Kiwi banks rate margin rebound after RBNZ cut
Kiwi banks are moving swiftly to reprice deposit and loan products in New Zealand after the country's central bank lowered its official cash rate.In a move widely expected by economists, the Reserve Bank of New Zealand on Wednesday cut the official rate by 25 basis points to bring its key money market benchmark into line with Australia's cash rate of 1.5 per cent.ANZ, the largest home lender in New Zealand, was the first bank to react to the RBNZ easing by announcing plans to lower rates on most deposit accounts and home loans. The bank will cut pricing on floating (variable rate) home loans by 10 basis points and fixed rate mortgages by up to 14 bps.In a statement issued last night ANZ said the floating rate repricing would take effect on 27 May, while fixed rate loans would change on 13 May.ANZ's consumer business came under margin pressure over the six months to the end of March as earnings derived from retail lending fell 3 per cent to NZ$ 510 million.The bank's overall net interest margin in New Zealand tapered by four bps to 2.38 per cent in the first half.However, the bank could retrieve margin in the current half because it has decided to lower deposit rates more aggressively than it has on home loans.ANZ is cutting term deposit offers by between 15 to 25 bps and has put rates on bonus saver accounts under review.State-owned Kiwibank was also one of the first to move, announcing it will be cutting all variable home loans by 15 bps.Kiwibank has also cut most variable rate deposit products by 15 bps.BNZ has said it will be taking 10 bps off its floating rates, but making no changes to fixed rates for now. Westpac is cutting its floating rate by 16 bps and will also be cutting its one year special fixed rate to match ANZ on 3.89 per cent.The decision of the RBNZ Monetary Policy Committee meeting announced yesterday by RBNZ governor Adrian Orr "was officially the first one that took place under the newly reformed monetary policy framework," commentator Sean Keane pointed out in a bulletin for Credit Suisse."As such the RBNZ was officially working on both an inflation and employment mandate for the first time, and for the first time ever the RBNZ Governor was not the person tasked with sole responsibility for achieving that mandate. Instead responsibility has shifted to the new Monetary Policy Committee which consists of four internal RBNZ executives, three external independents and one non-voting Treasury observer," Keane wrote."Whilst the Governor has been at pains for some time to say that the RBNZ's process won't have to change very much in response to the new mandates, there was clearly a different look and feel to parts of today's release and media conference."New Zealand economists are divided on whether the RBNZ will lower the cash rate again this year.The challenges confronting Kiwi monetary policy makers are remarkably similar to those facing their Australian counterparts.The shared concern