Bank fees rise for business in 2010

Ian Rogers
Big business in the main, but also, albeit to a lesser extent, small business paid much more in bank fees in 2010, according to separate analyses published yesterday by the Australian Bankers Association and the Reserve Bank of Australia.

The ABA analysis, which draws on a slightly wider data-set than that used by the RBA, is much the most detailed - the analysis is becoming a key annual exercise in reputation management for the industry lobby group.

The RBA version, published in its quarterly bulletin, is the fourteenth by the central bank.

The RBA notes that the banks' fee income from businesses increased by 13 per cent in 2010, to A$6.9 billion, even though the level of business credit outstanding has been falling over the year.

Over two years, bank fees paid by business increased by 25 per cent.

The drivers of these increased fees for business are the same as in 2009. They reflect the rush by bigger businesses to re-negotiate loans earlier and for longer terms (and often at wider interest margins) at a time of credit rationing by the banks following the financial crisis.

The ABA's analysis breaks this growth in fees down into small business and large business fees, highlighting how the latter accounts for most of the rise in fees over the past two years.

Fees paid by big business increased by $1 billion over two years, to $3.1 billion, the ABA said. Fees paid by small business increased by $400 million over two years, to $3.8 billion.

On the other hand, businesses are paying slightly less to manage their cash.

Service fees paid to banks on transaction accounts fell for the second year in a row in 2010, and, at $711 million, are down 17 per cent over the period.

The increase in fees to collect some of that cash (in the form of merchant fees on Eftpos and credit cards) increased by about half the fall in deposit fees over the two years.