But as the Reserve Bank lifted interest rates fanalysts and investors are now expecting profit margins to increase.
Bank profit margins also benefit because as interest rates increase, some deposits such as savings accounts remain at or near zero, lifting overall margins as home loan rates go up.“And we probably are somewhere near the trough. But there’s the big unknown: the level of competition.”In ANZ’s presentation to analysts, it presented a slide that showed the sensitivity of the bank’s $142 billion replicating portfolio of safe assets to higher interest rates.
ANZ said that over one year, higher rates would add $800 million, or 9 basis points, to bank net interest margins, and $2.3 billion, or 25 basis points, over three years. A sharp fall in medium-term bond rates as the Reserve Bank pinned the three-year bond yield at 0.1 per cent as part of its pandemic stimulus measures, allowed banks toBut the subsequent surge in bond yields has meant fixed rate home loan rates have shot up, and even as variable rates are set to rise, they are now lower than fixed rate mortgages.
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