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.
Via the excellent Jonathon Mott at UBS: Results were all about the Balance Sheet. P&L takes the back-seat 1H20 reporting season was disappointing, in our view. Although sector NPAT fell 45%, the focus was on capital and provisioning build as the banks prepare for a recession. COVID-19 overlays were at the lower end of expectations,
The ABS is out with the April jobs report: The unemployment rate is a joke, resulting from ABS skullduggery over why less people participated. If the participation rate had been stable the number would have been 9.6%. Everything else is dire.
From Banking Day: Weekly application volumes trended lower over March, April and May “relative to the peak volumes experienced in February,” Commonwealth Bank said in a trading update yesterday. On the other hand the bank said “application volumes remain strong and are around 10 per cent higher than the same period last year,” perhaps confounding
Drip, drip, drip: Fitch Ratings – Sydney/Singapore – 12 May 2020: Fitch Ratings has downgraded the Insurer Financial Strength (IFS) Rating of Genworth Mortgage Insurance Australia Ltd’s (GMA) main operating subsidiary, Genworth Financial Mortgage Insurance Pty Limited (GFMI) to ‘A’ (Strong) from ‘A+’ (Strong). The Outlook is Negative. KEY RATING DRIVERS The rating actions are
Nice pickup from Dan Ziffer from the CBA update: pic.twitter.com/OO8zwi48rs — Dan Ziffer (@danziffer) May 12, 2020 On those numbers CBA would only need $8bn in capital to replenish that which was lost. I find that very hard to believe. It is probably derived from one of the usual garbage-in, garbage-out models.
Via Banking Day: Macquarie Securities has reviewed the institutional loan portfolios of the major banks, using a number of quality screens to assess their strengths: the rate of growth in the lead-up to the downturn; the proportion of listed versus unlisted companies; the proportion of companies with credit ratings; the average credit rating across the
CBA out with its update: So, profits down 23%. It’s sold Colonial First State to KKR. NIM down despite big deposit flows. Provisions up solidly but not enough. Capital not strong at 10.7% but it’s in line with the other banks so I guess that’s why it has been allowed to continue the dividend. That
Via Banking Day: Westpac is about to slam the brakes on home lending after it tightened credit policies to curtail lending to borrowers heavily exposed to the impact of the economic lockdown. The bank on Monday revealed details of the new policy in a notification sent to mortgage brokers. From 17 May Westpac will cease
Via S&P today: Our outlook on global banks has turned sharply more negative in recent weeks as a result of the significant effects of the coronavirus pandemic, oil shock, and market volatility, says S&P Global Ratings today in a report published on RatingsDirect. “We took 175 rating actions on banks between the start of the pandemic
Via the AFR: Figures provided by the Australian Prudential Regulation Authority show that, to date, consumers and business owners had sought between $150 billion and $160 billion in loan deferrals. This amounts to 6 per cent of all mortgages and 13 per cent of SME loans, prompting government concerns that the banks, too, are being
Fresh from ME: ME Bank to change back redraw limits on home loans In response to customer feedback ME Bank has decided to change back home loan redraw limits for any customers who want it. The bank recently made changes to some older, legacy home loan products which resulted in around 4 per cent of
Via Banking Day: A smart move by artisans of the craft, the soon to be in place forbearance SPV structure the ASF has put together for the industry shows the best of banking. Banks and NBFIs need to crash the SFSF and AOFM funding pools, and this gateway won’t easily be put aside. The AOFM
It was announced with great fanfare: The Coronavirus Small and Medium Enterprises (SME) Guarantee Scheme will support up to $40 billion of lending to SMEs (including sole traders and not-for-profits). Under the Scheme, the Government will guarantee 50 per cent of new loans issued by eligible lenders to SMEs. The Scheme will enhance lenders’ willingness and ability to
Via Banking Day: The customer relations crisis now engulfing Members Equity Bank is exposing much more than a breakdown in communication with home borrowers – it is also opening a window to a crude and inadequate approach to risk management. While the bank acknowledges that it failed to properly give customers notice that their capacity
Via Domain: The prudential regulator has contacted the board of ME Bank to obtain more information about changes to its redraw policy in a bid to determine if an investigation into the lender would fall under its remit. The Age and The Sydney Morning Herald have been told the Australian Prudential Regulation Authority approached ME
Via CoreLogic’s weekly leading indicators. Listings are getting hammered: There is some confusion around this with wider media reports suggests huge numbers of unlisted properties for sale. Mortgage origination is hinting at stability: A decent correction but still above last year’s Hayne RC lows. Is there life in the old girl yet? Full report.
Via Adele Ferguson on the weekend: The boutique bank owned by the industry superannuation sector has blindsided its customers by removing cash from accounts linked to home loans during a pandemic that has increased financial uncertainty. Members Equity Bank, which is owned by 26 major super funds linked to big unions and markets itself as
Westpac out with the latest bank shocker More on the charge: Profit smashed. CET1 at 10.8% is only OK for now. Still, it’s solid start to building provisions thanks to no dividend. I wouldn’t expect it come in the second half either. One positive was NIM holding up. Another is that new CEO Peter King
Via Banking Day: The Australian Securities and Investments Commission has cautioned lenders not to make too many assumptions about how quickly consumers’ income will recover post-pandemic when making loan application assessments. ASIC has published a letter it sent to the Australian Banking Association in response to a series of questions from the ABA about the
Via ANZ: More: And more: CET1 capital got belted but with dividend deferral it’s avoided having to raise capital. I very much doubt that that dividend will ever see the light of day given its loan loss provisions are still far too low and still think it will need capital later this year.
Yeees, at the AFR: Analysts examining NAB’s result, which included a 64 per cent cut to the interim dividend and $3.5 billion capital raising, say the entire amount of the $3 billion institutional placement could be chewed up by the higher risk weightings assigned to its loans as the economy weakens. This occurs because as
The AFR has the wrap: Banking analysts fear that if the COVID-19 crisis worsens, the cost to the big four banks of bankrolling “Team Australia” could exceed the $10 billion estimated for this year and $35 billion over three years. Many business customers stung by the economic shutdown are expected to struggle to repay debts
Via Chanticleer: The bank believes we are heading for a severe downturn in commercial property valuations, which will trigger a sharp rise in loan losses in Westpac’s business and institutional banking divisions. …Chanticleer understands the economic forecast underpinning the $1.6 billion impairment includes a spike in mortgage defaults along with a 10 per cent to
It’s an almost daily warning from Westpac these days: Its CET1 capital is higher than NAB’s so it is implying it won’t need capital. The share price is therefore up. Wanna bet!
Here’s the base case: Bartho has the less sanguine version: The differences in outcomes between the scenarios are stark…the losses of output will be unpalatable if the worst-case scenario plays out. The “severe downside” scenario would still see GDP fall three per cent this year but it would shrink again, by 2.5 per cent, next
The Australian dollar is up and away this morning. It’s forming a bullish ascending triangle pattern. Or, an even more bullish cup and handle: Bonds are bid: But XJO is held back by banks which are on the way to retesting the lows: Big Dirt is soft all over: As banks sink with capital raises
Nasty from NAB. Profit halved. Divi cut by two-thirds: Revenue down, costs up, impairments to the moon: And just for laughs, big capital raise: Is it bad enough for the share price to rally?
Via S&P: The Standard & Poor’s Performance Index (SPIN) for Australian prime mortgages increased to 1.41% in February from 1.36% a month earlier. Arrears typically rise in February, reflecting the end of the summer holidays and post-Christmas spending period. Increases in arrears were more pronounced in New South Wales, Queensland, and Victoria, reflecting the effect
Via Moody’s: “We changed our outlook for the broader Australian banking system to negative in early April, reflecting our view that the economic impact of coronavirus-related disruptions will strain banks’ loan performance,” says Tanya Tang, a Moody’s Analyst. “Today’s rating actions are prompted by this change in outlook on the broader banking system.” As a
Via Ian Rogers at Banking Day: The muted, even trivial, supply of urgently needed business finance from banks – especially for SMEs – in the face of an epic contraction and a national consensus to minimise job shedding has turned into a flash point between the industry and the Australian government. Barely six weeks has
