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.
Perhaps mortgage control fraud doesn’t pay in the long run, via the AFR: Lawyers’ representing up to 300,000 litigants are planning an $80 billion action against mortgage lenders, mortgage brokers and financial regulators in a class action that would dwarf previous actions. …Roger Brown, a former Lloyds of London insurance broker, said he already has
Via the AFR, it just doesn’t pay to be bearish at the CBA: The allegations, by the head of the Institute of Internal Auditors Peter Jones, comes in response to criticism that internal auditors had lost their authority within large corporations, were too timid to “speak truth to power” and too readily intimidated into watering
Via our Chris today, whose royal commission objections are mounting towards jihad: Labor fundamentally undermined the integrity of the financial system by partially shifting responsibility for repaying debts from the borrower to the lender, which is insane. Now lenders, not borrowers, are liable for understanding borrowers’ financial circumstances and verifying whether they can service a
AUD is off during the morning: Bonds are bid: The XJO double-top is still in play: Dalian is holding modest overnight gains: Big Iron is down with the recent short of FMG at $5 looking good: Big Gas is down too: And Big Gold: But that snapping sound you can hear is CBA breaking as
Via S&P: Australian home loan arrears rose in March. The Standard & Poor’s Performance Index (SPIN) for Australian prime mortgages increased to 1.18% in March from 1.16% in February, according to a recent report by S&P Global Ratings. Mortgage arrears remained relatively unchanged year on year in March and are lower than the decade-long average
Notice the expanding number of banks turning bearish on house prices lately? Damien Boey today argues that that is springing from a much deeper problem. Interbank funding market is redundant and therefore relevant It is well documented that interbank credit spreads are elevated by historical standards. But it is far less well understood why this
Nobody knows what LMI is: Mortgage Choice and CoreData’s new Evolving Great Australian Dream 2018 whitepaper found 42.1% of respondents said they were not sure what LMI was, yet a third (32%) said they would need to pay it in order to get into the property market. “Our data found that a majority of home
Via Banking Day: Shares in listed mortgage broker and wealth advice group Yellow Brick Road touched a record low on Tuesday as Macquarie Group continued its sell down of its strategic stake in the company. Macquarie, which previously held 19 per cent of the company’s scrip, ceased to be a significant shareholder this week, according
Westpac chairman Ken Henry yesterday entered the royal commission debate: When historians of finance look back on this period they will identify an unusual level of corporate complacency driven by relatively benign macroeconomic conditions and a long period of impressive ROE performance. They will suggest that corporate leaders fell into believing that a sector capable
Swithed on banking at the AFR: The trail of documents used by Westpac to support a business loan for a failed franchise and led the loan’s guarantor to lose her home were haphazard, inconsistent and incomplete the Hayne royal commission has heard. It follows earlier hearings on consumer credit and financial services that also highlighted the insufficient and
More pain for the banks today, via Chanticleer: Hodge assured those in the room and others watching the live stream that commissioner Kenneth Hayne, who built a distinguished career ruling expertly on black letter law, wants to draw out the personal and emotional impact of banking misconduct. The commission has become a venue for reminding
There is no better bellwether for Australian fortunes than the CBA. It is still our largest bank and caretaker of Australia’s monstrous household debt. So it pays to keep tabs on the health of its equity. The news is not terribly reassuring. As the royal commission has proceeded, and the CBA faces corruption allegations on
From the last journalist standing at Domainfax: Staff fraudulently activating school kids’ bank accounts to earn bonuses isn’t a victimless crime. Nor is the practice of faking customer referrals to meet performance hurdles and generate kickbacks – no matter how big or small. But that’s just what’s been going on inside Commonwealth Bank. It speaks
From Chris Joye today: One of the most enduring legacies left by the royal commission will be more conservative and risk-averse banks. This process was already underway after the Australian Prudential Regulation Authority (APRA) embraced the 2014 financial system inquiry recommendation that the banks deleverage. Since then the four majors have raised more than $50
Via the AFR: …Bankwest…is overhauling credit policy and treatment of residential apartments. Units equal to, or greater than 40 square metres, will be subject to an 80 per cent loan to value ratio (LVR), or up to 95 per cent for borrowers with lenders’ mortgage insurance. Units between 30 square metres and 40 square metres
From Morgan Stanley analysts Richard Wiles and Andrei Stadnik: We have a negative stance on the major banks as they have come to the end of a super cycle and now face a difficult transition, which features a combination of both operating headwinds and regulatory risks. We see fundamental change in the mortgage market, modest
Via Domainfax: Commonwealth Bank chief financial officer Rob Jesudason has resigned, leaving new chief executive Matt Comyn with a sixth senior management role to fill as he works to rebuild the bank’s reputation amid a series of scandals. Alan Docherty has been appointed acting CFO while the bank undertakes an internal and external search for
Banking Day pulls no punches today: It’s going to be massive, the pain in banking. The credit crunch is breaking for crisis. Housing prices are turning toward freefall, with discounting the only real option for vendors in a market now dictated by bargain hunters. RateCity summed up Friday morning’s ABS data on housing lending for
Bank results season wrap from the excellent Johnathon Mott at UBS: Standing in front of a train? 1H18 results were disappointing. Across the sector all line items weakened with the exception of credit impairment charges. Further, the outlook is getting tougher and the long shadow of the Royal Commission is hanging over the sector. Overall,
Some great stuff here from Phil Soos at LFEconomics: A comprehensive report was published by the Council of Small Business Organisations of Australia in 2010, explaining how the Australian Bankers’ Association (ABA) and subscribing banks have thoroughly subverted our system of co-regulation. This describes a system consisting of a combination of self-regulation and prudential regulation,
Via The Australian: Treasury told the royal commission into financial services that the second round of hearings had made it “clear” that poor culture and misaligned incentives were the “key cause” of misconduct, and said there were many benefits that could come from the major banks splitting up their financial advice and wealth management arms.
Via the AFR: ANZ has increased rates on its fixed interest in advance loans by eight basis points, or about $800 a year in extra annual interest on a $1 million loan…The bank, which is the most dependent of the major banks on brokers for distributing mortgages, is circulating “policy updates” about minimum evidence of
Via the AFR following the APRA lift of the 10% investor loan limit: “This is what the market has been waiting for,” said Steve Lusi, a director of Direct Property Group, a Melbourne-based real estate agency. “This will make investors a lot more confident about property and means they are not being penalised. Other lenders are
Via Jonathon Mott at UBS who has hosed off the AFR’s WBC “demolition” muck with aplomb: 1H18 Result – Cash NPAT $4,251m, Basic EPS 125cps, Dividend 94cps, ROE 14% WBC result was 2% above expectations. Highlights (H/H): (1) NIM rose 7bp to 217bp (+3bp ex Markets) given mortgage repricing and lower funding costs; (2) Average
Via the ASX: That’s the worst CBA update in recent history: costs up 3% on royal commission compliance; income down -4%; profit down -9%; net interest margins down, and bad debts up though off very low levels. Some of it appears to be seasonal but even so this looks eerily like a proto-profit warning to me. Consensus
Recall the UBS take on the Westpac mortgage book via the Royal Commission data dump: Royal Commission releases APRA’s ‘Targeted Review’ into mortgage books In recent days the Royal Commission into Bank Misconduct has released hundreds of subpoenaed exhibits including: internal reviews; board papers; and correspondence with regulators. Given the Royal Commission’s focus on Responsible Lending it
Two factors determine mortgage availability. One is the price or interest rate. The second is distribution or lending standards. Both are under mounting pressure. The MSM lending standards crunch panic is building nicely. It was headline news at Domainfax over the weekend: To get a home loan, most people would know they might have to make
There’s been a nice little bank short squeeze running this week. How far it has to run is anybody’s guess: But the MB Fund is selling into it because we retain the view that the bank bear market has far yet to run as profits are squeezed by: rising funding costs; criminal remediation; post-RC lending
It’s a rogue bank, simple as that. In the past year it has been exposed for: predatory lending; poor risk controls; fraudulent insurance; fraudulent financial advice; charging fees to dead people; manipulating BBSW; manipulating forex; money laundering for mafia and terrorists; losing 20 million accounts to god knows who, and failing to report most of
The AFR has gone full blown bear: …buyers without deposits of between 25 to 35 per cent are being squeezed out of the market by the tougher lending conditions, agents claim. …Borrowers with pre-arranged credit limits are also being reviewed by lenders before a deal is settled and lending limits being lowered, following tougher analysis
