Australian banks' net interest margins will be hurt by Tuesday's cut i...
SYDNEY - Australian banks’ net interest margins will be hurt by Tuesday’s cut in interest rates to an unprecedented low of 0.75% and any further central bank action to stimulate the economy, analysts said.
The Reserve Bank of Australia earlier lowered its benchmark cash rate by another quarter-point from 1% in an attempt to kick-start the economy amid sluggish mortgage demand, putting further pressure on banks’ profits. Net interest income for the four largest banks, which dominate about 80% of the deposit and house lending market, could fall by about A$8.4 billion if the central bank moved rates to zero percent, Wilson estimated.
“The RBA now has only three, or possibly even fewer, more conventional cuts available to them before they will have to venture into unconventional monetary easing territory — negative rates, QE , or bond yield targeting,” ING’s chief Asia-Pacific economist Rob Carnell said.
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