Banks raking it in amid financial crisis   (Category: Financial News) A Reserve Bank report into banks' interest margins has found that they have grown during the global financial crisis. Australian banks increased their interest margin (the gap between the rate they borrow for and the rate they lend at) by an average of 9 basis points (0.09 percentage points) during the peak of the global financial crisis in the six months to March this year. Interest margins are a major source of bank profits, and the margin rise helps explain why Australian banks have limited profit declines in the face of large bad debt write-offs. Banks picked up an additional 5 basis points in the six months prior to that, bringing their current average margin to 2.27 per cent, which the Reserve Bank says is "a little above the level before the onset of the financial market turbulence in mid-2007." Small business, credit cards lose ... "Variable interest rates on small business loans have fallen substantially less than housing loan rates... Overall, the weighted average cost of small business loans has fallen by 230 basis points since September 2008," the report said. Large businesses fared much better, with rates dropping 350 basis points, which is partly to do with the ratio of fixed to variable loans in that sector, but probably also reflects the fact that small business is a particularly risky investment for banks in a recession. Credit card holders and those with personal loans have seen the least benefit from the RBA's cuts, with rates falling a meagre 170 basis points over the last six months - less than half the official cash rate reductions. Longer-term view There is also little doubt that ... the demise of many of these (non bank) lenders and increasing concentration in the banking industry may see the trend of rising bank interest margins continue well past the current economic crisis. By Online ABC NEWS business reporter Michael Janda (edited) Thurs Jun 18, 2009 Back   Print this article