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.
The Reserve Bank of Australia (RBA) has released its private sector credit aggregates data for the month of July 2020, which reveals that mortgage growth continues to hover near record lows: A chart plotting the long-run time series is shown below: Overall mortgage growth was 3.1% in the year to July, a fraction above all
Via ABC comes one of Australia’s best bank analysts: Australians have more money invested in bank stocks than any other stocks, either directly or indirectly, but leading bank analysts suggest a rethink on whether that is the best place to have your money parked. Jefferies’ Brian Johnson likens the Australian economy, and by proxy the
Last month, ASIC abandoned its “wagyu and shiraz” responsible lending suit against Westpac after the heads of the Australian Treasury and the Reserve Bank of Australia both privately warned that proceeding with the case would exacerbate economic uncertainty amid COVID-19. ASIC had argued that Westpac was too reliant on the Household Expenditure Measure to assess
According to the Australian Prudential Regulatory Authority (APRA), around 170,000 Australian property investors have deferred repayments on their mortgages due to financial pressures arising from COVID-19. This is among the 500,000 total borrowers that have deferred repayments on $195 billion worth of mortgages, according to APRA. Digital Finance Analytics’ mortgage stress data also shows that
As we know, Australian households are among the world’s most indebted people. According to the Bank for International settlements, Australians held the second highest household debt loads as a share of GDP at the end of 2019 (120%), behind only Switzerland (132%). Australia’s household debt loads also dwarf other advanced English-speaking nations, as clearly illustrated
Via the AFR: Commonwealth Bank says its most over-leveraged borrowers – those whose prospects for returning to work after the coronavirus look the bleakest – could be encouraged to downsize the family home or sell multiple investment properties. Angus Sullivan, head of CBA’s retail bank, reassured all struggling borrowers that it won’t move too quickly
Lol. Things must be bad for the Game of Mates to come so a-cropper at AMP: More at AFR: David Murray, John Fraser and Boe Pahari have all resigned from their positions at AMP following The Australian Financial Review’s investigation into the wealth manager’s culture that revealed sexual harassment complaints against top executives. I never understood why
Two months ago, ASIC narrowly lost its responsible lending case against Westpac in the Federal Court. ASIC’s case against Westpac went all the way back to 2017, when it commenced proceedings alleging that between 2011 and 2015 Westpac failed to properly assess whether borrowers could meet their repayment obligations before entering into home loan contracts.
Via the excellent Jonathon Mott at ANZ: 3Q20 ahead of expectations. Boosted by strong trading and lower bad debts ANZ Cash NPAT $1.5bn, ~$200m above UBSe. Highlights (vs 1H20 ave): (1) Revenue significantly higher than expected. Trading income rose 60%, implying ~$930m in 3Q. This compares to targeted trading income of ~$1.8bn p.a.; (2) Excluding
Westpac yesterday released its third quarter results, with the company announcing that it would not pay a dividend due to “significant uncertainty” and “increased provisions for bad debts” as “many mortgage and business customers continue to require assistance”. Included in its disclosures is the below slide showing that 78,000 customers had deferred $30 billion worth
Here’s a beauty from Scott Pape: The horror, the horror!
Reserve Bank governor Philip Lowe suggested on 14 August that responsible lending restrictions implemented in the wake of the banking royal commission are impacting on credit growth. Lowe’s comments before federal parliament’s Standing Committee on Economics have been used as ammunition by the the Housing Industry Association (HIA) to argue for eased restrictions on mortgage
The Australian dollar is pushing towards another breakout within a bullish ascending triangle chart: Bond yields are nailed down: The ASX also has a bullish ascending triangle but I am much more skeptical about this one, in part because the AUD is so strong: Big Iron is up: Big Gas is meh: Big Gold is
Get a load of this shocker from Westpac this morning: That is threatening to become a complete ponzi-unwind: skyrocketing bad debts leading to… rising risk-weighted asset capital needs leading to… canceled dividends leading to… lower equity leading to… lower lending leading to… rinse and repeat.
NABs third quarter results were released on Friday, which revealed that 86,000 mortgages have been deferred totalling some $35 billion: According to NAB: 7.4% of people have an LVR over 80% of which 4.5% don’t have LMI. 2.6% of people have an LVR over 90% of which 1.5% don’t have LMI. Compared with the total
The latest Australian Prudential Regulatory Authority (APRA) data on mortgage repayment deferrals revealed that $195 billion of mortgages have been deferred by around 500,000 Australian households, accounting for 11% of total outstanding mortgage debt: Moreover, around one-third of investor mortgages have been deferred, according to APRA: With the September deadline on the resumption of mortgage
The CBA has recorded a $7.3 billion full year cash net profit after tax (NPAT), down 11.3% as it counts the cost of COVID-19. The fall in NPAT is being blamed on extra loan impairmants with CEO Matt Comyn saying the bank anticipates lower credit growth and lower interest rates. CBA’s net interest margins also
Australia’s banks are currently engaged in a mortgage war, which is seeing average mortgage rates plummet to record lows of just 3.65% (discount variable) and 2.35% (3-year fixed), according to the RBA: However, while refinancing borrowers are the big winners from this mortgage war, spare a thought for deposit holders, whose savings rates are being
NAB has begun restricting mortgage credit to older borrowers – a move that is expected to be replicated across the banking industry: At the stroke of a pen it’s just become a lot harder for older Australians to get a property loan… Since July 25 NAB has demanded applicants nominate a date of for their
Good work from Chris Joye today: One significant concern relates to record unofficial arrears in illiquid and subordinated bonds comprising “securitised” portfolios of Australian home loans, SME loans and consumer loans that are packaged up and sold to investors through residential mortgage-backed securities (RMBS) and asset-backed securities (ABS). We are particularly anxious about RMBS and
According to the Reserve Bank’s latest indicator lending rates, average mortgage rates have fallen to their lowest level on record at just 2.35% for 3-year fixed and 3.65% for discount variable: These are average rates of course, and much better deals – under 2% – can be gained from specific lenders, with juicy cash backs
Via the excellent Jonathon Mott at UBS: Two steps forward… one big step back? With Melbourne moving to Level 4 lockdown (all non-essential businesses closed), the outlook for the Australian economy and banks has deteriorated sharply. After a strong economic bounce from May until early July, this is a clear setback. While the assumptions underpinning
In other countries, this is called corruption. In Australia, it is the natural course of a political career. Via the AFR: It wasn’t until several hours after the state government brought down the shutters on retail and construction in Victoria that the Australian Banking Association was able to breathe a sigh of relief. With the
Via Crikey: A slow news day in a pandemic is a great time to trot out the old “wouldn’t it be a good idea to start a government-owned bank” story. What a fabulous concept. No wonder Labor’s shadow treasurer Jim Chalmers jumped at the chance to support the union-backed report from the Per Capita think tank. But wait. Wasn’t it Labor which sold the last government-owned
Today’s new mortgage data from the Australian Bureau of Statistics (ABS) recorded a rebound in June as COVID-19 restrictions were lifted: The next chart plots the time series: Total new mortgage commitments (excluding refinancings) rose by 6.2% in June, with owner-occupied mortgages rising 5.5% and investor mortgages rising 8.1%. Year-on-year, total new mortgage commitments (excluding
Via UBS’ excellent Jonathon Mott: SME health-check – deteriorating since the Melbourne lockdown Our recent SME In-depth Report laid out key indicators to watch for the health of the sector. Higher frequency data by both the ABS and ACA Research indicates that SME performance has worsened since Melbourne re-entered lockdown. ABS data indicated that 50%
Via APRA: Many authorised deposit-taking institutions (ADIs) have granted temporary relief to borrowers impacted by COVID-19, allowing them to defer loan repayments for a period of time. To provide greater transparency of loan repayment deferrals at the industry level, APRA is publishing the aggregated data obtained from all ADIs in Australia, excluding foreign branches. *the
Alan Kohler has joined the chorus warning that Australia faces a tsunami of mortgage defaults once repayment holidays and emergency income support is unwound from October: Morgan Stanley commissioned a survey of mortgagors as part of some research on the impact of the coronavirus, and found that 55 per cent of them have received some
Via Banking Day: At-call and term deposit rates continued to fall last month, in what comparison site Mozo called “a significant retreat”. AMP made some of the biggest cuts, reducing the six-month introductory rate on its Saver account by 70 basis points to 1.5 per cent and the ongoing bonus rate on its Bett3r account
The Australian dollar is struggling this morning: Bonds the usual flatline: XJO is soft” Big Iron is up: Big Gas not: Big Gold is: Big Banks have been sucked back into the bath of blood: WBC technicals tell the tale. Supports all broken: Property crash!
