The Bank of Queensland has gone down the greed route by boosting home loan rates, despite reporting a 7% rise in cash earnings for the six months to the end of February and a snazzy 6% rise in interim dividend to 38 cents a share.
BoQ said it would be lifting interest rates for investor mortgage customers by 0.25%, while owner occupiers see a rate hike of 0.12%.
It was the first rate rise for mortgage customers since most banks raised interest rates in late 2015. It’s an increase that is likely to be watched closely by rivals.
BoQ also raised its interest rates by 0.18% independently of the Reserve Bank in November last year.
Revenue rose 4% to $561 million in the latest half.
The surprise move was blamed on higher funding costs.
CEO Jon Sutton revealed the rise yesterday while announcing a 7% rise in first-half cash profit to $179 million, helped by faster loan growth and low bad debts.
The CBA, Westpac, NAB and ANZ have all increased interest rates for business borrowers in the opening months of 2016, which they justified by pointing to higher funding costs and tighter regulation.
But Reserve Bank governor Glenn Stevens said in February that the recent rise in wholesale funding costs had not been sufficient to warrant banks increasing their lending rates independently of the central bank.
Mr Stevens said banks were still able to roll over debt at lower interest rates than they had paid several years ago.
"I do not see much of a case for independent increases in lending rates based on funding costs as they have evolved just lately," Mr Stevens said in February.
Mr Sutton justified the bank’s move was the result of it balancing "growth, risk and margins over the long term”.
"This is not a decision that was made lightly and we were very mindful of the impact on our customers even in an environment where interest rates remain at very low levels.
"However, given the fiercely competitive market and increased funding spreads and hedging costs, these increases are necessary to help us achieve the appropriate balance between growth, asset quality and profitability," he said.
BoQ shares fell 1.2% to $11.45.