Report from "Markets Live"
BoQ’s Frazis plays down bad debt risk from rate hikes, eyes wider margins
By Clancy Yeates
Bank of Queensland chief executive George Frazis says he is unconcerned about the risk of higher bad debts caused by rising interest rates, saying the very low rate of unemployment is good news for banks.
Frazis, who previously ran Westpac’s consumer bank, also suggested there would probably be an “opportunity” for banks to widen their margins as interest rates rose.
Addressing investors at the Macquarie Australia Conference on Thursday, Frazis played down the risk of rising bad debts over the medium term, as a result of expected rises in interest rates.
“That’s probably one area I’m not really concerned about,” Frazis said.
Bank of Queensland CEO George Frazis.Credit:
“At a top level, the critical thing for us is unemployment. It’s what drives any impact on home loans, at 4 per cent, or even possibly going down, that really creates and environment that’s really positive for home owner and banks on that front.“
Like its larger rivals, BoQ says it will increase home loans by 0.25 percentage points this week, passing on the RBA’s hike in full.
However, investors in the market are keen to see banks reverse a squeeze on margins, and Frazis was asked how long it would be until banks “re-priced” their loans, which refers to increasing mortgage rates by more than the RBA.
“Obviously we can’t talk about pricing strategies and competition will be competition,” Frazis replied.
“I’d say the current period we’re in right now during an election is quite a sensitive period. So I’m not surprised that what’s occurred is effectively the passing on of the rate.“
“My guess would be, if you think about the pressures around revenue growth that some of the players in the industry will have, I’d be surprised if there isn’t an opportunity to increase margins further, but obviously we’ll just have to see.“
In response to an earlier question, Frazis also said he was confident rate increases would have a “positive impact” on BoQ.
(20min delay)