Two more banks defend wider loan margins

Westpac managing director Gail Kelly yesterday took her turn in the spotlight to prepare the case for banks to widen margins on loan products in the context of the likely reduction in the cash rate in Australia that the Reserve Bank of Australia is likely to agree on today.

Speaking on the Seven Network, Kelly said banks were paying more for deposits, and the cost of wholesale funding sourced offshore was "higher than it's ever been".

"The costs of funding have continued to go up."

Speaking to The Australian Kelly said, "With regard to cost of funding though, you know, I don't think we communicate this well enough, but actually the facts are that our costs of funding within banks continue to go up rather than anything else."

Bendigo & Adelaide Bank also used an investor briefing yesterday to highlight the lack of a funding connection between cash rates and product rates, even though Bendigo's home loan rates followed the cash down.

This was largely "political" the bank's chair, Robert Johansen, told the briefing.