Westpac Lifts Mortgage Rates

123jump.com Staff
28 Apr, 2008
New York City

Westpac Banking Corp, the third bank to raise its variable mortgage rate by 10 basis points to 9.47% at the end of this week. Earlier, ANZ and NAB raised their rates for mortgage loans. The Reserve Bank of Australia last increased its official rates in February, when its cash rate was increased to 7.25%. Westpac share was up 1.2%, ANZ rose 3.2% and National Australia Bank Ltd added 3.2%. Orica reported 7% rise in earnings and said its cost savings plan from the merger with Dyno is on track.

[R]3:00AM New York, 7:00PM Sydney – Westpac, the third largest bank to raise its mortgage rate and blamed it on the rising cost of wholesale banking.[/R]

Market Sentiments

ASX 200 index gained 0.3% or 15.4 to close at 5,602.70.

The preliminary market turnover was 1.34 billion shares worth $5.52 billion, with 632 up, 571 down and 336 unchanged. The most traded stock was Empire Oil and Gas with trading volume of 84.31 million shares worth $1.47 million.

Market Driver

The Commonwealth Bank Group today announced that it spend $580 million on a comprehensive program to modernize its existing banking legacy systems with a customer centric platform developed with the help of Accenture.

Ralph Norris, CEO of the Commonwealth Bank said, ""The modernisation of our core systems is a fundamental strategic plank to the successful future of the Group.”

The Group has selected SAP for Banking Solutions based on SAP''s leading technology platform, NetWeaver. It has also appointed Accenture to support the implementation of the programme.

The company through the implementation of new information system and reorganization expects to achieve $200 million in savings.

Michael Harte, the Group''s Chief Information Officer said, ""The transformation programme will see the removal of the current legacy systems that have supported the Group for over 45 years. While legacy systems are inherent in all large financial institutions, few have had the courage to challenge and execute the necessary changes.

CBA share traded 2.8% higher.

Gainers and losers

Of the ASX 200 index stocks, Western Areas led the gainers with a rise of 11.7% followed by increases in AED Oil Ltd of 7.8%, in Mount Gibson Iron of 6.1%, in Macquarie Trust of 6% and in Centro Retail of 5.8%.

Of the ASX 200 index stocks, Coeur D''Alen-CDI led the decliners with a fall of 6.5% followed by losses in JB Hi-fi Ltd of 6.5%, in Acquarius Platinum of 6.1%, in Australia Worldwide of 5.6% and in ABC Learning of 4.9%.

Westpac raises rates

Westpac Banking Corp today announced that its standard variable home loan rates would rise by 10 basis points to 9.47% from Friday.

Westpac''s became the third bank after ANZ Banking Group Ltd and National Australia Bank Ltd to raise its variable mortgage rates in less than a week, independent of the central bank.

The latest round of interest rate hikes are on the back of rise in wholesale borrowing costs.

""We are mindful that this additional rise will have an impact on some family budgets,"" Westpac group executive of consumer financial services Peter Clare said and further added that bank''s funding costs remain at record levels.

The Reserve Bank of Australia last increased its official rates in February, when its cash rate went up to 7.25%. Westpac''s share was up 1.2%, ANZ Banking Group Ltd rose 3.2% and National Australia Bank Ltd added 3.2%.

Orica''s net profit up 7%

The world''s largest explosives maker, Orica today announced 7% rise in net profit after tax and significant items of $225 million for the half year ended 31 March 2008.

Excluding the loss on individually significant items of $5.3 million, net profit after tax was $230 million, up 13% on 2007. Sales increased 11% to $3 billion.

The board declared 39 cents per ordinary share interim dividend, franked at 14 cents per share, representing an increase of 3 cents or 8% on the 2007 interim dividend.

Earnings per share before significant items increased 16% over the 2007 half-year to 70.1 cents.

The earnings release from the company noted that the underlying earnings rose across all businesses despite some adverse weather conditions, unfavorable exchange rates, delays in resource projects and rising input costs.

Mining Services had a record result, with an 11% increase in profit, which came from modest growth in volumes in Australia and Asia and reasonably favorable conditions in most major mining and resource markets.

The company further added that given the tightening supply in global ammonium nitrate the company is looking for expansion in Indonesia, Latin America and Australia.

Orica managing director Graeme Liebelt “The successful integration of the Dyno businesses continues with synergies being delivered ahead of plan. Annualised synergies delivered to date total $80 million and we are on track to deliver the full $90 million, a year ahead of schedule.”

Orica share fell 3.8%.

IAG lowers insurance margin guidelines

Insurance Australia Group Limited today lowered its insurance margin guidance for the full year ending 30 June 2008 to between 6% and 8% on the impact of high storm costs and widening credit spreads in the second half.

The company said the guidance provided at the interim results in February 2008 was for a full year insurance margin at the low end of between 9% and 11% subject to no catastrophes or large losses outside the Group''s allowances, or any material movements in currency or investment markets in the second half of the year.

However, so far in this half-year these two factors have had a negative impact of 1.6% on the current fiscal year insurance margin. The lower insurance margin guidance also reflects further deterioration of the claims experience in the UK due to market conditions.

The Group said it also lowered its guidance on GWP growth for the full year from the low end of 7% to 9% to 5.5% to 6.5%, a factor that largely reflects reduced premium revenue from Australian Commercial Lines (CGU) as the business has not been able to maintain forecast volumes.

The latest situation has left IAG in a weakened position to convince QBE Insurance Group Ltd. to increase its $8 billion takeover offer. IAG Chairman James Strong however maintains that QBE''s bid was inadequate and added that they were making effort to reverse declining profits.

IAG''s share fell 2.1% while QBE was up 1.2%.

Wesfarmers opens retail offer

Australian conglomerate, Wesfarmers Ltd today concluded part of its $2.5 billion equity raising as it launched its offer to retail shareholders.

Wesfarmers said it plans to use $940 million raised through the institutional rights issue to service its debt from the acquisition of Coles while an additional $1.6 billion was expected from the retail component.

Retail shareholders are allowed to subscribe for one new Wesfarmers share for every eight shares held. A retail subscription will open on May 26.

Antam/Zhongjin extends bid for Herald Resource

Herald Resources Ltd''s suitors Antam/Zhongjin today extended its $505 million takeover bid for target by almost a month to June 5 from May 6 as it still awaits approval from FIPB approval for the bid.

The Herald board has already recommended Antam/Zhongjin''s offer of $2.50 a share. Indonesia''s largest coal miner, PT Bumi Resources has been experiencing difficulty finalising debt funding to partially finance its $444.8 million, $2.25-per-share takeover bid.

Last week, Bumi extended its self-imposed deadline to finalise funding for the third time. Bumi has a 19.83 stake in Herald while Antam/Zhongjin has a 10.72% interest.

Herald stock fell 1.8%.

Midwest to respond to Sinosteel

Takeover target Midwest Corporation Ltd today indicated that it would respond to its criticism by Sinosteel Corporation in its statement to be released tomorrow.

In a statement to Midwest shareholders on Thursday, Sinosteel stated that Midwest''s dispute with former ally Yilgarn Infrastructure Ltd could jeopardise Midwest''s ability to secure a state government tender to develop the Oakajee port and related infrastructure in Western Australia.

The bid - the first hostile takeover attempt by a Chinese corporation for an Australian company - became unconditional last week when Chinese regulatory approvals were received.

A fortnight ago, Midwest said it needed a shareholder approval to formally appoint privately held Yilgarn as the developer because Yilgarn and Sinosteel were associated parties.

Sinosteel, which has a 19.89% stake in Midwest, has made commitments to invest in Yilgarn.

Sinosteel is offering $1.19 billion for Midwest.