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.

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Citi: Aussie mortgage underwriting standards poor despite regulatory tightening

By Leith van Onselen Australia’s poor mortgage underwriting standards have been well documented recently. The recent UBS survey on Australian mortgages concluded that brokers were loose with lending standards: One of the key areas of focus of the 2017 UBS Evidence Lab Australian Mortgages survey was to assess the level of factual accuracy in mortgagor’s

12

ASIC puts sub-prime interest-only lending on notice

By Leith van Onselen ASIC’s has released its review of interest-only lending, which has put both banks and mortgage brokers on notice to tighten up their selling of interest-only loans or risk regulatory intervention: ASIC has concluded the first stage of its targeted review, which involved data collection from 16 home loan providers (including large

4

Time to buy CBA?

Via UBS: Is it the right time to buy CBA? One of the key question in the bankings sector at the moment is whether it is time to buy CBA. The arguments in favour of buying CBA are: CBA is a quality bank with a superior Retail franchise; CBA has underperformed the rest of the

11

The Big Sleazy withdraws from schools

Via The New Daily: The Commonwealth Bank of Australia has promised to scrap a controversial practice that sees it pay primary schools a commission for every student that signs up to its Dollarmites program. The decision came just hours after consumer advocacy group CHOICE launched a scathing attack on school banking programs, saying banks should

11

Aussie banks take a break from binging on offshore debt

By Leith van Onselen The Australian Bureau of Statistics (ABS) last week released its National Financial Accounts for the June quarter, which revealed a small large 2% quarterly rise in Australian banks’ gross external liabilities (offshore borrowings) in the June quarter, but a big 5% reduction over the year and a sharp contraction relative to

5

You want good governance then sack Evil Anna

She’s making out like a bandit with a fat public pension plus the lobbying silver pieces worth $500k according to The Australian, so why not go for gold on bank salaries too, at the AFR: Banks want more stringent checks and balances placed on the prudential regulator to ensure it doesn’t abuse new powers granted

23

The 1890s echo in dodgy mortgage brokers

The RBA described the 1880s Melbourne land bubble like this: The potential for ‘bubblesʼto have a wider impact strengthened dramatically from the 1880s. The financial system was broadened by an expansion in the number of banks, their greater geographic reach through the establishment of branch networks and by the growth of non-bank financial institutions. The ratio

6

Evil Anna ramps attack on SA

Paver by paver Evil Anna lays her highway to Hell: “South Australia needs jobs to grow its economy, not new taxes that will undermine this objective,” ABA Chief Executive Anna Bligh said. “Over the past 10 years, full time jobs in South Australia grew by an average of 0.2 per cent per year, compared with

8

Mortgage arrears by district

Via Moody’s: The proportion of Australian residential mortgages that were more than 30 days in arrears (30+ delinquency rate) increased to 1.62% in May 2017, the highest rate in five years. Higher delinquencies raise the risk of mortgage defaults and are therefore credit negative for Australian residential mortgage-backed securities (RMBS). Mortgage delinquencies increased to record

19

Royal commission alert: All banks are laundering

Hoocoodanode? Via Domainfax: Gaping holes in the anti-money laundering systems of Australia’s big banks are being exploited by crime groups to wash up to $5 million in drug cash a day, according to confidential briefings by federal and state policing agencies. New details of police investigations reveal that the big four banks – Westpac, ANZ,

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Pascometer red lines on liar loans

Weeoo, weeoo, weeoo. Lol: I have a “liar loan” – a mortgage based on less than absolutely factual information. I’ve pretty much always had liar loans. And I recently obtained a “liar credit card”. So what? Given readers’ (and therefore the media’s) love of stories that combine housing and doomsday scenarios, investment bank UBS received saturation

6

“Liar loan” liars lie about loans

From the Mortgage Professionals Australia: Bank’s claims about borrowers’ ‘liar loans’ criticised by industry over methodology and intentions The MFAA and FBAA have harshly criticised a UBS report which claimed 1/3 of mortgage applications were not entirely accurate (which they term ‘liar loans’). The report, which also claimed broker channel loans were more likely to contain inaccurate information, was branded ‘reckless’ by the FBAA because

7

Moody’s downgrades Australia’s mortgage linchpin

Via Moody’s: Moody’s Investors Service has downgraded to Baa1 from A3 the insurance financial strength rating (IFSR) of Genworth Financial Mortgage Insurance Pty Limited (Genworth Australia). Today’s rating action on Genworth Australia concludes the review initiated on 19 June 2017, which was part of a wider rating action on Australian financial institutions to reflect Moody’s

5

Moody’s warns on rising Aussie RMBS bad loans

Via Moody’s: » Macroeconomic update: We forecast that Australia’s real GDP will grow by around 2.5% for full-year 2017 and 2.7% for 2018. Australia’s GDP is growing at below the 10-year average, but we believe the level of growth is supportive of RMBS performance. However, Australia’s high household debt in combination with record low wage

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Inside Australia’s half trillion dollar “liar loan” nuclear time bomb

So you want know what drives the bubble? Make sure you’re sitting down because here it is, cross-posted from the always excellent Jonathon Mott at UBS: Work Undertaken Between 7th of July and 4th of August 2017 UBS Evidence Lab conducted an online survey of 907 Australians who had recently taken out a mortgage to buy

0

Big Sleazy catches a bid as Big Iron fails break out

Dalian is trying repair overnight damage today: Big Iron is down sharply. BHP and RIO failed at largish double tops, at least for now… Big Gas is soft but the pensioner abuse specialists continue their predictable but appalling re-rating: Big Gold is off sharply. I remain a seller short term: Big Sleazy has caught a

4

What price The Big Sleazy?

From Credit Suisse: The capital impact of reputational loss This research note builds on our previous work on the valuation impact of CBA’s reputational loss (refer further: “Commonwealth Bank – Valuing reputational loss” 28 August 2017) by now looking at the possible capital impacts. The two potential key impacts we see in this regard are:

6

Big Sleazy breaks to new lows

Dalian is trying to rebound: BHP is still nudging breakout: Big Gas continues its re-rating with exporters down and the domestic gougers flying: All I can say to that is, what a pack of bloody idiots we are. Big Gold is powering, working beautifully as portfolio insurance. I’m still a seller here for the short

16

Sleaze Bank class action launches

It’s a go: Australian litigation financier IMF Bentham Ltd said it would fund an open class action lawsuit against Commonwealth Bank of Australia in relation to allegations it oversaw thousands of breaches of anti-money laundering rules. IMF said on Tuesday that it will bankroll the class action on behalf of all CBA shareholders who bought

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Is Sleaze Bank uninvestable?

Via Banking Day: Professor Milind Sathye from the University of Canberra expects Asian regulators and law enforcement agencies to audit the anti-money laundering records of other Australian banks in light of CBA’s failures. “Australian banks that have branch licences throughout Asia are likely to come under greater scrutiny from anti-money laundering agencies to ensure they