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Post GFC customers still cautious and paying down debt, says Bendigo Bank boss -

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MICHAEL BRISSENDEN: Almost eight years after the Lehman Brothers collapse triggered the global financial crisis, everyday people and businesses caught up in the fallout remain cautious - especially when they see recent market gyrations.

Mike Hirst, chief executive of the regional lender Bendigo and Adelaide Bank, says customers are continuing to pay down debt and their appetite for risk remains low.

Mike Hirst spoke with our business editor Peter Ryan.

MIKE HIRST: Certainly offshore markets have been volatile in the first part of this year, but by and large the industry is in a strong position.

PETER RYAN: The cash rate is at a record low and that's good news for borrowers, but how sustainable is the intense competition between banks to win new customers and also to keep the old ones?

MIKE HIRST: I think one of the good things about the financial sector inquiry that we had is that it identified the need to have a competitive banking system.

And certainly some of the recommendations that came out of that are aimed at making sure that Australians have a lot more choice when they decide who to trust their banking with.

So even though it's a really competitive market, it's a market that is able to be contested on a number of different levels other than just price.

PETER RYAN: But you've also talked about irrational pricing - competitors really pushing the boundaries to get more customers and also more exposure to the home loans market.

MIKE HIRST: Well that's certainly the outcome of that.

During the latter part of last year there was a re-pricing of mortgages led by the major banks where prices were raised for investors and then for owner-occupiers in response to the need for the industry to hold more capital.

And I think leading up to that point the pricing had been irrational but once that re-pricing set in we've now moved to now more sustainable levels.

PETER RYAN: So given that re-pricing we saw late last year, will banks be forced to make more out of cycle rate rises during the year?

MIKE HIRST: Not at the moment.

There might be things at the edges. We saw I think ANZ increase their business lending a few weeks ago, as did the NAB.

So, you know, from time to time there'll be different re-pricing occurs in response to what's going on in the market.

PETER RYAN: And we saw this in 2007 and 2008 in the lead-up to the Lehman Brothers collapse where there was that credit crunch.

Are you seeing the possibility of any similar crunch, given the current situation we're seeing on global markets?

MIKE HIRST: Not at this point in time.

The thing we haven't seen this time around is the lack of liquidity, and it was really the lack of liquidity in the markets that caused the problem last time and I don't see any sign of that at the moment.

PETER RYAN: Given those market gyrations and big sell-offs in bank stocks since the beginning of the year and in the background big concerns about a slowdown in China, are customers becoming more cautious about where they spend their money or where they save their money?

MIKE HIRST: We're certainly seeing a desire on customers' part to make sure that they're well ahead on their loan repayments.

There hasn't been the same return to risk appetite at the retail end. We certainly see that through our margin lending book, which is just maintaining its balances and hasn't grown back to where it was pre-GFC.

So I think people are being cautious. The reality is that there are economies around the world that are having difficulty and I think in this global environment you often get overreactions to things that are taking place.

MIKE HIRST: Kate Carnell from the Chamber of Commerce and Industry says Australia could become a basket case like Greece in the future unless tough reforms are made on spending.

Do you agree with that comparison?

PETER RYAN: Whether or not we get to the levels of Greece I'd be surprised to see that myself.

Sometimes people like to make statements to emphasise a point, and the point here is that the Government needs to be careful with the budget, making sure that the money they're spending is well-spent and not wasted and that we're living within our means.

MICHAEL BRISSENDEN: Chief executive of the Bendigo & Adelaide Bank Mike Hirst with our business editor Peter Ryan.

And Bendigo has reported a half year profit of $208.7 million - that's down 8.2 per cent.