Westpac Ups IO Mortgage Rates

Westpac has lifted interest only mortgage rates by 34 basis points, whilst cutting principle and an interest rates by 8 basis points, effective 30 June. The bank says this has nothing to do with the Bank Tax which passed the Senate yesterday.

Effective on 30 June 2017, Westpac will reduce its variable rate interest rates for customers paying principal and interest on their owner occupier home loans by 8 basis points to 5.24% per annum (comparison rate 5.38% per annum*).

Westpac will also adjust interest only rates for variable home loans as follows:

  • Owner occupier interest only rate will increase by 34 basis points to 5.83% per annum (comparison rate 5.97% per annum*)
  • Residential investment interest only rate will increase by 34 basis points to 6.30% per annum (comparison rate 6.43% per annum*)


George Frazis, chief executive of Westpac Consumer Bank, said this is good news for owner-occupier customers who make principal and interest repayments as they will benefit from lower interest rates allowing them to pay off their loans faster.

“We hope the rate reduction will encourage owner-occupier customers with interest-only home loans to switch to principal and interest repayments, helping them to pay down their home loan in this low interest rate environment. There will be no switching fee,” he said.

“We understand the significance of interest rate changes to our home loan customers, so we try to balance the needs of both owner-occupiers and investors in making these decisions.

“APRA’s limit on new interest only lending is 30 per cent of new residential mortgage lending, so we have to continue to make changes to our interest-only rates and lending policies to meet this benchmark.


NAB Ventures backs Sydney start-up, Basiq

Basiq, a start-up that provides Australia’s first open banking API platform, has gained investments from NAB Ventures and Reinventure in a seed funding round.

Based in Sydney, Basiq’s core platform enables fintech companies to securely acquire authorised financial data on behalf of their customers. This enables fintechs to develop innovative solutions for their customers around things like personal finance management, wealth management and income verification.

Basiq launched in early 2017 and is unique in the Australian market with a product that provides easy integration, great developer experience and a pay-as-you-go pricing model.

“Basiq’s fundamental mission is to enable innovation in the fintech space. By providing a platform that delivers core banking functionality through a set of secure and easy to use API services the opportunities and possibilities of what can be created are endless,” Founder Damir Cuca said.

“A key part of realising this vision is to work with existing financial institutions and fintechs and be the bridge between the two. The institutions provide the regulatory discipline and the core systems, and the fintechs provide the speed of innovation.

Managing Director NAB Ventures, Todd Forest, said: “The way financial institutions use and share data continues to be an area of focus as banks look for ways to provide improved products and services for their customers.

“Over a number of years NAB has invested in secure API technology and looked for ways it can be used to deliver improved experiences for our customers by effectively and safely using data.

“Basiq is still in its early stages, but it is developing a dynamic technology platform; as they grow and develop their platform and tech capabilities we hope this relationship will help provide us with valuable insights and opportunities for future innovation.”

General Partner Reinventure, Kara Frederick, said: “Damir is a repeat founder with a unique ability to balance the sophisticated requirements of financial institutions with the pace and specialisation of fintechs. The result is that Basiq’s platform enables an ecosystem of tailored and secure solutions that banking customers want.

“Through this investment, Basiq will help to open up a world of fintech end-to-end solutions, some of which we anticipate – like the digitisation of the traditionally manual mortgage application process – and many of which are yet to be discovered.”


About NAB Ventures

NAB Ventures was established in January 2016, as the venture capital arm of National Australia Bank (“NAB”). NAB Ventures is a global initiative supporting entrepreneurs in Australia and offshore in their quest to build leading technology companies. NAB Ventures’ partners, Todd Forest and Melissa Widner, have founded, led, and invested in technology companies for two decades in both Australia and the US. NAB Ventures invests in founders that can leverage NAB’s expertise, assets and market position, to scale both within Australia and overseas. To learn more about NAB Ventures visit: www.nabventures.com

About Reinventure

Reinventure is an Australian venture capital fund whose largest investor is the Westpac Banking Corporation, one of Australia’s largest banking and financial services companies. Reinventure’s primary objective is to bring great entrepreneurs together in a partnership opportunity with Westpac. As a result, Reinventure helps ventures to scale more rapidly than they could do on their own. Reinventure makes investments from seed to Series B. Reinventure was co-founded by Danny Gilligan and Simon Cant, and is managed along with partner Kara Frederick. The partners are also fund co-investors. Reinventure funds total $100 million across Fund 1 and Fund II and include 15 portfolio companies and growing. To learn more about Reinventure Group visit: www.reinventure.com.au.

Westpac Tightens Mortgage Lending Policy

Westpac has joined the bandwagon as from 5 June, the bank will reduce the maximum LVR on new and existing interest only lending to 80%. This change will apply across the board to owner occupier and residential investment loans, equity access loans and special borrower packages such as Medico, Industry Specialisation Policy, Sports and Entertainment, and Accounting, Law and Executive Sector loans.

Westpac will also no longer accept new standalone refinance applications for owner occupier interest only home loans from an external provider, effective from 5 June. Internal refinancing for owner occupiers will still be permitted for interest only loans, subject to maximum LVR requirements and customer suitability.

Principal and interest as well as residential investment interest only refinancing will not be affected.

Westpac will continue to waive the repayment switch fee for those wishing to move from interest only to principal and interest repayments. Premier Advantage Package customers can switch at any time with no additional costs. For fixed loans however, certain break costs may apply.

Westpac said in a note to brokers:

“We are committed to meeting our regulatory requirements, and ensuring we are lending responsibly and in the best interests of our customers. We regularly review our polices and processes based on a number of factors such as the impact of regulatory requirements and the economic environment,”

“These changes will help us continue to meet our regulatory requirements and apply responsible lending practices in assessing a customer’s ability to service existing and proposed debts.”

Westpac overhauls lending conditions

From Australian Broker.

Major bank Westpac and its subsidiaries BankSA, Bank of Melbourne and St George have announced a wide range of changes to home loan products across the board.

Westpac has increased the rates on its fixed rate investment property, SMSF and non-resident fixed investment property loans with interest-only repayments by 20 basis points. These changes came into effect on Monday (22 May).

There will be no changes to Westpac’s policy of no new lending to non-residents, however, with the increased rates only available to non-residents seeking to switch their existing lending.

The major has also updated its customer identification and verification process, meaning brokers will now also have to ask for tax residency information.

Under the Common Reporting Standard (CRS), banks such as Westpac are obligated to collect and maintain information about the foreign tax residency of their customers. This means that, effective from Monday (22 May), new mortgage customers will need to confirm if they are a tax resident of a foreign country.

The collection of this data is mandatory when finalising a customer’s loan application with a branch. If the individual answers yes, the countries where they are a tax resident plus their Tax Identification Number (TIN) will need to be collected.

“Please be aware of this new requirement as you are having discussions with your customers, to prepare them for what information they need to provide to branch staff,” Westpac wrote in a broker note.

“We regularly review our rates and the changes to fixed rates reflect prudential regulatory requirements and the economic environment,” a Westpac spokesperson told Australian Broker.

Westpac’s subsidiaries

At BankSA, Bank of Melbourne and St George Bank, a number of changes have been made to interest rates across a wide variety of owner occupier and investment products, effective Monday (22 May).

For standard fixed rate principal & interest mortgages, the three year fixed rate for owner occupiers has dropped by 21 basis points while the three year fixed rate for residential investment dropped by 30 basis points.

The interest rate for these lenders’ residential investment standard fixed rate interest only loans increased by 20 basis points for terms between one and five years.

A similar increase of 20 basis points has also been made across all portfolio fixed rate loans (of one to five year terms).

Rates for principal and interest low doc loans have only changed for those with three year terms. For owner occupiers, rates dropped by 21 basis points while for residential investment they dropped by 30 basis points.

The final rate change is an increase of 20 basis points to all residential investment low doc fixed rate interest only loans and fixed rate super fund interest only home loans regardless of the term.

Westpac’s subsidiaries have also extended the current $1,500 Refinance Cashback offer for owner occupiers and investors which was previously due to expire on 31 May. Those eligible will need to refinance from outside Westpac or its subsidiaries. Owner occupiers are restricted to switching to a principal and interest loan.

Finally, the banks have banned borrowers from switching from principal and interest loans to interest only within the first 12 months of loan drawdown. If the client requires this, a full re-origination will be required with some limited exemptions.


Westpac Sells 19% Of BT Investment Management

Consistent with this strategy to prioritise investment and capital management, Westpac Group has announced a fully-underwritten offer of 60 million shares (approximately 19% of BTIM’s shares on issue) to institutional investors domiciled in Australia and other relevant jurisdictions.

Following completion of the offer, Westpac’s ownership in BTIM will reduce from 29% to 10%. Westpac intends, subject to favourable market conditions, to sell its remaining 10% shareholding in BTIM in the future.

Completion of the offer is expected to add approximately 10 basis points to Westpac’s Common Equity Tier 1 capital ratio.

While BTIM will remain a strategic partner, following the selldown some changes in the arrangements between Westpac, BT Financial Group and BTIM will occur over time.

We estimate the post-tax profit on sale will add around A$100 million, or more than 1% of the banks FY17 earnings.

Impact of new major bank tax on Westpac

Westpac today updated the market on the new major bank budget deficit repair levy (‘Levy’) announced in the 2017 Federal Budget.

Given the limited detail available to us it is difficult to precisely calculate the Levy.  Nevertheless, given information received to date, we are able to provide preliminary estimates of the cost of the Levy for Westpac.

Based on Westpac Banking Corporation’s balance sheet at 31 March 2017, the announced 0.06 per cent (or 6 basis point) Levy would apply to approximately $615 billion of Westpac’s liabilities (‘Impacted liabilities’).  Impacted liabilities would exclude certain prescribed items including approximately $174 billion of financial claims scheme eligible deposits. The Levy is expected to be tax deductible, but will not attract franking credits (Australian tax imputation credits).

As the Levy is expected to be applied from 1 July 2017, it will impact Westpac’s Full Year 2017 financial results (year ended 30 September 2017).  On the basis of the above estimates, it would result in a new cost in our Second Half 2017 of approximately $65 million after tax.  On an annualised basis, that represents a cost of around $370 million or around $260 million after tax.  The exact cost will depend on the final form of the new legislation passed and the composition of Westpac’s liabilities.

No company can simply ‘absorb’ a new tax, so consideration is being given to how we will manage this significant impost on the bank.  We plan to consult with stakeholders, including shareholders, on the Levy.

To dimension the impact of the Levy for our shareholders, the $260 million after tax cost is equivalent to around 8 cents per share (using the above estimates).  Based on Westpac’s 2016 full year dividends of 188 cents per share, this represents 4.3% of dividends paid.

Westpac has strongly objected to the Levy on the grounds that it is an inefficient tax that targets just five companies; it places the major Banks at a competitive disadvantage relative to international peers; and it is a tax on growth because as lending and investment increases the cost of the Levy also rises.  A further objection is that the Levy currently has no end date, so it becomes a permanent tax impost on companies that are already amongst Australia’s largest taxpayers.

BT Panorama inks deal with robo-adviser

From Investor Daily.

BT has made a clear statement of intent on digital advice by signing a platform connectivity deal with Ignition Wealth.

In a deal that will be announced this morning, BT has agreed to connect advisers and accountants using the Ignition Wealth platform to BT Panorama.

A spokesperson for BT confirmed to InvestorDaily that Ignition Wealth is the first digital advice provider to have connectivity with Panorama.

The agreement between the two companies is squarely aimed at accountants who are no longer permitted to provide advice to SMSFs after the expiry of the ‘accountants’ exemption’ on 1 July 2016.

Speaking to InvestorDaily about the deal, Ignition Wealth chief executive Mark Fordree said that while many clients will continue to be offered portfolios of ETFs, others will now be recommended a BT Panorama product if it is in their best interests.

The experience will be “seamless”, he said, with the Ignition Wealth engine granted permission to create BT Panorama accounts for clients.

“Our hybrid solution will allow an individual to have a complete self-service into numerous investment options including BT Panorama but not limited to it,” Mr Fordree said.

“The journey starts with Ignition Wealth, and a proportion of the clients that come through our platform may end up in BT Panorama where it’s appropriate.”

The agreement with BT was a long time in the making and it was a matter of “jumping bank-grade hurdles” at every step of the process, Mr Fordree said.

While the initial agreement with BT is limited to connectivity with Panorama, the goal of Ignition Wealth is to become completely integrated into Panorama and the BT Wealth platform.

“All the major players in the wealth management business may over the next few years have a digital platform,” Mr Fordree said.

“Whether they build it themselves or partner is the key question. We’re offering a solution to those who either don’t have the appetite or capability to build it.

“If they haven’t started already, I suspect that they’re already leaving it too late.”

In a separate statement, Ignition Wealth said the deal with BT was “the largest fintech deal in Australia to date”.

“This marks the first of the ‘big four’ to choose an independent technology provider to power their digital financial advice,” it said.

$200m+ Refunds Due From Major Financial Advisory Firms – ASIC

ASIC says AMP, ANZ, CBA, NAB and Westpac have so far repaid more than $60 million of an expected $200 million-plus total in refunds and interest for failing to provide general or personal financial advice to customers while charging them ongoing advice fees.

These institutions’ total compensation estimates for these advice delivery failures now stand at more than $204 million, plus interest. As foreshadowed in ASIC’s Report 499 Financial advice: fees for no service (REP499), ASIC can now provide an update on compensation outcomes to date.


In October 2016 the Australian Securities and Investments Commission (ASIC) released REP499. The report covered advice divisions of the big four banks and AMP and described systemic failures to ensure that ongoing advice services were provided to customers who paid fees to receive these services, and the failure of advisers to provide such services. The report also discussed the systemic failure of product issuers to stop charging ongoing advice fees to customers who did not have a financial adviser.

At the time of the publication of the report compensation arising from the fee-for-service failures reported to ASIC was approximately $23.7 million, which had been paid, or agreed to be paid, to more than 27,000 customers.

Since REP 499 a further $37 million has been paid or offered to more than 18,000 customers. In addition, the institutions’ estimates of total required compensation for general and personal advice failures have increased by approximately 15% to more than $204 million, plus interest.

The table provides, at an institution level, compensation payments and estimates that were reported to ASIC as at 21 April 2017. Since that date compensation figures have continued to increase.

Group Compensation paid or offered Estimated future compensation   (excludes interest) Total (estimate, excludes   interest)
AMP $3,816,327 $603,387 $4,419,714
ANZ $43,818,571 $8,613,001 $52,431,572
CBA $5,850,827 $99,786,760 $105,637,587
NAB $4,641,539 $385,844 $5,027,383
Westpac $2,670,479 Not yet available $2,670,479
Total (personal advice   failures) $60,797,743 $109,388,992 $170,186,735
NULIS   Nominees (Australia) Ltd (1) Nil $34,720,614 $34,720,614
Total (personal and general   advice failures) $60,797,743 $144,109,606 $204,907,349

Source: Data is based on estimates provided to ASIC by the institutions and will change as the reviews to determine customer impact continue.

(1) For details, see the section on NAB below.

Key compensation developments


  • AMP’s total compensation estimate decreased from $4.6 million to $4.4 million as AMP reviewed customer files and data to determine compensation required, and revised its previous estimates.


  • The total compensation estimate has increased from $49.7 million to $52.4 million due to the expansion of existing compensation programs and the identification of further failures by authorised representatives of two ANZ-owned advice businesses:
    • Financial Services Partners Pty Ltd; and
    • RI Advice Group Pty Ltd.
  • The largest component of ANZ’s compensation program relates to fees customers were charged for the Prime Access service, where ANZ could not find evidence of a statement of advice or record of advice for each annual review period.
  • In addition, ANZ found that further compensation of approximately $7.5 million is required to be paid to ANZ Prime Access customers for ANZ’s failure to rebate commissions in line with its agreement with customers. This compensation has not been included in the figures in this media release because it does not relate to a failure to provide advice for which customers were charged, but is noted for completeness and transparency.


  • There has been no substantial change in CBA’s compensation estimate, which remains at approximately $105 million, plus interest, the majority of which relates to Commonwealth Financial Planning Ltd (CFPL). The compensation estimate for CFPL results from a customer-focused methodology whereby, as well as providing refunds where the adviser failed to contact the client to provide an annual review, CFPL will provide fee refunds to customers where:
    • the adviser offered the customer an annual review and the customer declined, or
    • the adviser tried to contact the customer to offer a review, but was unable to contact the customer.
  • Some of the other licensees or banks covered by the ASIC fees-for-no-service project have not, at this stage, adopted a similar customer-focused approach to the situation in which a service was offered but not delivered.  ASIC continues to discuss the approach to this situation with these banks and licensees.


  • Since the publication of REP 499, by 21 April 2017, NAB reported to ASIC the further erroneous deduction of adviser service fees for personal advice from more than 3,000 customers of the following licensees:
    • Apogee Financial Planning Ltd: $11,978, from 11 customers;
    • GWM Adviser Services Ltd: $179,446, from 290 customers;
    • MLC Investments Ltd: $9,755, from six customers;
    • National Australia Bank Ltd: $2,777, from seven customers; and
    • NULIS: $173,120, from 3,310 customers.
  • In addition, the table shows the expected compensation of approximately $34.7 million by NAB’s superannuation trustee, NULIS Nominees (Australia) Limited (NULIS), for two breaches involving failures in relation to the provision of general advice services to superannuation members who paid general advice fees (other fees referred to in this release relate to personal advice). As announced by ASIC on 2 February 2017 ASIC has imposed additional licence conditions on NULIS following these and another breach: ASIC MR 17-022. The failure was by MLC Nominees Pty Ltd (and MLC Limited for the first of the two breaches).  Whilst on 1 July 2016 the superannuation assets governed by MLC Nominees were transferred by successor fund transfer to NULIS, and on 3 October 2016 NAB divested 80% of its shareholding in the MLC Limited Life Insurance business, accountability for this remediation activity (including compensation) remains within the NAB Group. The estimate of customer accounts affected has increased from approximately 108,867 to 220,460 since REP 499, reflecting the second of two breaches.


  • REP 499 noted that Westpac had identified a systemic fees-for-no-service issue in relation to one adviser only, with compensation of $1.2 million paid in relation to those failures.
  • Following further ASIC enquiries, Westpac subsequently clarified that it has paid further compensation of approximately $1.4 million to 161 customers of that adviser and 14 further advisers, in respect for fee-for-no-service failures in the period 1 July 2008 to 31 December 2015.

Next steps

ASIC will continue to monitor these compensation programs and will provide another public update by the end of 2017.  In addition ASIC will continue to supervise the institutions’ further reviews to determine whether any additional instances are identified of fees being charged without advice being provided.


Customers who are paying ongoing advice fees for services they do not need can ask for those fees to be switched off. Customers who have paid fees for services they did not receive may be entitled to refunds and compensation, and should lodge a complaint through the bank or licensee’s internal dispute resolution system or the Financial Ombudsman Service.

ASIC’s MoneySmart website has a financial advice toolkit to help customers navigate the financial advice process and understand what they should expect from an adviser. It also has useful information about how to make a complaint.

Westpac 1H17 Result Good, In Parts

Westpac has declared a 1H17 Statutory net profit of $3,907 million, up 6% compared with 1H16, with Cash earnings $4,017 million, up 3%.

Most of the increase in net operating income was due to a higher Institutional Bank contribution from participation in a number of significant customer transactions and from stronger markets income.   This strong markets result relies on non-customer trading, and may be hard to replicate. They were impacted by higher insurance claims mostly associated with Cyclone Debbie, and higher delinquencies with a $44 million rise in impairment charges in the consumer book.

Net interest income increased $136 million or 2% compared to First Half 2016, with total loan growth of 4%, primarily from Australian housing which grew 6%.

However net interest margin is under pressure, and has declined 7 basis points over the past 12 months, of which 4 basis points was in 1H17. The consumer bank fell 6 basis points.  Loan repricing may help in the 2H17.

Group net interest margin was 2.07%, a decrease of 4 basis points from Second Half 2016. Key features included:

  • 4 basis point increase from loan spreads. This reflected loan repricing mostly in Australian mortgages, including repricing of interest-only and investor loans. These increases were partly offset by competition;
  • 4 basis point decrease from customer deposit spreads, driven by the full period impact of increased competition for term deposits in 2016 (3 basis points) and the continuing impact of lower interest rates on the hedging of transaction deposits;
  • 1 basis point decrease from term wholesale funding costs reflecting an increase in Additional Tier 1 and Tier 2 capital balances and the higher costs of these instruments;
  • Capital and other decreased 2 basis points primarily from the impact of lower interest rates; and
  • 1 basis point decrease from liquidity, reflecting the increased holdings of third party liquid assets to meet the LCR requirement. This was partly offset by a lower CLF fee following a $9.5 billion reduction to the CLF from 1 January 2017.

Cash earnings was per share 119.8 cents, up 1% and the cash return on equity (ROE) was 14%, at the upper end of 13-14% range.

Expenses are well controlled (up 1% over the year) and included a productivity saving of $118m with an expense ratio of 41.7%.

Impairments were down (15bps of loans) down 26% over year to $493 million as 1H16 included additional provisions for a small number of larger names. There were workouts of some larger facilities in the Institutional Bank and NZ.

They further strengthened their Common equity Tier 1 capital ratio of 10.0%

Organic capital generation of 29 basis points included:

  • First Half 2017 cash earnings of $4.0 billion (99 basis points increase);
  • The 2016 final dividend payment, net of DRP share issuance (70 basis points decrease);
  • Ordinary RWA was modestly lower (excluding FX movements, RWA initiatives and modelling changes), a 2 basis point increase; and
  • Other movements, decreased the CET1 capital ratio by 2 basis points.

Other items increased the CET1 capital ratio by 20 basis points:

  • RWA initiatives including management of unutilised limits reduced RWA by $1.6 billion (4 basis points increase);
  • Regulatory modelling changes (discussed further below) reduced RWA by $1.0 billion (3 basis points increase);
  • Reduction in the deferred tax asset (6 basis points increase);
  • The impact of foreign currency translation (4 basis points increase), mostly related to NZ$ lending; and
  • A decrease in the accounting obligation for the defined benefit pension plan primarily reflecting higher discount rates used to value defined benefit liabilities (3 basis points increase).

They announced a 94 cents per share interim, fully franked dividend, which is unchanged from last period.

Looking at the divisional splits

Consumer Bank

Cash earnings of $1,511 million was 2% lower than Second Half 2016 with the decline primarily due to a $44 million rise in impairment charges. While asset quality remains sound, higher delinquencies – including from
changes in the reporting of facilities in hardship – led to the increase in impairment charges. Core earnings were relatively flat over the period (up $6 million) as were most of its components, with operating income up $2 million and expenses declining $4 million. The division recorded disciplined growth with mortgages rising 2% and other lending slightly lower.

Customer deposit growth was solid, up 3% supported by a 2% rise in customers and a focus on deepening relationships by growing transaction accounts. Balance sheet growth, however, was largely offset by a 6 basis point decline in net interest margin. The margin decline was mostly due to competition for lending and higher funding costs, particularly across term deposits. As a result of these movements, net interest income was up $12 million. Non-interest income was $10 million lower mostly from reduced cards related income.

Productivity continues to be a significant focus with costs broadly unchanged over the half and the expense to income ratio continuing to fall. A range of initiatives contributed to the improved efficiency including the further digitisation of manual processes such as: changing PINs online, enhancing the origination of personal loans, and improving access to key mobile banking transactions. Improving customers’ digital access contributed to a net reduction of 26 branches over the half.

Australian mortgages accounts for 62% of group loans. They showed a 2 basis point rise in delinquencies, with a rise in WA. The number of consumer properties in possession rose from 261 in Sept 16 to 382 in Mar 17. Investment property 90+ day delinquencies rose from 38 basis points in Mar 16, to 47 basis points in Mar 17.  Loss rates remain at 2 basis points.

They said that interest-only represented 46% of flow in 1H17 and 50% of the total mortgage book. That said, the proportion of current drawdowns that are interest-only has already fallen into the mid-30s of total flow, remembering the APRA target of no more than 30% by September.

They also reported higher delinquency rates in their unsecured consumer books, with 90+ day up from 1.17% in Sept 16 to 1.63% in Mar 17.  28 basis points reflect an adoption of APRA hardship policy adopted across Westpac’s Australian unsecured portfolios.

Business Bank

Cash earnings of $1,008 million was $9 million, or 1% higher than Second Half 2016. The result was supported by higher fee income, targeted loan growth, and efficiency gains from digitisation and simplification initiatives. The division took a disciplined approach to growth in the half choosing to grow in sectors such as services and in SME and reducing exposure to some lower returning sectors including asset finance and commercial property. As a result, lending was up less than $1 billion (1%). Deposits grew 1%, mostly from working capital balances (up 4%) as the division focused on broadening relationships. Fee income was also higher mostly from a rise in line fees.

Expenses were up 1%, mostly from increased technology and investment including expanding the use of the division’s online origination platform and the continued roll out of new payment technologies. These increases
were partially offset by improved efficiencies including from the greater use of digital and refining the banker to customer ratio across segments. Impairment charges were flat, reflecting higher provisions in the auto loan portfolio, mostly related to a rise in delinquencies from changes in hardship reporting, offset by a lower impairment provisions for other business lending.

BT Financial Group

BTFG delivered a sound performance in a challenging environment, with good increases in funds, strong volume growth in lending and deposits and disciplined expense management. FUM and FUA balances were up 14% and 4% respectively while Life in-force premiums were up 6%.

Despite these benefits, the division was impacted by higher insurance claims mostly associated with Cyclone Debbie, and reduced fund margins from product mix changes, including from customers being transitioned from legacy products to lower fee MySuper products. As a result, cash earnings were 5% lower to $397 million for First Half 2017. Expenses were $17 million lower over the half (down 3%) with productivity more than offsetting higher compliance costs and an increase in investment related expenses. The division reached a major milestone over the half with the release of a number of modules on the Panorama platform. The key elements of the platform are now complete resulting in increased activity and flows onto the platform.

Westpac Institutional Bank

WIB delivered a strong result, with a 26% increase in core earnings from a rise in customer transactions, improved markets income and disciplined expense management. Cash earnings increased 20%, supported by the higher core earnings and partially offset by a $65 million rise in impairment charges. WIB has managed the business in a disciplined way over recent periods, including changing its business model in 2016 helping to keep costs flat and reducing exposures with low returns. This active management of the balance sheet contributed to a 3% decline in
lending over the half with margins up 1 basis point. A focus on relationships has supported a 6% increase in deposits and contributed to a rise in non-interest income as the division has been well placed to support customers involved in significant transactions. This was reflected in higher markets income and an improved contribution from foreign exchange and commodities. Impairment charges were $64 million from an increase in IAPs from new impairments which are partially offset by a reduction in CAPs due to a decrease in stressed assets. Overall asset quality remains sound with stressed assets to TCE falling by one third to 0.59% and impaired assets also declining.

Westpac New Zealand

Westpac New Zealand delivered cash earnings of NZ$462 million, up 6% over the half, with most of the rise due to impairments which were a benefit of NZ$36 million in First Half 2017. Core earnings were 7% lower over the half reflecting a 4% decline in net interest income with growth in lending more than offset by a 17 basis point decline in margins. Most of the decline in margins was from higher funding costs, particularly customer deposits and from the ongoing effects of low interest rates.

Non-interest income was little changed over the prior half. Expenses
were 1% higher, as the business continued the investment in its transformation program. Productivity benefits, from this multi-year program partially offset inflationary increases. Asset quality improved over the half with stressed assets to TCE of 2.41% down 13 basis points. The improvement reflects the stronger outlook for the dairy sector and the work-out of one larger facility. These two elements led to the NZ$36 million impairment benefit. In 2016 a drop in the price of milk solids saw a large number of facilities become classified as stressed; with milk prices having significantly improved, the division is beginning to see customers use the higher prices to improve their financial position and migrate out of stress.

Westpac increases fixed rate home loan deals

From News.com.au

WESTPAC has followed the lead of the Commonwealth Bank and today increased fixed rate loans deals.

Just three days after CBA announced increases on fixed loan deals with interest-only investment loans getting the biggest hikes, Westpac has just announced their home loan customers will also be hit.

They are hiking fixed interest rate deals across their owner occupier and investment products.

Owner occupiers on interest-only fixed loans will be the worst hit — Westpac is increasing rates by 30 basis points across 1, 2, 3, and 5 year fixed deals.

For a three-year fixed rate loan — among the most popular fixed rate term for borrowers — fixed rates for owner occupier interest-only loans will rise by 30 basis points to 4.56 per cent.

For investors on interest-only deals fixed rates will rises by 10 basis points per cent across 1, 2, 3 and 5 year loan terms.

The Westpac Bank is hitting customers with interest rate hikes.

Investor principal and interest deals will remain unchanged for 1, 3 and 5 year loan terms.

Owner occupiers with principal and interest repayments will also be spared moves on 1, 3, and 5 year deals, while two-year fixed loan rates will drop by 11 basis points to 3.88 per cent.

Westpac’s subsidiary banks, St George and Bank SA are also experiencing moves across many fixed rate deals.

1300homeloans director John Kolenda said in more than 20 years in the mortgage industry he had never seen times like now with continuous changes to rate deals by banks simply wanting to boost their margins.

“I’ve never seen anything like the current market conditions where we have banks moving all over the place and raising rates across different products and totally out of cycle,’’ he said.

A Westpac spokeswoman said these deals which only affect customers who fix their loan from today onwards was “in response to recent regulatory changes.”

Financial comparison site Mozo’s spokeswoman Kirsty Lamont said many lenders are continuing to push up fixed rate deals and putting more pressure on borrowers’ budgets.

“Hot on the heels of the round of out-of-cycle hikes last month we’ve seen 28 lenders in total now up fixed rates since the start of April,’’ she said.

“The fresh round of hikes has hit owner-occupiers and investors paying interest-only loan the hardest as lenders respond to APRA’s recent crackdown on interest-only loans.”

On a $300,000 30-year loan for an owner occupier paying interest only, for a three-year fixed deal their rate new rate of 4.56 per cent will increase monthly repayments by $75 to $1140.

For an investor with the same sized loan paying interest-only their new three-year rate will be 4.56 per cent and their monthly repayments will rise by $25 to $1140.

For owner occupiers and investors paying principal and interest on three-year fixed deals the fixed rates won’t change from 4.09 per cent for owner occupiers and 4.29 per cent for investors.