$240 million credit card rip-off
By Simon Hoyle
The 13th of August 2004
Credit card-holders are being ripped off to the tune of almost a quarter of a billion dollars a year because card issuers have failed to pass on the benefits of lower interest rates to customers, research has found.
Card issuers have used interest rate movements over the past eight years to increase the interest rate margin on cards, the research found. The margin is the difference between the Reserve Bank official cash rate and the interest rate card issuers charge their customers.
The research, conducted by BIS Shrapnel and commissioned by Virgin Money, said the additional interest margin imposed on card-holders who did not pay off their balances in full each month - so-called "revolvers" - created up to $240 million in profits.
The analysis did not take into account reduced interest rates issuers can extend to balance transfers and new customers. "Of the 10 credit card products included in the sample, all showed an increase in the interest margin for the varying periods in which data was available," the BIS Shrapnel report said.
It said when interest rates fell, card issuers generally did not pass on the full cut, and when rates rose, the full rise - and often more - was passed on to consumers.
Margins had been at record levels for the past three years, and in one case the issuer's margin had increased by almost 3.8 percentage points, the report said.
The increased profit to card issuers might not have been apparent to consumers because even if the Reserve Bank cut rates, a card's interest rate may remain.
The managing director of Virgin Money, Rohan Gamble, said tracking the interest rate margin was a better way of gauging the value of a card because as the base rate - the Reserve Bank's cash rate - moved, the profitability to the issuer could increase even if the interest rate charged on the card did not rise.
Virgin Money issued its own credit card - a MasterCard - just over a year ago. Since then it has raised the card's interest rate from 11.9 per cent to 12.4 per cent, the same as the increase in the Reserve Bank cash rate during the period.
SMH 13-8-4
http://www.smh.com.au/articles/2004/08/12/1092102598871.
Pay rise protest as bank profit soars to $2.5bn
Insurance companies defend strong profits
Bank fees cost customers $3 billion as profits boom
The 11th August 2004
Commonwealth Bank of Australia staff will protest in Sydney today for better pay, conditions and staffing levels as the bank recorded a 28 per cent profit rise to $2.5 billion.
Staff will stand outside a number of metropolitan Sydney branches asking the public and bank customers to sign a petition calling for the bank to acknowledge and address staff concerns.
Finance Sector Union national assistant secretary Sharron Caddie said CBA management had failed to listen to staff as to how CBA workplaces could be improved.
"The bank is clearly not listening to staff so maybe they will listen to members of the general community," Ms Caddie said.
About 3,500 bank employees voted on July 22 to conduct a series of rolling stoppages up until and including today when the bank was scheduled to announce its profit.
"So by the end of today every part of the bank will have been pulled out for half a day at some point," Ms Caddie said.
"The idea of holding the rolling stoppages wasn't to shut workplaces, it was to create major inconvenience for the bank having to shift people around to fill gaps. It wasn't to inconvenience customers."
Ms Caddie said a recent staff survey across all business areas confirmed a lack of engagement and enthusiasm for the "Which new Bank" strategy, introduced by bank CEO David Murray last year to change its culture.
"Respondents say people are feeling insecure about their jobs, can't access resources to improve customer service, and that this bank is not prepared to take its cues from staff," Ms Caddie said.
"CBA says one thing and does the opposite."
A CBA spokesman said the bank rejected the union claims.
The majority of staff had shown up for work despite the various industrial actions that had been organised, he said.
"The union has not been successful in any of the action they have taken and four out of five of our staff continue to turn up to work regardless of the action the FSU propose," the spokesman said.
He also said staff recently received a four per cent salary increase and for the past seven years had received a free share allocation.
"We refute (sic) the claims about staff shortages totally because customer service is our number one priority and we will continue to talk and liaise from our staff."
AAP
SMH 11-8-4
http://www.smh.com.au/articles/2004/08/11/1092102490052.html
Friday, The 5th of March 2004
There has been a strong defence today of the significant profits now being achieved by Australia's insurance companies.
There is almost embarrassment in the industry over the reporting season honour roll: QBE made a $572 million profit for the full year; Promina $298 million; and IAG made $302 million for the half year.
The Insurance Council of Australia (ICA) has been holding its annual New South Wales conference and ICA director John Butler told the audience that profit is not a dirty word.
"I don't think anyone's looking to gouge or rape consumers," he said.
"All we're simply trying to do is earn a return that is appropriate for the capital that sits in the industry."
There has been an expression of support from the Parliamentary Secretary to the Treasurer, Ross Cameron.
"Unless you are profitable, we simply cannot offer the forms of risk management that this community demands," he said.
ABC 5-3-4
http://www.abc.net.au/news/newsitems/s1059817.htm
Thursday the 20th of May 2004
A new study has found Australian households paid $3 billion in bank fees last year as the leading banks report record profits.
The fee revenue was driven higher by a 38 per cent increase in credit card fees.
The Reserve Bank figures also showed banks reaped $604 million in credit card fees last year.
Australia's four major banks reported a record profit season in their half-year reports, accountants PricewaterhouseCoopers (PwC) said earlier this month.
Cash earnings by the big four - NAB, Commonwealth Bank, Westpac and ANZ - totalled $5.87 billion compared to $5.6 billion in the first half of 2003.
Scandal-hit NAB reported cash earnings before significant items are down 9 per cent, despite a 16 per cent increase in the bottom line profit to $2.17 billion.
The Commonwealth Bank of Australia reported a net profit of $1.24 billion in the six months to December 31, 2003, a 3 per cent increase over the same period a year earlier.
ANZ has booked a record first half net profit of $1.39 billion, up 22 per cent over the previous corresponding period.
Westpac reported a record first-half profit on net income of $1.23 billion in the six months that ended March 31, from $1.05 billion dollars a year earlier.
ABC 20-5-4
http://www.abc.net.au/news/newsitems/s1112515.htm
Westpac announces record half-year profit
Thursday the 6th of May 2004
The Westpac Bank has achieved double-digit profit growth in its latest six-months of operation.
The outcome has been a record interim result.
For the six-months to March, Westpac's profit after tax has come in at almost $1.23 billions.
That is up nearly 17 per cent on the previous corresponding period.
A fully-franked interim dividend of 42-cents a share has been declared.
And Westpac is also to embark on a $500-million share buyback.
While Westpac's interest margins have contracted in the latest period, lending volumes have been strong.
And the bank's results contain a solid contribution from its wealth management operation, BT Financial Group.
Over the remainder of its financial year, Westpac expects slowing consumer activity and housing investment to be offset by increased business spending and a stronger export performance.
ABC 6-5-4
http://www.abc.net.au/news/newsitems/s1102359.htm