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 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
Via Martin North: Digital Finance Analytics (DFA) has released the April 2018 mortgage stress and default analysis update. Across Australia, more than 963,000 households are estimated to be now in mortgage stress (last month 956,000). This equates to 30.1% of owner occupied borrowing households. In addition, more than 21,600 of these are in severe stress,
Via the ABC: The Commonwealth Bank has confirmed it lost the historical financial statements of almost 20 million accounts, but insists its customers’ information has not been compromised. The statements, containing customers’ names, addresses, account numbers and transaction details from 2000 to 2016, were stored on two magnetic tapes which were lost by sub-contractor Fuji-Xerox
Jonathon Mott on NAB: ONE LINER Subdued result with revenue trends continuing to slow. KEY NUMBERS (1H18) (1) Cash NPAT -17.6% to $2,759m (UBSe $2,732m); (2) Cash Basic EPS 102cps (UBSe 101cps); (3) Interim DPS 99c (UBSe 99c) RESULT HIGHLIGHTS (1H18 seq. basis) Note: There is no consensus given inconsistent treatment of Restructuring costs. (1)
Peter Costello today: When you talk about corporate Australia, when you talk about the Business Council, most people think you’re talking about the banks. The royal commission is affecting the reputation of all of corporate Australia. [banks are in] more trouble now than they were in the financial crisis. The financial system was essentially designed
Via the AFR: Lending by the Bank of Mum and Dad has increased by 25 per cent to about $20 billion in the past 12 months as banks’ raise rates, increase minimum deposits and toughen repayment terms and conditions. …Bank of Mum and Dad, a term used to describe parent lending to their children for
My favourite pre-nationalisation mortgage dog is out today with stellar results: Collapsing profit and a massive buyback. Nice. Amusingly, GMA did not even release its gross written premium number this quarter, no doubt to keep it from nosey bloggers. It was 369bn at the end of 2017 so it’s still trading on a spectacular capital
Via the AFR: Commonwealth Bank of Australia’s new chief executive, Matt Comyn, and chairman Catherine Livingstone have pushed back on calls by Treasurer Scott Morrison for more heads to roll at the top of the bank, after the prudential regulator exposed a culture of arrogance and complacency at the nation’s largest lender. After a scathing
Phil Lowe uttered the words finally in a speech last night: Domestically, for some time, we have seen the main risk to be related to household balance sheets. For a while, trends in household credit were quite concerning. On this front, things now look less worrying than they were a while back, although the level
The banks must shaking in their boots as ScoMo turns punitive: Treasurer Scott Morrison said he expects more high level resignations from the Commonwealth Bank following a damning report from the regulator into the culture of the bank in the wake of year’s money laundering scandal. Mr Morrison said the report by the Australian Prudential Regulation Authority should serve as
APRA is out with its CBA culture review: Overview The Australian Prudential Regulation Authority (APRA) today released the Final Report of the Prudential Inquiry into the Commonwealth Bank of Australia (CBA). APRA announced the Prudential Inquiry on 28 August 2017 to examine the frameworks and practices in relation to the governance, culture and accountability within
APRA is out with end of month lending totals today and housing investors continue to ease up with monthly growth at just 0.1% in the top eight banks and only 1.6% year on year: Interestingly, of the big four only WBC persists with above system growth: These are March numbers, before the recent tightening, so
The week ahead for banks is big, via the AFR: A highly anticipated interim bank earnings seasons this week will be kicked off by ANZ Banking Group, which is expected to unveil a slightly higher $3.5 billion cash profit on Tuesday. National Australia Bank will report its half-year numbers on Thursday, and profits are expected
Last week it was lending ATMs, today it’s the whole bank. Via the Mirror: A bank has opened a branch run entirely by robots, who greet customers and manage accounts, in a world first. The Shanghai branch of the China Construction Bank (CCB) is run purely by technology – with virtual reality, artificial intelligence and
From Chris Joye today: Westpac demolished Mott’s allegations on loan quality, revealing that of the 420 loans in the sample file just one borrower (0.2 per cent of the total) was three months or more in arrears, which is “well below [Westpac’s] portfolio average for delinquencies”. …PwC found that 38 of the 420 loans failed
Via The Australian and an FOI comes the lowest public figure in Australia today: The documents, obtained by The Australian today, showed a list of issues raised by the ABA in the days after a royal commission was announced by the Turnbull government in November. The letter shows Ms Bligh also she was “concerned” the
Gettin’ ugly now: The royal commission into banking misconduct has recommended AMP should face criminal prosecution for misleading the corporate regulator. Senior counsel assisting Rowena Orr, QC, said AMP had breached criminal provisions for misleading the Australian Securities and Investments Commission over its charging clients fees for no service. In handing down her preliminary findings,
Where do I sign up? From Banking Day: APRA and the RBA and other regulators – not banks – will be the defendants in a class action centred on the questionable home loan finance supply practices of Australian banks over the last decade or longer. Roger Brown, an Australian living in the UK for many
Domainfax accidentally printed its own obituary today. It came in the form of an op-ed by Dick Bryan, emeritus professor of political economy at the University of Sydney: …the royal commission into finance is revealing that poverty is no longer just about low income. The commission has heard that Australian banks have adopted actual lending practices (as
Form UBS today, which is doing a fantastic job of pulling apart the bubble at the moment: APRA today announced plans to remove the investor lending cap… APRA today announced the removal of the 10% investor loan growth cap from Jul-18 (which had been in place since Dec-14). That said, this only applies after ADIs
Via UBS: APRA announces removal of 10% investor cap APRA announced the removal of the 10% cap on investment property loan growth for ADIs from 1 July 2018 (established Dec 2014). However this removal only applies to ADIs that can demonstrate: 1) Investor loan growth <10% for the past 6 months; 2) CET1 is on
Via the ABC comes more debt: The emergence of instant cash loan machines across parts of New South Wales has sparked fears about low-income families being potentially caught in a debt trap. The machines, which look like ATMs, only require identification and bank details before users are approved for cash loans almost immediately. Financial counsellors
By Leith van Onselen UBS has just released their analysis of the WBC dataset from the Royal Commission data dump, which reveals that ‘liar loans’ are prevalent among its $400 billion mortgage book: Royal Commission releases APRA’s ‘Targeted Review’ into mortgage books In recent days the Royal Commission into Bank Misconduct has released hundreds of
