Get a load of this shocker from Westpac this morning:
That is threatening to become a complete ponzi-unwind:
- skyrocketing bad debts leading to…
- rising risk-weighted asset capital needs leading to…
- canceled dividends leading to…
- lower equity leading to…
- lower lending leading to…
- rinse and repeat.
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal.
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.
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Mortgage holidays will leave nasty hangover
Evans & Partners' Matthew Wilson is
Fitch: Aussie banks remain on downgrade watch
Yep. Via Fitch: Fitch Ratings has maintained the
Banks brace for tidal wave of mortgage defaults
According to Richard Gluyas at The Australian,
RBNZ demands more bank capital
More capital from the Aussie ponziteers: The
That’s an absolute “peg on the noser”.
So just as well I’ve opened a new business account in CBA and moving my cashflow money out of Westpac???
Aussie banks are safe on that front. Even in worst case.
Ah, but DL-S – Senator Roberts’ depositor bail-in exclusion will probably not get passed in the end because Treasury, APRA and pollie Bail-inees will do a snow job. Their loyalties lie elsewhere?
I really can’t see the banks being bailed in, because:
– in the first instance the taxpayer is underwriting $250k per account, which will protect a substantial proportion of all deposits
– a bail-in would necessitate a total wipe-out of equity holders i.e. 30% of the ASX200 extinguished
– Boomers / retirees are the LNP’s key support
– the banks, if (when) they hit the skids will be bailed out with more capital (taxpayer takes an equity stake) or ‘lends’ via hybrid debt.
Bail-in of depositor funds (which the government lamely claims won’t happen, but they aren’t prepared to support Senator Roberts’ legidslation to enshrine it in law – go figure) would occur before any $250K depositor protection were ever invoked. People will have their deposits wiped-out before that protection (which has to be triggered, it is not in place all of the time) were invoked.
Parliament House would be a smouldering ruin (with its inhabitants interred) if that ever happened.
As long as the RBA can print money, a bail-in won’t be a risk.
Cheep cheep, cheep cheep… thunk.
Dun dun dun dununn…
I love the sound of Beethoven’s 5th in the morning.
I think they will have to offer some level of protection as it will be politically unreadable not to do so.
I’m guessing it will only be $50K per account holder. According to APRA data, there is big cluster of deposits around the $50K level.
Spread your risk across the big 4. Westpac appears the weakest out of all of them.
Management from top to bottom is going to have to learn fast how to navigate the first real distressed environment in 95% of their careers. I know from US mortgage bankers when the market went belly up in 2007-2008 just when they thought it couldn’t get any worse it did again, and again, and again. If that experience is any guide qualifying for any kind of mortgage is about to get very hard indeed as management gyrates to being driven primarily by fear and self-preservation. They’ve been careful with their language to not spook the masses but there is just a shade of it here. Will be interesting to watch how they handle it.
They learned their lesson and headed it off in March/April.
It’s stagnation and zombification for the banks now, as households clean-up their balance sheet.
History has taught that households are pretty bad at tightening up their own balance sheets.
Australian households are no different. Debt to income ratios second highest in the world.
We will borrow as much as the banks are willing to lend and that is about 7-8x our income.
The fun started in the US and UK when banks were forced to limit it at 4x income.
Great points!
They’re ‘Master of the Universe’ when paddling the kayak in a fast growth current and usually attribute the velocity to their exertion only.. However. once they hit the class 4 whitewater chutes and ledges, they’ll be swimming and worried only about trying to stay alive.
If the wind is strong enough even turkeys can fly.
I like it.
Can’t remember which one but one of the big 4 has been deliberately losing market share in refinancings. Getting ahead of the game!
none of them know how to forecast for slower growth or negative sideways movements. Not only at our large banks but at most if not all large Australian corporations.
I remember calling $12m revenue gap in for H1 when my group was $7m ahead of budget with 4 months left. I was told I am out of my mind and was forced to adjust my forecast. I literary told them “look don’t worry, I can make it look good, it’s easy, it’s only a spreadsheet.”
Feb comes we were $12m down (bit of luck to guess the exact number) and was told by my boss (same guy who in front of all managers said I am an idiot for calling $12m gap” “look, we both knew this was coming..”, “now what are you planning to do to close the gap”. My response was – there is nothing we can do now, it’s too late as we should have start planning 5 months ago. We just need luck now – to land some large deal – at zero margin off course so at least we meet revenue target.
That was the moment when I started to volunteer to take my redundancy package every time cnvts asked if anyone wants to leave. I was let go on my second attempt.
Now faced with pandemic these people will be lost. They simply don’t read and don’t learn.
Yep, this. (And every big Aussie business is built on debt.)
Excellent point
> Now faced with pandemic these people will be lost. They simply don’t read and don’t learn.
And good riddance to them too. Couldn’t happen to a nicer pack of cunces, I take it!
that was a good read!
will be funny if their shares go up today.
I think the mkt will like that result.
Given the Cba result.
We just lodged finance with WBC for a house purchase (already AIP on an LVR < 70%) so be interesting to see what happens here. We secured 2.62 variable c/f NAB std variable 2.6 so they must want the business. Also have one with NAB just in case.
Wow 2.6%. So low!
It’s going to be interesting watching things going forward. Low interest rates are a sign of a weak economy but usually such low rates would drive the bubble further, but we’re well and truly into the credit rationing phase now
You can get lower. Much lower. 1.99 at loans d0t c0m d0t au. They’re more conservative.
This goes to Brenton’s point, I think, about balance sheet repair for households.
Conveyencer told me she has never, ever, been busier than since C19 hit.
WBC was prepared to lend on an LTI of 4.7 (yikes! No thanks I said). NAB slightly less 4.4), not much change since I checked these pre Christmas. We have no debt and no ccard debt/limit to speak of.
Thanks for that info! I’m not surprised they have never been busier. Apart from an element of bs, I’d expect with such a major tumultuous event like Covid that there would be a surge of activity initially. What will be interesting is activity levels in about 4 months time.
Swampy, the headline rate from l0ans.. is good, but the comparison rate isn’t that sharp.
Have you had a look at freedomlend dot c0m dot au?
They have a 2.17 var with the same comparison rate. Only Up to 70% LVR on this one though. At higher lvrs they have 2.39 var with the same comparison rate.
Funny (?) thing I was told soon after start of Covid, WBC loan processing Centre in Manila was s/t summary door-chaining, the helpful Flow Chart Loop Operators arrived at work and could not … over night the loan turnaround times went to 45 days. I think it got better.
We’re refinancing away after 20 years at WBC, 3 house buys (owner occ no investment), no repayment issues, stable govt management and iron ore salaries – they don’t seem to care less. Won’t dip the rate on $750k from 3.19!
Why does MB delete my comments about Chinese money laundering?
Well Les we can’t say it’s coz you’re not a paying member!
Paying members have perfectly reasonable comments gobbled up, often after writing a thoughtful response (not me, I put no thought in!), and nothing changes.
I’ve had it happen on some random words. I post it up. It looks legit… then wham, lost to the nether.
Even so, what is the relevance of non existent Chinese buyers to this horror show from Oz’s 2nd largest mortgage lender?
My 2c. They don’t seem to like colours or religion. Say “white” or “Christian” or worse still both, and poof your comment disappears.
🎩
And yet your comment is still here?
That’s how they play with your mind. Next time – or this time – poof!
Testing! Testing !
White Christian extremists on the loose.
You even got away with “poof”!
why do you think David went missing for few days?
That’s nothing. This whole article went missing this am:
https://www.macrobusiness.com.au/2020/08/nbn-divided-and-conquered-by-telstra/
Hmmm. 90+ day delinquencies at 1.5% up 0.5% over the qtr.
That’s means major banks have 30+ days at around 2.5% or more.
Non conforming must be at 5-6% now.
When does this become our minsky moment
Never, because there’s a man from the government and he’s here to help.
85% of mortgage check-ins completed.
No. of retail depositor check-ins completed to see how they are coping with Captain Phil’s and Uncle Bill’s almost ZIRP?
None?
And no. of check-ins proposed?
None.
Screw depositors day in, day out?
I wouldn’t trust banks with 5k. I took my substantial savings out years ago and bought bullion, while mates who are now getting under 2% savings thought I was mad. I hope people start to lose that undying trust in them that they are all powerful and safe…pffft
Yeah, I looked into doing just that about 18 months ago, but with the gold price being quite volatile, the 5% that the broker takes when you sell and the lack of liquidity, I thought I’d put it into the MB Fund so that I am cashed up to buy property if/when it becomes more affordable.
Time will tell if my strategy is good, bad, or plain ugly!!
Just buy a gold ETF. You don’t need the physical stuff unless you are paranoid.
Dug into the announcement to get to the pack
https://www.westpac.com.au/content/dam/public/wbc/documents/pdf/aw/ic/WBC_3Q20_Update_Pack_18_Aug_20.pdf
Slide 7, under Mortgage delinquencies 90+ days past due is starting to resemble a virus curve.
Good find. Deferrals exiting, though, would that not be a good sign.
On slide 7: “Consumer properties in possession” – is this properties the bank has taken possession of? That’s down c/f previous periods. Is that due to deferrals I wonder?
Mortgagee sales have been lower than pre covid. Its not can kicking anymore. They will hide the stinking turd under the rug as long as they can.
Yep, Anna B. is probably talking to SFM about what else (apart from NIRP and unleashing a few vibrant uni students on Adelaide) can be done to reinflate the housing price bubble, to fix up banks’ dodgy mortgage loan books.
That’s just the climb to base camp, only gets steeper, colder and more dangerous on the way to the top of the mountain
You’re right about that graph! Thanks for finding that, put a [horrible] smile on my face
This graph will prove as priapic as reusa.
Lol, learnt about priaprism in my first aid course. Which reminds me I do an update course
We follow the “Excluding hardship” line right?
There is proof of the difference between “reality” and extending and pretending. The two shall entwine eventually.
From page 11
Westpac’s risk management framework outlines the Group’s endto-end approach to managing risk
• Our analysis and reviews, in addition to regulator feedback, have
highlighted that the framework is not operating satisfactorily in a
number of respects and that it needs to be improved
• As a result, the Group has a number of risks where we do not
meet the standards we have set for ourselves or are expected by
regulators and therefore rectification is required
• Westpac has a number of programs underway to deal with these
shortcomings as quickly as possible (including through increasing
the number and capability of resources) with a focus on
addressing
‒ complexity of systems along with data and process issues
‒ the management of risk including financial crime and a number
of credit risk processes
‒ the pace and quality of how we respond to risk issues
• As we address these shortcomings further issues have, and are
likely to continue to be, identified
Adios
awesome. thanks for that. Not good
Good to see that WBC are still using their GLOBAL (their interal LGBTQ body) colouring formats in all their slide presentations.
What was that saying about go woke?
makes me think of the continued rumours and gossip around town that Wespac in / or has been in trouble.
Is it only Westpac?
Like this?
https://twitter.com/_mumbling_me/status/1257806671771910144