Australian banks

MacroBusiness covers Australian banks from the perspective of their macro-economic role, as political economy actors, as investment propositions and in terms of financial stability and capital adequacy. Australian banks have played a crucial role in inflating the Australian property bubble, exist within an utterly privileged position as “too big to fail” institutions and operate within a deeply distorted financial architecture that has Australian tax payers well and truly on the hook in the event of trouble. MacroBusiness seeks to define this role for investors as well as change it in the name of the Australian national interest.

3

UBS: Avoid banks as NAB warns

Another bank profit warning: UBS remains highly skeptical: …underlying trends are likely to remain very soft and deteriorating: (1) Volume growth should continue to slow as the credit squeeze continues and banks move to improve expense verification (reduced reliance on the HEM benchmark). (2) A bounce in NIM is expected following mortgage repricing. But how

5

APRA releases new lettuce leaf

Via Martin North: The Australian Prudential Regulation Authority (APRA) has released details on the future role and use of enforcement activities in achieving its prudential objectives. Guiding principals include “risk-based”, “forward-looking”, “outcomes-based” and deterrence impact. Of course the question is, will it really make any difference? Here is the release. APRA’s new Enforcement Approach, published today, sets

2

CLSA: Banks won’t cut mortgage rates

CLSA’s excellent Brian Johnston is on the money here: Veteran CLSA bank analyst Brian Johnson said while funding costs had fallen, margins were still under pressure due to increased costs as investors coming to the end of their interest-only periods are forced to switch mortgage products to pay off both the principal and interest. Switching

1

BOQ canary croaks on banks

The AUD is a little soft this morning: The lunatic RBA has paralysed bonds for now: XJO is down moderately: Dalian is soft: And Big Iron: Big Gas is still enjoying its deluded political risk holiday: Big Gold is mixed: Big Banks are sick: Made that way by the croaking BOQ canary which has broken

7

Greg Medcraft’s “absolute rubbish”

Via the AFR: The former corporate regulator Greg Medcraft has broken his silence on the Hayne royal commission, warning that using the courts against the banks could backfire given justice moves so slowl. He also described the recommendation to kill broker commissions as “absolute rubbish” because it overlooked the crucial role competition plays curbing misconduct.

2

UBS: RBNZ capital requirements slam into Aussie banks

New Zealand may not have had a royal commission but it knows what it is doing when it comes to reckless Aussie banks. Via the excellent Jonathon Mott at UBS: Reserve Bank of New Zealand capital requirements larger than prior estimates Recent speeches and publications by the RBNZ suggest it remains fully committed to its Bank

3

Mortgage arrears rise coast-to-coast

Via S&P: Australian prime home-loan arrears rose in January, according to a recently published report by S&P Global Ratings. The Standard & Poor’s Performance Index (SPIN) for Australian prime mortgages rose to 1.45% in January from 1.38% a month earlier. January is typically the peak of the arrears cycle, reflecting the after-effects of Christmas and

29

How far will specufestor mortgages fall?

Via the AFR today: As Credit Suisse analysts pointed out recently, investors are genuine net new buyers and invest for capital gains rather than net rental yield. The Labor policies are seen as negative for the investment housing market and sales will slow, leaving residential developers such as Mirvac and Stockland most exposed. On the upside,

7

Budget delays ASIC funding to protect banks

Via Banking Day: Aggrieved financial services consumers might have to wait several years before regulators are adequately resourced to mount court actions against misbehaving and negligent institutions. While community expectations are high that ASIC will launch a wave of civil and criminal actions against financial institutions over the next 12 months, the truth is that

49

Chris Joye’s big short

Via Livewiremarkets: In assessing whether to get long or short residential mortgage-backed securities (RMBS), we undertake a great deal of quantitative analysis, including revaluing the homes that protect these bonds at regular intervals and developing globally unique RMBS default and prepayment indices. (Regular readers will know that we exited most of our RMBS in February

7

Judo Capital: Aussie bankers biased towards property

By Leith van Onselen Judo Capital founder Joseph Healy has told a banking and wealth summit that a generation of bankers lack sufficient knowledge of the lending requirements of the small business sector, as they favour lending to property buyers. From The AFR: The co-founder of challenger SME lender Judo Capital said bankers were addicted

15

ANZ’s Lord Ponzi battles ASIC

Via the AFR comes the chutzpah of the roving cavaliers of credit: ANZ Banking Group chief executive Shayne Elliott has rebuffed Australian Securities and Investments Commission chief prosecutor Dan Crennan’s ambitions to lock bankers in jail, arguing regulators should prioritise a “fully functioning financial system” to support the economy. Mr Elliott warned the corporate regulator’s

12

Chris Bowen goes raw prawn on mortgage broker commissions

Via The Advocate: In a clear stance on Labor’s trail position, Chris Bowen MP has said that the government’s response to the banking royal commission has “got it wrong”, particularly in regard to its “backflip” on removing trail from next year. Speaking at the AFR Banking & Wealth Summit this morning (26 March), Chris Bowen,

22

UBS: Westpac warning “alarming” for interest only reset

Via UBS’ excellent Jonathon Mott: WBC is finding it very difficult to estimate the potential remediation requirements for customers served via aligned planners, especially as many planners no longer work under BTFG Licences and in many cases have left the industry. WBC indicated that it generated fees of $966m from this channel in the decade

14

Deutsche: APRA fudging mortgage data?

By Leith van Onselen Analysts at Deutsche bank believe they have found a major flaw in APRA’s mortgage data, which significantly understates average loan size. Basically, because APRA has failed to adjust for split-loans, the $276,000 average loan size figure has been understated by around 40%, according to Deutsche, thus giving regulators a false sense