says the Reserve Bank will take careful notice of the unofficial rate hike by the banks as it’s most concerned with the rates people actually pay. However, the central bank didn’t cut rates last week because it said the economy doesn’t need it yet and forecasters should remember this. The Australian’s David Uren points out the Reserve Bank takes more notice of the unemployment numbers rather than ABS employment numbers, while The Sydney Morning Herald’s Ian Verrender runs down the growing list of job loss stories from some of our bigger companies.

The Sydney Morning Herald’s Ross Gittins says European leaders are making damn sure to not learn any economic lessons from the last 70 years in a piece for the weekend. The Age’s Adele Ferguson and Eric Johnston delivered a weekend feature talking about the decline of investment banking in the wake of Macquarie’s jobs cuts and the lead up to bigger than expected bloodletting at RBS Australia.

And finally, The Australian’s Glenda Korporaal finds big Australian investor Mark Carnegie suggesting gold will be a useful hedge against economic uncertainty, while bigger investor Warren Buffett is more wary.

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