Commonwealth Bank of Australia joined rival National Australia Bank in warning that the global economic turmoil was hitting customer confidence and may push funding costs higher, but said it was well positioned to ride the storm.
CBA, the country’s top home loan lender, said it was sitting on record liquidity and capital to weather a crisis, but it doesn’t expect a major pick-up in domestic lending within 12 months.
Global uncertainty and market volatility hurt Australian and South Korean lenders the most in the region as they suffer from significant deposit deficiency and need to tap debt markets in Europe and the United States for funds.
Australia’s four major banks combined borrow $100 billion largely offshore to bridge a funding gap between loans and deposits and such turmoil jacks up their funding cost.
The banks are still reeling under sharp cost increases as they refinance cheap debt raised before the global financial crisis, with CBA expected to refinance most of its cheap debt only by January 2012.
“There is increased risk aversion which means a higher cost of wholesale funding. So banks don’t want to lend as much. Therefore banks globally, which are big borrowers in the wholesale market, theoretically will be the most negatively impacted,” said CLSA’s regional banking analyst Daniel Tabbush.
From / Gulf Today