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.
Check out its response to the Hayne Royal Commission yesterday: 1. This submission provides APRA’s views on issues and questions posed by the Interim Report that are relevant to APRA’s mandate. 2. In summary, there are three overarching questions posed by the Commission with respect to the regulators: First, have the regulators’ responses to
The Reserve Bank of Australia’s (RBA) assistant governor, Michele Bullock, has praised the success of measures aimed at increasing the capital ratios of Australian banks. Bullock notes that the four major banks are close to achieving the Australian Prudential Regulation Authority’s (APRA) “unquestionably strong” capital benchmark, claiming the banks’ capital ratios have increased from 8%
Via Martin North: Lenders Mortgage Insurer Genworth reported their 3Q18 earnings today with a statutory net profit after tax (NPAT) of $19.6 million and underlying NPAT of $20.4 million for the third quarter ended 30 September 2018 (3Q18). It is an important bellwether for the mortgage industry, and confirms recent softening. Whilst they have a strong capital
There’s no reprieve for specufestors in this month’s APRA mortgage data. Monthly flows are weak and getting weaker: ANZ CBA MAC NAB WBC BOQ BEN SUN Total Sep-18 -0.4 -0.2 1.7 0.1 0.0 0.1 1.0 0.4 -0.1 Aug-18 -0.3 0.1 2.8 0.2 -0.1 -0.1 0.7 0.0 0.0 Jul-18 -0.3 -0.2 3.7 0.0 -0.1 0.2 0.4
We’ll see this morning whether the bank short squeeze has any legs because the ANZ result is seriously soggy: EPS down. ROE down. Net interest margin down 12bps to 1.87. Costs up despite big head count reductions. Fantastically low credit impairments that are going to climb. A very uninspiring strategy of increasing exposure to the
Here’s what passes for reform in Australia today: The small business ombudsman has called on the corporate regulator to again review the Banking Code of Practice, suggesting its mid-year approval of the revised code was premature and that banks still have too much power over small business borrowers. …The revised code “falls short of addressing
It’s hard to miss the hopeful action in Aussie bank stocks over the past few days. Despite major US falls the local banks have gone up, including this morning: ANZ, WBC and NAB all report market updates this week. Bloomie has more: Morgan Stanley (Oct. 10): Looking for guidance on margins, expense growth with focus
Via Gotti: It’s a credit squeeze without any Australian precedent. And since the Wentworth by-election, the squeeze’s effects are being multiplied by the fear of ALP policies that were conceived before the squeeze had taken hold. At this stage, the squeeze is restricted to dwelling prices and developers but it’s about to spread to retail
The evidence is in. Australian’s no longer trust their banking system, via the AFR: Only one in five Australians believes banks act ethically and only one in four thinks banks take responsibility for mistakes and keep their promises to customers, according to the damning findings in a new national survey. The survey underlines that the
If it didn’t matter, the contortions that Australia’s corrupt financial regulators are going through would be hilarious. We already have the RBA and Treasury working hard behind the scenes to restore criminal banking. ASIC seems to be trying to bring some kind of accountability but has no resources with which to do it and, let’s
It’s pricing in a local bust. The S&P500 has corrected 7.8% from the peak. The ASX200 has dropped 11%. Add the AUD and the difference is much larger at -11% versus -5.5% (numbers are up to this morning): Why? One reason is Aussie stocks are more expensive given relative earnings growth: But, I put it
More great discussion from Martin North’s bear porn channel:
Via the ABC: Embattled financial services firm AMP has seen its share-price smashed by more than 10 per cent after announcing it would offload its life insurance and wealth protection businesses as part of an overhaul, in the wake of damning revelations at the banking royal commission. The sentiment was not helped by a weak
Is a free radical loose among the banking game of mates? Via The Age: A bigger Australian Securities and Investments Commission will be better equipped to deal with banking misconduct driven in part by a lack of competition, the head of the corporate regulator says. ASIC chairman James Shipton told Senate Estimates on Wednesday evening
Via S&P: Australian prime home loan arrears fell in August, according to a recently published report from S&P Global Ratings. The Standard & Poor’s Performance Index (SPIN) for Australian prime mortgages was 1.36% in August, down from 1.38% in July. The decline was consistent with our expectations; arrears have typically decreased month on month in
The corrupt Treasury is hard at it, openly trying to restore criminal banking: Treasury secretary Philip Gaetjens has warned that a key risk to Australia’s strong economy is banks cutting their lending too much in response to the Royal Commission into financial services and tougher credit rules imposed by the prudential regulator. Amid complaints from
Via Mortgage Choice: Too early, I think not. Too late so far as the market is concerned:
Via Banking Day: COBA chief executive Mike Lawrence believes large credit unions and mutual banks are poised for a new era of accelerated growth under proposed capital reforms announced by the Morrison government. Assistant Treasurer Zed Seselja yesterday called for public comment on planned changes to the Corporations Act that would remove capital restrictions constraining
Via the always excellent Damien Boey at Credit Suisse:: In Tom Clancy’s 1984 best-selling novel “The Hunt for Red October”, a Russian Naval captain attempts to defect to the US by commandeering a state-of-the-art nuclear submarine “Red October” into US waters. The twist is that for a long time while the submarine is sub-merged, neither
So says ANZ Banking Group’s former chief risk officer Mark Lawrence: …most local banks are nearly a decade behind international peers transforming risk capabilities and fixing cultures, because until the Hayne royal commission there had not been a “burning platform” to stir reform like the 2008 financial crisis did overseas. Violations exposed by the royal
And good on it, at Domainfax: Australian Securities and Investments Commission boss James Shipton has called for a radical increase in the regulator’s funding and slammed delays to legislation that will dramatically increase penalties against business crooks. Appearing at a parliamentary hearing in Canberra, Mr Shipton made his strongest speech since being appointed to the
Macquarie is today arguing that a 15-20% fall in house prices would plunge 310,000 home owners into negative equity and would cost the banks roughly $6bn in legal costs and remediation owing to breaches in responsible lending laws. That is, jingle mail: For legal actions to eventuate, a customer would need to have suffered a financial loss
Via Banking Day: If Australia’s major banks have retained any vestiges of complacency, that will be rubbed out by the comments from the Lafferty Banking 500, which rated 500 banks from 73 countries for their overall quality. The report card from Lafferty’s team of analysts ranked three of the four majors as substandard versus their
AUD is firm through the morning: Bonds are soft: XJO gapped higher at the open but has faded ever since: Big Iron is mixed: Dalian soft: Big Gas too: There are signs of life in Big Gold. I am still unconvinced beyond a small counter-trend rally: Big Mortgage is still under selling pressure. It gapped
Karen Moley puts lippy on the banking pig today: …there’s no doubt that the Hayne royal commission – which has forced the banks to crack down on some of their lax lending standards and to forsake some of the suspect fees they’ve been happily pocketing for years – has played some role in this sell-off
Via NAB comes more news to upset the banks:
It’s both riveting and horrible watching the major bank’s abort the next round of regulatory reform before it is even born, from The Australian: The word on the street is that Jacinta Ellis, a 12-year APRA veteran and a senior manager in the legal group, has defected to National Australia Bank, taking up a regulatory affairs
No shit, Sherlock: Housing Risks Re-Emerge Wilting house prices have prompted 50% of Australian fixed-income investors to nominate a domestic housing market downturn as the top risk to Australian credit markets over the next 12 months. While regulations and tighter lending standards have played their part, external threats posed by trade wars also loom and
Via Martin North:
There is no stopping it. Australia’s major banks are in a monster bear market. CBA and ANZ are down 28%, NAB is down 30% and WBC is down 33%: CBA and WBC have both broken monthly chart support and are in free fall. They appear to have much more downside. The triggers are obvious in
