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.

11

Calls for banking royal commission extension grow louder

By Leith van Onselen National Party senator John Williams is confident that Kenneth Hayne would be granted more time to conduct the banking royal commission if he asked for an extension. Labor and the Greens are keen for the inquiry to be extended, with Hayne currently due to present his final report in February. Prime

1

Mortgage arrears still getting worse

From S&P: Australian prime home loan arrears held steady in June. The Standard & Poor’s Performance Index (SPIN) for Australian prime mortgages remained unchanged from a month earlier at 1.38%, according to a recent report by S&P Global Ratings. Arrears typically decline in June. While home loan arrears remain elevated year on year, we expect

9

Ken Henry should resign

Via the AFR today: The scale of NAB’s inability to report licence breaches on time has been revealed in a document published by the Hayne royal commission which shows the bank breaking conditions of its licence at the alarming rate of around once every week between 2014 and 2017. Of the 297 breaches the bank

7

APRA, ASIC “captured” by banks

This is old school AFR from Alan Mitchell: Economists call the problem “regulatory capture” and, as well as being under-resourced, it seems the financial sector’s main regulators, APRA and ASIC, may have fallen prey to it. None of these problems are new. The failures of governments and regulators to protect the public from the behaviour of industry have

27

APRA responds to Deep T.

Remarkable news: The Australian Prudential Regulation Authority (APRA) has sought industry feedback on potential approaches to adjust the capital framework for authorised deposit-taking institutions (ADIs) to make capital ratios more transparent, comparable and flexible. The prospective approaches are outlined in a discussion paper released today for industry consultation. The approaches would not change the amount

24

Australian banks’ giant mortgage capital rort

I’ve waded through Matt Comyn’s presentation of CBA’s results and some things struck me as, bluntly, lacking clarity. There’s no doubting CBA has a valuable franchise inherited mainly from its government owned history and its does have leading tech in delivering customer outcomes, but when it comes to the capital and liability side of the

3

S&P drinks Kool Aid on Aussie mortgage risks

Ratings agency, S&P, has released Panglossian analysis of Australia’s mortgage insurance industry, which it claims is facing low risks: SYDNEY (S&P Global Ratings) Aug. 9, 2018–S&P Global Ratings today said it has maintained its low risk insurance industry and country risk assessment (IICRA) for the mortgage insurance sector in Australia (AAA/Negative/A-1+, unsolicited ratings). The low

27

Fitch: Australian house prices to keep falling

By Leith van Onselen Fitch Solutions has released a research note warning that Australian property prices will continue falling which, when combined with falling credit growth, will hit bank profitability: We are maintaining our long-held view that the outlook for Australian banks will remain subdued over the coming quarters, which will be mainly driven by

12

Mining bust drives up CBA’s mortgage arrears

By Leith van Onselen The 29% crash in dwelling values in Perth and Darwin: Along with the surge in rental vacancies in both markets: rental vacancies: And the circa 20% collapse in rents: Has seen mortgage arrears lift in both jurisdictions, as reported by CBA’s full-year profit results. As shown below, overall mortgage arrears lifted

13

Greens call to split-up banks no panacea, but worth investigating

By Leith van Onselen The Australian Greens yesterday launched a proposal to split-up Australia’s banks: “The Hayne Royal Commission has proven that the foundations of our banking and financial system are rotted through. It’s past time we stopped letting these huge corporations get away with fraud, bribery and other systemic abuses of the customers they

26

Captured APRA loosens investor mortgage cap for mad Macquarie

Via Banking Day: The volume gains made by non-ADI lenders in the investment mortgage market could come under severe pressure in the next few months as APRA begins to loosen the prudential constraints on lending to investment borrowers. Banking Day can confirm that HSBC Australia, Macquarie and People’s Choice Credit Union are among the first

26

Another financial crime band-aid

News broke yesterday morning that ASIC Chairman James Shipton has greenlit the prospect of tactical taskforces to be embedded in our banks (for up to 8 weeks at a time) in an attempt to address the surging and endemic misconduct present in our banking system. Treasurer and chief Royal Commission resister, Scott Morrison, has backed

12

Royal Commission deems NAB “hopelessly conflicted”

There was more from the Royal Commission grilling of National Australia Bank yesterday.  “Hopelessly Conflicted” is one term that I’m hoping will catch on: The process that saw NAB’s superannuation trustee NULIS advised by the bank’s wealth management arm was hopelessly conflicted, the Hayne royal commission has heard. Counsel assisting Michael Hodge QC put to

13

Why Australian mortgage credit will fall much further

Via Damien Boey at Credit Suisse comes the big three: 1.    Out-of-cycle rate hikes. The spread of bank bill swap rates to overnight indexed swap rates has come in after financial year-end, but still remains elevated by historical standards. Current spread levels have historically been consistent with margin pressures for banks, and eventually, out-of-cycle rate hikes.

6

Productivity Commission: Raise the bank levy

By Leith van Onselen The Productivity Commission’s (PC) final report on Competition in the Australian Financial System has recommended that Australia’s banks “should pay for any support they receive from taxpayers via the Australian government” and, therefore, the 0.06% levy on the liabilities of the Big Four banks and Macquarie should be lifted.  From Banking

43

Bankruptcies to rise as negative mortgage equity spreads

Last month, the Australian Financial Security Authority (FSA) released personal insolvency statistics for 2017-18, which revealed a sharp rise in total personal insolvencies to the highest level since the Global Financial Crisis (GFC): In particular, debt agreements hit the highest annual number on record in all states and territories except Tasmania after posting the seventh

50

APRA’s airbrushing of mortgage risks exposed

By Leith van Onselen Last week, economist John Adams penned an excellent article exposing the way that the Australian Prudential Regulatory Authority (APRA) has airbrushed Australian history to paint over the huge housing risks facing the economy: This event was predicated on the assumption that a downturn in China would lead to a collapse in

145

The poison of negative mortgage equity spreads

Via Domainfax: Suburbs in Sydney’s inner west have borne the brunt of the city’s steepest annual drop in property prices since the Global Financial Crisis. …“I think it reflects a combination of those areas being among the most popular. During the boom they were the key beneficiaries,” said Dr Shane Oliver, AMP Capital’s chief economist.

21

Why this is a mortgage “credit crunch”

Via CoreLogic: With the tightening of lending criteria over recent years by lenders there is increasing use of the phrase ‘credit crunch.’  A formal definition of ‘credit crunch’ is inherently loose, however, looking at the data and commentary from the banking regulator APRA, although dwelling values are falling and credit growth has reduced, the term

4

Gottiboff: Banking “Golden Age” over

Via Gottiboff today: ATKearney has undertaken a detailed review of Australian banking prospects and says: “The golden age of banking is ending, profit growth ahead is going to be tough as easy profits are eroding.” Two years ago, ATKearney caused great controversy when it first predicted that the banking boom was coming to an end. ATKearney

7

Macquarie leaves new CEO to clean up mortgage mess

Via Banking Day: Supercharged growth in its mortgage book remains a pillar of the Macquarie Group story, with the Australian mortgage portfolio of its banking arm expanding by five per cent to A$34.3 billion over the June 2018 quarter. That’s 20 per cent annualised and in line with growth reported in the monthly APRA data

23

APRA airbrushes history of huge mortgage risks

By John Adams, Chief Economist at As Good As Gold Australia Australia has truly entered the uncharted twilight zone. Last week, Chairman of the Australian Prudential Regulation Authority (APRA), Wayne Byres delivered a speech entitled ‘preparing for a rainy day’ . The Chairman, as part of this speech, outlined a range of policy initiatives that APRA