Westpac announces years of volatility

When asked for her views on Channel Nine’s “Financial Review Sunday” regarding interest rates and the economy in general, Westpac’s (ASX: WBC) CEO Gail Kelly gave her opinion that whilst “our economy remains fundamentally robust”, there are still years of volatility remaining in wholesale funding markets.

Currently, Westpac’s standard variable mortgage rate is 6.26%, measuring higher than ANZ’s (ASX: ANZ) and NAB’s (ASX: NAB) 6.13% or Commonwealth Bank’s (ASX: CBA) 6.15%. Upon being quizzed about Westpac’s promise last year to cut rates out of cycle, Kelly remained firm that she could not discuss interest rates directly, but stated that whilst funding costs had been declining significantly earlier in the year, they were now climbing once more as global volatility had once again heightened.

The underlying economy is in good shape, according to Kelly, with low unemployment rates and good diversity. However, credit demand is currently very low and sitting around the GDP level of roughly 3%, compared to 11% or 12% experienced pre-GFC.

Whilst there were no suggestions that Westpac would pass on any relief to customers any time soon, she announced her expectations that there would be a further cash rate reduction in the foreseeable future, which would likely return an element of confidence and growth to the Australian economy.

Foolish takeaway

Westpac’s higher variable rate has seen the company lose 0.7% of its market share over the last year. As funding costs once again begin to climb however, its higher rate could allow it to return higher revenues than its competitors.

The Australian Financial Review says “good quality Australian shares that have a long history of paying dividends are a real alternative to a term deposit.” Get “3 Stocks for the Great Dividend Boom” in our special FREE report. Click here now to find out the names, stock symbols, and full research for our three favourite income ideas, all completely free!

More reading

Motley Fool contributor Ryan Newman does not own shares in any of the companies mentioned in this article.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.