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.

2

Bank bad loans fall to 1980 levels

Via UBS:   The one that got away? The Major Banks’ 2H17 results were mixed, with subdued growth the key theme. Entering reporting season we had suspected earnings could surprise positively given mortgage repricing and lending tailwinds. However, Non-Interest Income was even weaker than anticipated. Overall Sector EPS was up just 1.2% sequential, with PreProvision

5

Westpac prints another weak bank result

Via AFR: Westpac Banking Group has marginally undershot expectations with a full year cash profit up 3 per cent to $8.062 billion versus consensus forecasts for $8.162b. Westpac’s CEO Brian Hartzer spoke of the difficult environment for banks which included the impact of the major bank levy and the higher capital levels required by the

8

Gottiboff: NAB sackings just the beginning

Via Gottiboff today: What National Australia Bank chief executive Andrew Thorburn did this week was to blow the starters gun on the labour revolution which will dominate the next decade. And that revolution will see not only a radical change in the types of jobs on offer but a dramatic swing to self employment and

70

NAB sacks 6000

Via UBS: TWO LINER Result in line. Good NIM. BUT flagged capex blowout in FY18 (guiding FY18 costs up 5-8% plus $500m-$800m restructuring charge). Costs then flat to 2020. KEY NUMBERS (FY17) (1) Cash NPAT +2.5% to $6,642m (Cons. $6,661m); (2) Cash Basic EPS 249cps (Cons. 250cps); (3) Final DPS held at 99c. RESULT HIGHLIGHTS (2H17

7

Mortgage arrears fall again

Via Moody’s: Moody’s Investors Service says that delinquencies for Australian auto loan asset-backed securities (ABS) and prime residential mortgage-backed securities (RMBS) fell in August 2017 from July 2017. Specifically, 30+ day delinquencies for Australian auto loan ABS transactions fell to 1.60% in August 2017 from 1.64% in July 2017, but rose from 1.42% in August

15

Bank levies don’t “cost jobs”, they create them

Gail Kelly says so: Former Westpac chief executive Gail Kelly has slammed the proposed South Australian bank tax, warning a short-term “sugar fix” sought by the Weatherill government will ultimately mean less ­investment and fewer jobs. In her first public remarks about the controversial impost, Ms Kelly yesterday told The Australian that a “quick fix, a sugar

43

Bendigo warns, Westpac tightens

Via UBS: BEN issues market update with its AGM BEN provided some commentary on key line-items at its AGM this morning. Key statements: (1) Balance Sheet growth is expected to be “relatively flat” in 1H18 as it has had to “slam on the brakes in investor and interest only lending” to comply with Macro Prudential

3

APRA corrals shadow banks

From Australian Parasite: The Australian Prudential Regulation Authority (APRA) will be tasked to infiltrate the non-bank sector for enhanced data gathering, according to Treasurer Scott Morrison APRA will have “eyes on the ground” with its ability to collect data from non-ADI lenders, Morrison said in an address to the Financial Services Council in Sydney yesterday (30 October). “Such

4

Bank levy dividend: offshore funder abandons banks

Via The Australian: South Australia’s claims that its investment standing has not suffered as a result of the planned bank tax have been challenged after a significant international investor said it had slashed its ­exposure to Australia because of growing political risk. As the state’s upper house prepares to vote this week on the tax

10

Banking Royal Commission back in frame as Coalition MPs mull crossing floor

By Leith van Onselen After narrowly holding-off a banking Royal Commission in September 2016, three Coalition MPs are considering crossing the floor of parliament and voting in favour of establishing a Royal Commission. From The ABC: The High Court disqualification of former deputy prime minister Barnaby Joyce appears to have emboldened several Coalition MPs, who

5

APRA warns small banks to back off macroprudential changes

From Wayne Byers, APRA chairman, today: Housing lending standards Before I conclude today, I want to take a short detour to the subject of residential mortgage lending standards. Earlier this year, we announced further measures to reinforce prudent standards across the industry. We did this because, in our view, risks and practices were still not

11

Evil Anna dumps her own fake government reforms

Remember what Evil Anna said when she was appointed as chief banking apologist? “Our banks are critical to the strength and stability of our national economy and the prosperity and wellbeing of every Australian,” she said. “Personally I’ve always believed you get more done inside the tent,” she said. “That’s why I’m very excited the

9

Mortgage arrears fall in cities, boom in regions

Via S&P: The number of delinquent housing loans underlying Australian prime residential mortgage-backed securities (RMBS) fell to 1.10% in August from 1.17% in July, according to a recent report by S&P Global Ratings. The decline, which is not unusual because arrears typically have fallen in August for the past 10 years, was partly influenced by

66

The spooky mortgage risk signs our bankers are ignoring

Cross-posted from The Conversation: I’m not normally a fan of parliament hauling private sector executives before them and asking thorny questions. But when the Australian House of Representatives did so this week with the big banks it was both useful and instructive. And, to be perfectly frank, terrifying. Let’s start with Westpac CEO Brian Hartzer.

15

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