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.

2

UBS warns on impact of macroprudential 2.0

From the always excellent Jonathon Mott at UBS: Is the purple patch coming to an end? Over the last six months the Aussie banks have enjoyed a purple patch. While share prices have been supported by the global reflation trade and investors closing underweight positions, EPS forecasts have been revised upwards for the first time

10

Bank mortgage broker channel akin to US sub-prime

Via Investor Daily: In a ‘Spectrum Insights’ article released recently, Spectrum Asset Management principal Damien Wood put forward his views that the third-party channel is a significant risk that could spark problems for Australia’s banks. Mr Wood noted that while high levels of household debt and interest-only mortgages have received plenty of attention, Australia’s preferred

30

Bear’s lick lips at ASX discounts nuthin’

Iron ore and coking coal futures have held Friday’s gains so far: Which has BHP and RIO  up a little, though FMG and WHC are down: Given RIO has barely corrected since the crash began, let us ask, what is the difference between it and FMG? Given FMG’s great deleveraging, and RIO’s reliance upon iron

10

Yawn: Moody’s warns on bubble, AGAIN does nothing

From Moody’s: Moody’s Investors Service says housing affordability deteriorated on average across Australia over the year to March 2017, a credit negative for Australian residential mortgage backed securities (RMBS). Rising housing prices outstripped the positive effects of lower interest rates and moderate income growth. In the near term, Moody’s expects housing affordability to continue to

2

Macquarie downgrades banks on fading housing boom

From Macquarie: In this regards, the most indebted 10% of households are at most risk from rate increases. Our analysis below dissects this group by income quintile (i.e., highest 10% of households based on debt-to-income measure split into income quintiles). While a large share of debt (i.e., ~50%) resides within the highest income quintile, when

79

$100 separates Australia from a housing crash, apparently

Via Australian Broker: A staggering 57% of mortgage holders could not handle a $100 increase in their loan repayments, according to new research by Finder.com.au. This additional $100 is equivalent to an interest rate rise of just 0.45% based on the national average mortgage of $360,600. This means the average standard variable rate of 4.83%

2

Iron ore opens, crashes

While global markets party on the rise of Emmanuel Macron in France, Dalian has opened and immediately shed the good spirits as iron ore and coking coal futures tank: Big Iron is dutifully down: Big Oil is up despite the oil pounding, fishing for a low: Big Gold is mixed: Big Debt is enjoying the

1

Mortgage arrears decline unseasonally

From S&P: The number of delinquent housing loans underlying Australian prime residential mortgage-backed securities (RMBS) fell to 1.23% in February from 1.29% in January, according to a recent report by S&P Global Ratings. We normally expect arrears to increase month on month in February, reflecting the seasonal effects of Christmas spending and summer holidays. The

7

Big Iron dead cat run down

After a few hopeful signs and idiotic fundies, iron ore has suddenly turned down in Dalian this afternoon: Coking coal too: Aforementioned fundie dunces are still bottom fishing though with Big Iron roughly flat: But if you want to a new level in iron ore dumb then cop this from JPM: Iron ore’s 32 per

2

Morgan Stanley: Macroprudential 2.0 to crush specufestor growth

From Morgan Stanley: We think recent developments fundamentally alter the Australian mortgage market. Re-pricing should support banks’ near-term earnings, but we forecast lower loan growth and believe current multiples ignore the risk of unintended consequences. We prefer ANZ (OW) to CBA (UW). Fundamental change in the Australian mortgage market: In our view, the mortgage market

12

Australian banks are running a fake government

And they say that the Chinese have a problem with fakes: Retail banking staff, including tellers, should no longer receive bonuses for simply hitting sales targets, a review of banking remuneration has found. The Sedgwick Retail Banking Remuneration Review, commissioned by the peak body for Australia’s banks, the Australian Banking Association, has recommended changes to

2

Big Iron dead cat rides!

Dalian iron ore and coking coal futures have recovered a little today: As has Big Iron after being flogged yesterday afternoon: But the chart damage is done. Indeed, BHP looks like it’s about to join RIO and FMG in the broken head and shoulders top club: We’re clearly already in oversold territory but I do

16

If Citi is any guide, macroprudential 2.0 is going to misfire

Via the AFR on new lending changes from Citi: It is believed that other major lenders are planning similar announcements over coming weeks. …The major changes, which were notified to mortgage brokers last Thursday, will be a ban on interest-only loans for: All non resident loans; Loans reliant on foreign income; Loans requiring Foreign Investment

9

Fortescue stumbles to the brink

Dalian iron ore has held its overnight losses so far today: As has coking coal: Big Iron is mixed with BHP and RIO acting like they don’t care but FMG is off another -2%: Indeed, FMG is fast closing in the neckline of its lovely head and shoulders top formation in the mid-$5.70s: If that

4

How much credit will be limited by macroprudential 2.0?

From Morgan Stanley: A reliance on interest only loans: Our Chart of the Week shows that Australians are heavy users of interest only loans (IOLs), which have accounted for ~38% of the major banks’new loan approvals since the start of 2008. The IOLshare increased to ~44% in 2015, but eased to ~39% in 2016 due