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.
From an MB reader who has pre-approval for an Athena home loan: We are really sorry, but a lot has changed over the last few days. Given the market turmoil, we’ve had to make a few changes to ensure that we are considering all the uncertainty that could come from the current down turn. Given
Via GMA: “Strong balance sheet”…and hilarity ensues. Last time I looked it was leveraged 307x capital to insurance in force. I predict that within six months this business will be the hands of the government and be channeling fantastic quantities of your taxpayer dollars into backdoor bailouts for the banks making good on insolvent premiums.
More amusing stuff from S&P: A contracting economy in the short term, rising unemployment, and depressed consumer and business sentiment in the wake of the COVID-19 outbreak have increased the downside risks for property prices and consequently the financial system in Australia, S&P Global Ratings said today. We consider that the closure of real estate auctions as
Via Chris Joye: There was an enormous amount of completely erroneous reporting, and resultant confusion, on NAB’s repayment of the $1.34 billion owing under one of its hybrids yesterday (NABPC), which sparked the biggest fall in ASX hybrids in recorded history. This is quite ridiculous because NAB did exactly the same thing last year with
Yesterday was another bloodbath for banks on the ASX, with the ASX 200 Financials index plunging another 9.3% to be down 44% since the 21 February peak: According to Goldman Sachs, the domestic economy will contract by 6% in 2020, and that this will see the banks’ bad debts increase to 50 basis points of
Via Banking Day: Demand for business credit for the next few weeks may be the biggest it has ever been and banks will be sorely tested by the avalanche of flaky applications for working capital finance linked to government support measures. Access to financial support that lowers the cost of business credit applies only to
Via APRA comes the end of mortgage arrears: The Australian Prudential Regulation Authority (APRA) today confirmed its regulatory approach to the COVID-19 support packages being offered by banks and other lenders to their borrowers in the current environment. Many banks have recently announced COVID-19 support packages that provide affected borrowers with an option to defer
Via the excellent Jonathn Mott at UBS: Banks well positioned to assist the Government and RBA In recent days the Government and RBA have announced a comprehensive package of initiatives to support the economy through the COVID-19 pandemic. RBA Governor Lowe also stated today that authorities will do “whatever is necessary” to support the economy
Private funding that is. There’s $90bn in RBA coconuts on the way. Interbank spreads are still wide: GSIBs globally are locked up: Locally, things got a little worse yesterday with WBC CDS at 96bps: And all of this before we see a single bankruptcy of scale. The crisis did not begin with the banks but
Hmmm… CBA has cut home loan rates by 70 basis points to an all time low of 2.29 per cent for 1, 2 and 3 year fixed home loan customers. Alongside that, the bank said it was launching a new term deposit rate of 1.7pc, an increase of 60bps. That looks like cover for zero
Via Banking Day: Skittish investors appear to have turned a spotlight on the credit risks linked to ANZ Bank’s comparatively heavy exposure to borrowers in the oil and gas industry. The bank’s scrip was the worst performer among ASX listed banks on Wednesday closing down almost A$1.76 or 10 per cent to a decade-low close
Nigel Stapledon is a research fellow in real estate at the Centre for Applied Economic Research at the University of New South Wales at The Conversation: It’s one of the most googled questions since the Covid-19 outbreak began: how will coronavirus affect house prices? The bottom line is it will be negative – prices will
Via S&P: MELBOURNE (S&P Global Ratings) March 17, 2020–Australian banks can absorb the increase in credit losses and disruption to funding markets due to the COVID-19 outbreak without posing any immediate or significant risks to the banks’ creditworthiness, S&P Global Ratings said today. Our analysis reflects our expectation that Australia’s real GDP growth will fall
For a day at least. Yesterday’s RBA emergency announcement dropped the WEstpac CDS price 10% to 98bps: However, VIX exploded again overnight so let’s not count the chickens. Indeed, I will be very surprised if term debt unthaws for banks any time soon despite QE coming Thursday.
Via The Australian: Australia’s economy is set to experience consumer confidence levels not seen since the global financial crisis after an “alarming” surge in people falling behind on credit card and mortgage repayments in the lead-up to the coronavirus outbreak. Banking and financial transaction data from August to February showed the bushfire crisis triggered a
Cross-posted from Zero Hedge on some seriously fucked global financial plumbing. As Bank of America’s rates expert, Mark Cabana – formerly of the NY Fed – writes on Saturday, “the Fed has been on fire” lately, which in light of the Fed’s activities in the past two trading days of the week, may be an
At Banking Day: Macquarie Bank has joined National Australia Bank in withdrawing hybrid security offers, with both citing market volatility and its likely impact on the price of the notes once they listed. Macquarie withdrew its A$500 million offer of Macquarie Capital Notes 2, which it had launched on February 11, saying it made the
Via Banking Day: In his final months as ASIC chairman in 2017, Greg Medcraft began lobbying for a ban on hybrid securities being marketed to retail investors. …NAB’s decision last night to abandon a planned A$2 billion hybrid issue indicates that investors might no longer be prepared to buy in to the uncertain risks they
From the excellent Jonthon Mott at UBS: A week is a long time… Now incorporating an Australian recession and QE Given the rapidly deteriorating environment, UBS has further reduced our economic outlook. While we downgraded our bank EPS forecasts by ~3% last week these revisions already appear too optimistic. As a result, we have moved
The global credit crunch is worsening by the minute. Global interbank rates are ripping: European bank equity is disappearing: GSIBs have been crushed: High yield markets are blasting towards 2015 mining GFC peaks: Led by energy: Worryingly, investment grade is just as bad: Locally, Aussie banks have lost access to term funding: In reality, term
Via Jess Irvine today: With jobs at risk, Morrison is understandably feeling pressure to respond with a multibillion-dollar stimulus package. Indeed, given the very low cost of borrowing at the moment, some strategic spending to keep affected industries on their feet and employing their workers is prudent until normality returns. But Morrison must also tread
Global interbank liqudity is tightening fast: The Fed can’t print fast enough at its repo facility: Junk spreads are rapidly overtaking the 2015 Mining GFC: Investment grade is following: And, locally, as well as the RMBS market being shut, big four CDS is on the march. Here’s Westpac versus VIX: Now at 71bps. At around
The Tennis Treasuerer is back doing his best to hit a forehand. It goes well wide but the AFR calls it “in”: Commonwealth Bank said it was ready to cut fees and defer repayments for small business borrowers struggling with cash flow amid the coronavirus outbreak, ahead of a meeting between bank CEOs and Treasurer
Via Ian Rogers at Banking Day who has gotten the memo that others dare not read: The pandemic is a function of the financial system, and the Australian recession of 2020 and 2021 will be a self-inflicted blow on banks. For CBA, NAB and the lot of them, credit losses will be the worst since
Last night was bank carnage on global bourses. European banks were slaughtered: As funding markets lock up: US banks fell 11%: As funding markets lock up: And Aussie bank CDS has begun its inevitable climb, up by nearly half yesterday: Funding markets are already locked up. Pricing will take a few days to catch up.
Via Ian Rogers at Banking Day last week: Xinja is nursing bruises, a neobank in a fix – from today the bank’s high-yield savings account is a dormant product, a sharp twist to the capital raise the bank has in the market. Xinja Bank have thus abruptly ended one centrepiece of their customer acquisition strategy.
BofAML has nice wrap on deteriorating credit markets via Zero Hedge: [JPM strategist] Panigirtzoglou starts off by pointing out that the “supply chain disruptions and the demand shock caused by the COVID-19 crisis are likely already creating cash flow problems for certain businesses in particular smaller companies and those belonging to sectors most affected by
Don’t be fooled by the dividend yields that you might see for the major Australian banks. They are reflecting a rosy vision of the future that is far from certain, and in my view are a value trap. For those with superannuation investments (where Australian bank shares make up a large part of most funds),
Via Fitch: Fitch Ratings-Sydney-05 March 2020: Australia’s 30+ days mortgage arrears were down 1bp to 1.06% in 4Q19 from the previous quarter, and 1bp higher from the year earlier; 30+ days arrears have now been below 1.2% for the past two and a half years, says Fitch Ratings in a new report. The recent bushfires and COVID-19
Marginal bond funding costs continue to show rising stress. US and EM junk bonds are falling: In the US, yields are breaking above the 2018 Fed hiking scare crash: Chasing volatility: Australian bank funding costs are on the move: The yield is still low but can move very fast and I expect it too as
