Markets live, Thursday 5 May 2022

Bank of Queensland CEO George Frazis says he is not concerned about the risk of higher bad debts from rising interest rates, and says very low unemployment is good news for banks.

Frazis, who previously headed Westpac’s consumer bank, also suggested there would likely be an “opportunity” for banks to increase their margins as interest rates rise.

Addressing investors at Thursday’s Macquarie Australia conference, Frazis downplayed the risk of rising non-performing debt over the medium term due to projected interest rate hikes.

“That’s probably an area I’m not really concerned about,” Frazis said.

Bank of Queensland CEO George Frazis.Credit:

“At the highest level, unemployment is critical to us. It’s what’s driving the impact on home loans, down 4 percent, or possibly even falling, that really creates an environment that’s really positive for homeowners and banks on that front.”

Like its bigger rivals, BoQ says it will increase home loans by 0.25 percentage points this week, taking full advantage of the rise in the RBA.

However, investors in the market are eager to see banks roll back the tight margins, and Frazis was asked how long it would take for banks to “reprice” their loans, which refers to raising mortgage rates by more than the RBA.

“Of course we can’t talk about pricing strategies and competition will be competition,” Frazis replied.

“I would say that the current period we are in during an election is quite a sensitive period. I am therefore not surprised that what has happened is in fact the passing on of the tariff.”

“If you think about the revenue growth pressures that some players in the industry will have, I think I’d be surprised if there isn’t an opportunity to further increase margins, but obviously we’ll see.”

In response to an earlier question, Frazis also said he was confident that rate hikes would have a “positive impact” on BoQ.

Leave a Comment