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.
A Senate committee has been told that businesses and households have now deferred around $250 billion worth of loan repayments due to the coronavirus pandemic. However, Australian Prudential Regulation Authority (APRA) chairman Wayne Byres conceded that some customers will not be able to repay their loans when they are required to resume repayments: Australian Prudential
The Australian dollar is pulling back a little from the overnight surge: Bonds are firm: XJO is holding: Underneath the bonnet, however, there is considerable action. Big Iron is copping it: Big Gas marches on: Big Gold is bashed: But Big Banks have launched as Australia’s virus victory percolates: The financials index has very a
Via Banking Day: Demand for guarantees under the Morrison Government’s First Home Loan Deposit Scheme now exceeds capacity after the limit of 10,000 borrower reservations was reached last week. Data collated by the National Housing Finance and Investment Corporation – the government agency tasked with managing the program – show that 5,500 guarantees have been
What’s our medium to long-term outlook on Australian banks? We are not positive on Australian banks in the medium term. Australian banks will have a time to shine again. That time is not while staring down the barrel of the highest unemployment rate seen since the Great Depression and an extended period of close to
Can anyone say “sovereign risk”: S&P Global Ratings today said it has revised its outlook on Genworth Financial Mortgage Insurance Pty Ltd. (Genworth Australia) and Genworth Financial Mortgage Insurance Pty Ltd. (NZ Branch) to negative from stable. At the same time, we affirmed our ‘A’ insurer financial strength and issuer credit ratings on both entities. We also affirmed the rating on Genworth Australia’s subordinated
The Australian Bankers Association (ABA) has released figures showing that 429,000 mortgages have so far been deferred – one in every 14 mortgages – totaling $153.5 billion: The Australian Banking Association today released new figures which showed 429,000 mortgages had been deferred totalling $153.5 billion. The figures take the total number of loans deferred to
Some numbers for you: 1. Gov’t Guarantee 50% of new loans, up to $40b. Runs from 23 March to 30 Sep; 3. CBA has lent $555m and NAB $370m about a quarter of the way through, and 4. If you assume WBC and ANZ are a little lower than NAB = $1.5b ish so far.
Via the excellent Damien Boey at Credit Suisse: Real yield curve model points to steepening, but … We define the Australian real yield curve as the 10-year inflation-indexed bond yield minus the real 3-month interbank rate, using the inflation swaps curve to profile long- and short-term inflation expectations. Our proprietary model of the real yield curve
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
