The big four banks stand to suffer significant losses if they don’t follow St George’s lead and raise their standard variable rates, a report from JP Morgan revealed yesterday.
According to the report, the banks could lose between $91 and $166 billion in their fiscal earnings for 2008 if they absorb a 50 basis points rise in funding costs for a period of 12 months.
ANZ would be most impacted, with its earnings forecast to take a 3.85 per cent cut. NAB would lose 3.71 per cent, CBA 2.79 per cent and Westpac 2.49 per cent.
The report said St George’s 20 basis points rise in its standard variable rate introduced an “interesting dynamic”.
While rhetoric from the banks in recent weeks would suggest they would follow St George, JPMorgan said the banks might also consider St George’s decision as a move to price itself out of the market.
Should the other banks make similar changes to their lending rates this would be the sixth round of re-pricing outside official cash movements since the beginning of the year.