Westpac Tries To Explain Rate Rise

If you were an unlucky Westpac home loan customer, you would have had your home loan rates increased by 45 basis points. This is while the RBA only raised the cash interest rate by 25 basis points.

Westpac tried to explain this by sending their customers an email that shows that banking is similar to banana smoothies.

In case you missed it, here is the video in full. I ask you to watch it in full.

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Here is a video by Choice magazine that is a send up of this video that explains it better.

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Now I’m not an expert on international banking. However there are a few things that I do know. In the12months ending 30^th Sept 2009, Westpac earned $3.45 billion dollars. This was slightly down from the $3.86 billion dollars they earned the year before.

Banks have been making record profits year after year for what seems like forever. Each year we have heard about record bank profits from the big four banks. They have achieved this by raising their fees and charges for everything from credit cards, saving accounts and home loans.

However when things get tough for the banks they want us to help chip in and save them. Let’s be honest you’re not saving a company that has $3.45 billion dollars in profit. It’s not like they are on the verge of bankruptcy. You’re saving them from a smaller profit next year. They have to make their shareholders happy and return their profits above where they were only a year ago.

If fact one of my favourite lines in the real Westpac bank advert was: “There is a bottom line, the money that we buy has become more expensive. That means we have to charge more for it and that can mean rates will go up. When we make rate increases we do so because there really is no other option. By not taking these actions, we risk the future of our business and the future of our business means repercussions for all Australians”.

Give me a break. Risk the future of their business! No other option. There is another option. Charge what the RBA and the government have been asking them to charge and make a smaller profit. Believe me they will not go bankrupt.  This will not affect the future of their business.

All businesses have a hard time from time to time. Their costs in a product or service can go up quite a lot. The difference with Westpac is that it is extremely hard for their customers to change home loan products to a different company. It’s not like changing your favourite fruit from bananas to apples. This means that the majority of their customers are stuck! And they just have to accept the increase whether they like it or not.

While you’re thinking about how hard done by Westpac is. Take a look at what their CEO (Ted Evans) recently said in a Dec 16^th speech, well after the rate hike.

"The Westpac Group starts the new year well-positioned and with strong business momentum," he said.

"As a result, we look forward to the period ahead and the continued delivery of solid returns for shareholders."

So on one hand they are crying poor to their customers. However on the other hand they are talking up their business to their shareholders?

Do those statements above look like they are from a company that also said, “By not taking these actions we risk the future of our business”?