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.
More Gotti rent seeking today: Fear is suddenly driving the actions of a large rump of Australians. It is seen most clearly in the housing and apartment markets of Sydney and Melbourne. To a lesser degree, that housing fear infects most other mainland capitals. …For years people thought lower dwelling prices would attract first home
Via Banking Day: The Australian Competition and Consumer Commission has called out the big banks for gouging an extra $1.1 billion a year from thousands of interest-only borrowers, but has baulked at recommending action to fix the problem. The four major banks controversially repriced their interest-only back books by an average of 32 basis points
After the close yesterday: Not a great look for bank already struggling to grow profits at all:
To understand this question we first need some bank capital 101 from MB’s banking insider, Deep T: There are two ways an Australian Deposit taking Institution (“ADI”) calculates capital to be allocated against a residential mortgage. Either in accordance with APRA’s APS 112 Attachment C or under Advanced Basel II methodology. Let’s address the rather simple APRA
Via Gotti today: I have described previously how at the dramatic FINSIA regulators’ lunch in Melbourne it was clear that the Reserve Bank, APRA and ASIC, in their desire to quickly improve bank balance sheets, had little understanding of the downturn they would create and its implications. But the share market now fully understands the
The AUD is holding up this morning despite the NAB survey swoon: Bonds are consolidating after the big bid. More buying to come: The ASX can’t get off the mat after yesterday’s knockout: Dalian is stable: Big Iron too: Big Gas not so good as oil ignores OPEC: Big Gold has a sniff of the
It is a laugh a minute now for the politico-housing complex. First up the RBA, which “economists” say was actually bullish last week: Economists believe the market misinterpreted comments by Reserve Bank of Australia deputy governor Guy Debelle, whose speech on Thursday was received as dovish but in fact was “frank” and consistent in substance
Via the AFR: As Sydney and Melbourne house prices continue to fall, Mr Shorten signalled that an originally planned July 1, 2019 start date could be deferred until 2020. He said Labor remained committed to its three-year policy of reforming negative gearing to make the system fairer for first-home buyers against investors who now receive
From Guy Debelle, deputy governor of the RBA: It is now just over 10 years since the date that people most associate with the Global Financial Crisis (GFC), namely 15 September, the day that Lehman Brothers filed for bankruptcy.[1]There have been quite a number of articles written in recent months looking back at that time
UBS’ Jonathon Mott is out with more today on the mushrooming credit crunch: The banking sector is facing a period of substantial and sustained earnings pressure which is likely to last several years. The risk of the current credit squeeze turning into a credit crunch is real and rising, with the housing market now falling
Via Banking Day: Australia’s mortgage broking industry is preparing to engage in the 2019 Federal Election campaign, with plans to enlist support from home borrowers who want lenders to continue paying commissions. Large aggregator groups such as AFG, Loan Market and Connective are already encouraging affiliated brokers to lobby against proposals advanced by Commonwealth Bank
S&P deluded: Key takeaways − A weakening in government support remains a possibility, but we see a recent regulatory proposal on increasing banks’ loss-absorbing capacity as an indication that support is likely to remain high. − Economic imbalances remain elevated. However, low credit growth and small falls in house prices in the past year suggest
Because I agree with Janet on nothing but this: …last week former Treasury boss, now National Australia Bank chairman, Ken Henry delivered a pretentious and prolix lecture, pointing the finger for corporate misdeeds at “the state of capitalism”. “The capitalist model is that businesses have no responsibility other than to maximise profits to shareholders,” he
Via the AFR: Suncorp is attempting to improve insights on living expenses and lending on mortgage borrowers by requiring a minimum of three months statements for all credit liabilities, including home and personal loans, overdrafts, lines of credit and any other loan facility statements. …Macquarie Bank customers will need to be able to demonstrate they
Talk about not getting the memo: Assistant Treasurer Stuart Robert will headline a Liberal Party fundraiser that promises political donors an insight into the government’s potential response to the banking royal commission. …”It’s appalling and disgusting that after voting against a banking royal commission 26 times, Scott Morrison and the Liberals now want to make
Funny stuff today from Adam Creighton: If your family had doubled down on the London property market in 1938, you’d have done very well. In the 79 years since then house prices have risen 41,363 per cent. In the 649 years before that, London house prices rose only 887 per cent, meaning they went backwards
Via Deutsche Bank’s Matthew Wilson, my new hero: The Australian major banks appear cheap on most investment metrics. However, for the first time in a long time, they confront a raft of real challenges and uncertainty. The cosy oligopoly that historically generated healthy returns and essentially uninterrupted growth predominantly from retail banking (deposits and mortgages),
By Leith van Onselen Appearing before the banking royal commission in its seventh and final round of hearings, ANZ CEO, Shayne Elliott, admitted to being a serial abuser of the Household Expenditure Measure (HEM) – a relative poverty measure – in lieu of a comprehensive credit assessment, but also vowed to significantly wind-back its use to
Via Banking Day: Bounding along in the lead of “The Australian crisis” National Australia Bank has owned up to a litany of defects and an overload of corrective work around conduct and operational risk. Crisis: there is no hyperbole this time, it is a label selected by the industry thinktank the Group of 30 for
In the movie The Big Short, hedge fund manager Michael Burry (played by Christian Bale) is the man that looks inside sub-prime RMBS and discovers nothing but a mess of toxic assets. Chris Joye did something similar on Friday: One of our best “short” (as opposed to “long”) ideas this year has been to bet
Its plunge into investor mortgages is a source of much amusement: In it went the moment APRA lift the 10% speed limit (actually a bit before that). There was a big lift in May from either portfolio rebalancing or an acquisition but even accounting for that the book is currently growing at 25% per annum.
APRA is out with its monthly banking statistics for October and the news is investors can’t get credit. Monthly growth at the big eight banks is stuck around zero: ANZ CBA MAC NAB WBC BOQ BEN SUN Total Oct-18 -0.6 0.1 1.6 0.2 -0.2 -0.2 0.4 0.7 0.0 Sep-18 -0.4 -0.2 1.7 0.1 0.0 0.1
So says a humiliated Wayne Byers, via Banking Day: A more frequent use of sanctions by APRA is on the cards, the regulator’s chair, Wayne Byres, told the banking royal commission yesterday. An afternoon of questioning of Byres was centred on themes of remuneration and bank culture and APRA practices in challenging boards over executive
ANZ CEO Shayne Elliott today at the Royal Commission: So we accept that it’s conservative, in terms of it’s a relatively low level of expenditure … I think that it’s an agreed area for improvement. It’s a piece of software called Triex which we’re developing which would allow us to analyse an ANZs customer’s actual
Via the AFR: Ken Henry’s tone-deaf performance at the royal commission is exactly what National Australia Bank didn’t need as it seeks to rebuild trust with the community. His attitude in the courtroom was a surprise to those of us in the gallery on Tuesday morning. Henry provided long answers that often took the form
From Chanticleer today on the royal commission: Orr asked Henry what roll the Australian Prudential Regulation Authority should be doing to be satisfied that boards are ensuring their companies have a strong risk culture. “I don’t know whether this is the appropriate forum to say, but I will say it here now anyway,” Henry said.
Via S&P: Australian prime home loan arrears fell in September, according to a recently published report from S&P Global Ratings. The Standard & Poor’s Performance Index (SPIN) for Australian prime mortgages, declined to 1.33% in September from 1.36% in August. Arrears typically fall at this point in the annual cycle, though the current arrears level
From Christopher Kent, Assistant Governor RBA (Financial Markets): Introduction Good afternoon, and thank you to the Australian Securitisation Forum for their invitation. It’s a pleasure to be here. Today I’ll provide an update on developments in the markets for housing and housing credit. These markets are closely related and both are of considerable interest to those
Via Banking Day: CLEARLY DEFICIENT: ‘No saving NAB this time’ ASIC chair James Shipton did not quite tell Rowna Orr (pictured) at the banking royal commission. NAB’s inability to fully remedy illegal conduct in the foreign exchange market was laid bare in Friday’s hearing of the royal commission into misconduct in banking. In December 2016
More good work today from Martin North to block deposit bail-ins As we await formal responses from the regulators, I discuss Bail-In with Robbie Barwick from the CEC. They have launched a campaign to make a change to the law to specifically exclude deposits, and they have new evidence that despite what many in Government say,
