Westpac has defended its mortgage rate hike in face of criticism by consumers and politicians, calling it part of an "equitable" set of measures through which it is raising capital to meet banking regulations.
Westpac drew widespread criticism this week when it raised its residential and investor variable rates by 0.20 percentage points despite the RBA cash rate remaining at a historic low.
It justified the move by saying it needed to cover the cost of a $3.5 billion equity raising, even though Treasurer Scott Morrison has said the hike was twice that needed to support new capital requirements set out by the Australian Prudential Regulation Authority.
Westpac commercial and business bank chief executive David Lindberg said on Friday the banks had decided it was fair to pass on the rise to consumers given shareholders and the bank itself, through cost cuts, bore some of the load.
"The capital raising was significant and the cost of the raising was significant to us with a consequent impact across a range of stakeholders," Mr Lindberg told a Senate economics reference committee in Sydney.
"The return on capital from the pricing decision we announced this week does fall well short of the cost of capital. What we tried to do is to balance the cost in as fair way as possible between stakeholders, and those stakeholders include shareholders ... we shared that cost as equitably as we felt we could across those stakeholders."
Opposition Leader Bill Shorten on Thursday described the rate rise by Australia's second largest bank as "corporate greed", while Mr Morrison accused Westpac of gouging its customers.
Westpac announced the rate rise on the same day it unveiled an $8 billion annual profit and increased dividends for shareholders.
Owner occupiers with a $300,000 loan will fork out an extra $46 a month after their standard variable rate rises to 5.68 per cent on November 20.
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