Bank profits higher now than in 2007

Bank profits across Australia have increased than from before the Global Financial Crisis began in mid-2007 after a review of bank industries profit margins. The Reserve Bank of Australia released a review of banking profits which determined this increase based on its key measure of profitability, the banks' domestic average net interest margin (NIM).

The net interest margin showed that most Australian bank profitability results for the six months to March 2009 had improved and profitability had now increased enough to offset any declines experienced in profitability during the beginning of the economic downturn. The net interest margin results showed an increase in nine basis points from the six months proceeding with an average of 2.27 percent, higher than what percentage was recorded in mid-2007 when the Global Financial Crisis began to take effect.

This latest report on bank profits follows the major banks in Australia raising their interest rates on mortgages, despite no action from the Reserve Bank of Australia.

Commonwealth Bank - blamed high costs of term funding before raising its standard variable home loan, fixed home loans and Residentially Secured Better Business Loan by 10 basis points.

National Australia Bank - Fixed home loans raised by up to 40 basis points with fixed rates to between 5.09 per cent for a one-year loan to 7.79 per cent for a 10 year term.

Westpac-owned St George Bank- raised interest rates as follows:

• One year fixed mortgages by 10 basis points to 5.44 percent
• Two year fixed mortgages by 20 basis points to 5.94 percent
• Three year fixed mortgages by 50 basis points to 6.49 percent
• Four and five year fixed mortgages by 50 basis points to 7.14 percent

Reasons behind these increases according to the individual bank companies are the high funding costs associated with home loans and similar accounts. The RBA report did show a link between the cash rate and banks funding costs that are also used as general indicators of the overall financial market.

Compare your banks home loan rates with some of the best on the market here...