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Batman

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#87843 8-Aug-2011 19:50
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Yes i do have something against banks. OCR is 2.5% and they charge around just under 6%, seemingly making an immediate 3%+ profit (look, if you think it's tiddly winks the Reserve bank thought about $10+ billion of our mortgages were on the floating rate) ...

recently ASB raised some of their fixed rates to get even more profit ... and it appears they are trying to save face now
http://www.stuff.co.nz/business/money/5409908/ASB-cuts-fixed-interest-rates
  




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Batman

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  #503522 8-Aug-2011 19:52
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Batman

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  #503523 8-Aug-2011 19:52
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not sure about petroleum as not sure who eats our $$$, apparently not the pump stations




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jonherries
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  #503530 8-Aug-2011 20:03
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Not sure I think that banks are bad, but I believe that they probably make monopoly profits, based on switching costs for consumers.

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10742977

this article seems to back that up in terms of profit size, $2.3 billion in 6 months...

Jon

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  #503534 8-Aug-2011 20:19
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As banks don't borrow off of the government, it can only influence what banks actually make on a home loan.

The OCR is a measure that the government charges banks for guaranteeing interbank transfers overnight.

Further reading on the OCR http://www.rbnz.govt.nz/monpol/about/0072140.html
More on bank lending margins http://www.rbnz.govt.nz/monpol/3683652.pdf

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  #503538 8-Aug-2011 20:22
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It's a bit of a trick question really - all businesses are greedy. The purpose of a company is to return profits to it's shareholders, nothing more or less.

I've never worked anywhere where they have complained of making too much of a return, quite the opposite.

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  #503625 9-Aug-2011 00:01
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joker97: Yes i do have something against banks. OCR is 2.5%  


The OCR is only one factor in the floating and very short term rates.

The cost for the banks of sourcing money from overseas is a far bigger factor.

Before the GFC the banks were typically making a profit margin on their mortgage interest rates of 0.9% after the GFC they started playing safer and doubled their margin to 1.8% ish.

Banks need to be 100% safe and reliable, so yes they are somewhat greedy.

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  #503627 9-Aug-2011 00:40
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darn! markovnikov rules again!




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  #503638 9-Aug-2011 06:05
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Ragnor: Banks need to be 100% safe and reliable, so yes they are somewhat greedy.


Even with them being greedy they have proven they are not safe or reliable requiring bailouts from the government to keep those bonuses flowing.

Byrned
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  #503663 9-Aug-2011 08:19
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Even with them being greedy they have proven they are not safe or reliable requiring bailouts from the government to keep those bonuses flowing.


This may be true of the major offshore banks but I think you'll find that the Aus/NZ banks have not had bailouts and have played it remarkably safe even before the GFC. Its because of this conservative outlook that we have had a better cushioning from the effects of the GFC than say Ireland where the banks were involved in the same weird financial transactions of those in the US.

Now I'm not saying that the banks here are saints and couldn't do better. Alan Bollard pointed out yesterday in a speech that lack of any real competition (Kiwibank hasn't made it to this level yet) may be costing us, and that over the time period 2002 - 2007 the average return on equity was the second highest in the OECD. Realistically though, this needs to be looked at over a longer time period to work out if is actually the case.

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  #504522 10-Aug-2011 16:53
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Byrned:

Even with them being greedy they have proven they are not safe or reliable requiring bailouts from the government to keep those bonuses flowing.


This may be true of the major offshore banks but I think you'll find that the Aus/NZ banks have not had bailouts and have played it remarkably safe even before the GFC. Its because of this conservative outlook that we have had a better cushioning from the effects of the GFC than say Ireland where the banks were involved in the same weird financial transactions of those in the US.

Now I'm not saying that the banks here are saints and couldn't do better. Alan Bollard pointed out yesterday in a speech that lack of any real competition (Kiwibank hasn't made it to this level yet) may be costing us, and that over the time period 2002 - 2007 the average return on equity was the second highest in the OECD. Realistically though, this needs to be looked at over a longer time period to work out if is actually the case.


Well that depends on how far back in history.  Immediately crisis? no.  But BNZ needed a bailout in 1990 for example.

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  #504609 10-Aug-2011 19:44
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Pretty sure no bank sources their funds at 2.5%... Commercial lending keeps getting more expensive too.

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  #504634 10-Aug-2011 20:26
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joker97: Yes i do have something against banks. OCR is 2.5% and they charge around just under 6%, seemingly making an immediate 3%+ profit (look, if you think it's tiddly winks the Reserve bank thought about $10+ billion of our mortgages were on the floating rate) ...

recently ASB raised?some of their fixed rates to get even more profit ... and it appears they are trying to save face now
http://www.stuff.co.nz/business/money/5409908/ASB-cuts-fixed-interest-rates
??


It is not that simple and you should look at what they are paying depositors on call, rather than what the OCR is. They also have to build in risks and factor what they expect rates to be in the future. The fact is that rates will go up, as they are currently artificially very low due to the economy and EQ.

But we have been lucky that our banks have been so strong, and have been making a lot of money, otherwise we may have had banks fail in 2007-8

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  #504641 10-Aug-2011 20:37
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jbard:
Ragnor: Banks need to be 100% safe and reliable, so yes they are somewhat greedy.


Even with them being greedy they have proven they are not safe or reliable requiring bailouts from the government to keep those bonuses flowing.


I was referring to the banks that operate in NZ.

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  #504643 10-Aug-2011 20:41
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Yes, commercial banks exist to make money. Shall we move along to the next moan about things you can't change?

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  #504674 10-Aug-2011 21:39
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Given there are 9 major banks and a whole bunch of building societies, credit unions etc and NZ has only 1.6 million households... seems there is a decent level of competition.


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