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.

38

Ken Henry is right, and should resign because of it

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.

3

S&P: Mortgage arrears rise in NSW and VIC

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

29

RBA warns on non-bank mortgage credit crunch

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

10

NAB/ASIC corruption exposed

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

7

S&P warns on Aussie mortgage bonds

From S&P: – Tightened access to credit will affect refinancing conditions, but not for all borrowers. Borrowers with modest loan-to-value ratios, higher seasoning, and amortizing loan profiles are in good stead. Such borrowers make up a majority in most Australian RMBS portfolios. – We expect mortgage arrears to remain low in most portfolios, with modest

27

Hayne to bake-in conservative credit

Via Chanticleer today: Kenneth Hayne looks like reshaping the governance of Australia’s leading public companies judging from the line of questioning directed at Commonwealth Bank of Australia chairman Catherine Livingstone and chief executive Matt Comyn. Based on the the lines of inquiry pursued by counsel assisting, Rowena Orr, QC, the Hayne governance era looks something

3

Fitch: Mortgage arrears down modestly

Via Fitch:  Seasonal Decrease in Arrears: The 30+ days’ arrears fell by 4bp qoq to 1.04% during 3Q18. Fitch Ratings has observed a drop in third-quarter arrears for the previous decade.  Falling House Prices: National dwelling prices continued to decline in 3Q18, led by falls in Melbourne, which dropped by 2.33% from the

26

Can Rudd Bank 2.0 save developers from crunched credit?

Via The Urban Developer: In residential property, the law of unintended consequences is hurting a significant number of property developers, driving some businesses to a grinding halt and others to the brink of failure. There’s a combination of factors at work here creating a perfect storm for developers: APRA’s Macro-Prudential Lending Guidelines The requirements of

142

Quietly one arvo the Aussie property bubble burst

Game over. Via ABC coverage of CBA CEO Matt Comyn at the Hayne Royal Commission yesterday afternoon: Rowena Orr has moved on to CBA’s own lending practices, particularly its extensive use of the Household Expenditure Measure (HEM). For those of you who don’t remember the HEM from the first round of hearings, it is a relatively low-ball measure

20

APRA prepares banks for “economic winter”

Via InvestorDaily. APRA’s deputy chair John Lonsdale made the comments at FINSIA ‘The Regulators’ event saying that Australia had endured 27 years of continuous expansion but no summer lasts forever. “Australia’s unprecedented period of uninterrupted economic growth may have years yet to run. We hope it does. “But when our economic summer inevitably ends –

11

One reason to be very worried about Australia in the next global shock

We know all of the dry tinder. The big pile of external liabilities piled high in unproductive assets protected by the firebreak of public guarantees from a clean public sheet. But the next downturn could bring something that will set fire to all of this virtually overnight: Italexit. Via Albert Edwards, king bear: The orthodox

23

NAB’s Thorburn to take the Hayne perp walk?

Via Domainfax: National Australia Bank chief executive Andrew Thorburn took a luxury Fiji holiday and a Thermomix arranged through a company under police investigation over accusations it bribed his chief of staff to win contracts from the bank. Fairfax Media can reveal that the NSW police have uncovered information that Mr Thorburn’s former chief of

84

ASX adds its warning that house prices are going crash

Gotti is onto it: The share markets’ danger signals are telling the Reserve Bank economists to leave their Martin Place bunker and go out into the real world. Go and talk to bank branch people (not CEOs) and learn how APRA rules are cutting bank lending by at least 20 over cent but usually by

18

So, is the HEM doomed or not?

Yesterday’s Federal Court decision to stomp on ASIC’s WBC settlement has all tongues wagging. Martin North sees as bullish: The use of HEM may well be back in play, following the latest from the Westpac ASIC case.  Given that at some banks HEM is still being used for around half of applications, and the Royal Commission commented

45

ANZ slams and bolts door on easy mortgages

Via The Advisor: ANZ has informed brokers that it will introduce enhanced home loan verification requirements, effective from 20 November. Key changes include the following: PAYG income: Brokers are required to obtain three months’ bank statements showing salary credits in order to verify income (in addition to payslips). For casual, temporary and contract employees, six months

45

Frydenberg launches the great Aussie bank bailout

Via the AFR comes $2bn for small business from Amateur Treasurer Josh Frydenberg: The creation of a taxpayer-backed securitisation fund to invest in small and medium enterprise (SME) credit will also potentially expand an asset class for institutional investors such as superannuation funds to invest in. Treasurer Josh Frydenberg and Small Business Minister Michaelia Cash

29

Judge shoots down Westpac “liar loan” fine

Via the ABC: In an extraordinary move, the Federal Court has refused to approve a $35 million penalty for Westpac, despite the bank admitting it broke responsible lending laws.The penalty was a negotiated settlement between Westpac and the Australian Securities and Investments Commission (ASIC).However, in a highly critical judgment, Justice Nye Perram said “admirable ingenuity

62

Frydenberg panics, demands return of criminal mortgages

It would be amusing if it were not so horribly corrupt, via the AFR comes Amateur Treasurer Josh Frydenberg mainlining panic straight into bank executive veins: “I would encourage the banks when it comes to lending, in particular for small business, make sure you get the balance right, keep the books open and don’t lose

21

Goooong!!! ANZ tolls bell on great Australian property crash

Oh boy. ANZ is preparing for tough times, via the AFR: …From November 25 the bank will be using new “comprehensive credit reporting” checks by having third-party agencies check on applicants’ credit card, home, personal, or car loan debt. In addition, mortgage brokers will be required to provide “enhanced verification” about applicants’ income and rental

5

UBS: Aussie banks still un-investable

Via the always excellent Jonathon Mott at UBS today: (1) ‘Underlying’ revenue fell -1.3% (h/h); (2) NIM was down 7bp to 199bp; (3) Average Interest Earning assets grew just 1.4% as the banks further tightened underwriting and continued to run off low yielding institutional assets; (4) Fee income and markets revenue were weaker; (5) ‘Underlying’

15

Banks issue instructions for corrupt regulators

As we know, the corrupt RBA, Treasury and APRA are working behind the scenes to prevent any meaningful reform to Australia’s corrupt banking industry. Today they get clear instructions from their bosses on what needs to be protected, via The Australian: In submissions to Mr Hayne’s interim report that were released by the commission, the

12

Unquestionably weak: APRA lifts big banks capital requirements

Via Martin North: APRA has released a paper on Loss-Absorbing Capacity of ADI’s. It shows that currently major Australian banks are at the lower end of Total Capital compared with international peers. As a result of proposed changes, major banks (Domestic systemically important banks in Australia, D-SIBs) will see their funding costs rise – incrementally over

8

Macquarie called in by AUSTRAC

Via The Australian: Macquarie Group is locked in talks with Austrac to resolve “an issue” with its financial reports, joining National Australia Bank and Westpac in having to address problems with the anti-money-laundering and terrorism financing regulator. A cache of submissions to the royal commission into financial sector misconduct released late yesterday also revealed AMP

32

Wayne Byers reappointment slammed

Martin North and John Adams destroy Wayne Byers reappointment: More at Banking Day: High profile consumer campaigner Naomi Halpern, who was instrumental in securing parliamentary support for financial advice reforms in 2014, said victims were stunned by the government’s decision to extend Byres’ tenure given that the royal commission was still investigating the enforcement record of