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.

7

Pre-nationalisation Genworth pulls guidance

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.

16

S&P: Property risks “firmly down”

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

10

The great bank hybrid panic

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

42

APRA suspends mortgage arrears

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

7

UBS on how the banks can aid the virus-hit economy

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

3

ANZ most exposed to gas crash?

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

9

S&P: Bank loan losses to double

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

30

“Alarming” rise in bad debt on COVID-19 eve

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

10

UBS: Bank earnings slashed

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

20

Credit markets freeze up on Australian banks

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

25

At times like these, it’s good to ignore Jess

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

7

Neobank wipeout looms

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.

7

Global credit squeeze deteriorates

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