Credit squeeze may hit regional bank profits

Concerns about the level of reliance that regional banks have on wholesale credit markets saw Suncorp shares dip to a 12 month low of $16.54 yesterday but recovered slightly to close at $16.64.

 

Analysts at Citigroup said last month that the increased cost of credit could cut Suncorp's profit more than the $10 million to $15 million flagged by the bank in November. Deutsche Bank analysts said that regional banks generally would have to increase interest rates to protect their profit forecasts and estimated that Bank of Queensland earnings could be down by 11.4 per cent if funding costs were up by 20 basis points.