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.

19

Aussies shun debt. Unless it’s for property

Thursday’s Lending Indicators data for October from the Australian Bureau of Statistics (ABS) revealed that Australian households continue to shun consumer borrowings, with personal finance commitments collapsing to another record low: As shown above, annual new personal finance commitments fell by 15.3% year-on-year and were 42% below the long-term average. This followed last week’s private

6

Aussie banks turning Japanese

Furious saving. Via the excellent Jonathon Mott at UBS:   Housing lending boom not yet flowing through to housing credit growth Interest rate cuts, policy support, loosening lending standards and increased consumer confidence have led to a 38% bounce in new housing lending (flow) since May. However, this growth does not appear to be flowing

5

Australia’s creditless recovery

Via RBA credit aggregates: The table below presents a summary of the latest financial aggregates statistics. Financial Aggregates Percentage change Monthly Year-ended September 2020 October 2020 October 2019 October 2020 Total credit 0.0 0.0 2.4 1.8 – Housing 0.4 0.3 2.9 3.3 – Personal −1.0 −0.7 −4.7 −12.7 – Business −0.4 −0.3 2.7 1.4 Broad

2

APRA hacks big bank’s cyber-security

Via Banking Day: The thin credentials of the Australian finance industry’s most senior people – bank boards included – stand exposed after a landmark (and devastating) speech yesterday by APRA member Geoff Summerhayes. Summerhayes used the speech to unveil APRA’s new Cyber Security Strategy, but it’s what the industry has been doing (or, mainly, not

32

Savers slaughtered as deposit rates crater

Data from RateCity shows that banks have slashed deposit rates since the RBA’s latest interest rate cut, with the average ongoing savings rate across the banking system now just 0.46%: According to RateCity, 30 banks have taken a knife to interest rates since the RBA cut, with the average ongoing savings rate across the banking

20

Shocked. Shocked! Banks support criminal mortgage lending

Unsurprisingly, the Australian Banking Association (ABA) supports changes to responsible lending laws in its submission to an inquiry into the federal government’s proposed reforms. The ABA claims the reforms “strike the right balance” between protecting consumers and ensuring that credit is available: A submission by the industry’s peak lobby group, the Australian Banking Association, says

1

Measuring the US fiscal cliff

Via BofA: Fiscal cliff economics • Many pandemic-aid programs in the CARES Act are set to expire at the end of the year without action from Congress. • The expiration of federal UI programs—PUA and PEUC—alone could be a drag of 1.5pp in 1Q. Cutoff of other provisions will be additional headwinds. • We expect

4

Criminal mortgage push crucified by consumer groups

At the AFR: A submission to the government’s inquiry into the planned law changes from a range of groups, seen by The Australian Financial Review, says it is impossible to provide constructive feedback to proposals for change that are “fundamentally defective”. Organisations behind the submission include the Consumer Action Law Centre, Choice, Financial Counselling Australia,

11

Senate must reject criminal mortgage push

21 months is a long time in Australian politics. In February 2019, the Kenneth Hayne released his final report from the banking royal commission which, as its first recommendation, directed the government to keep responsible lending rules: This recommendation came after the Hayne royal commission documented extensive cases of criminal lending and behaviour, leaving Australia’s

1

CBA Mortgage lending consolidates in October

CBA has released its internal mortgage data for October, which shows that mortgage lending consolidated in October, whereas lending for renovations rocketed. Consumer and business lending also remained weak. Key Points: There was a consolidation in lending for housing in October after several months of very strong growth. But lending for renovations continued to rocket

5

Captured APRA to release dividends?

Via banking plaything Wayne Byers of APRA: “We have deliberately never put in place [dividend] guidance for a long period of time because we want to stay agile, we want to stay flexible, we want to be able to be conscious of the environment that’s evolving.” “Our first set of of guidance only lasted for

49

Depressionberg fluffs for criminal mortgage debt

Eighteen months is a very short time in Australian politics. In February 2019 we were all agog at the criminal lending and behaviour unmasked by the Hayne Royal Commission. The Government was humiliated. Regulators humbled. Victims vindicated. Yet, here we are today, at the AFR: At a speech on Wednesday morning to a special, virtual

9

Non-banks dial TFF whaaambulance

Via Banking Day: A leading non-bank mortgage lender has warned that non-banks originating prime mortgages face tough market conditions, largely as a result of the pricing impact of the Reserve Bank’s term funding facility. Firstmac chief financial officer James Austin said non-banks have had the benefit of the Australian Office of Financial Management’s Structured Finance

84

Mortgage cliff clouds over property market

Recent data suggests that Australia’s deferred mortgage cliff has shrunk considerably since the nation went into lockdown earlier this year. According to APRA’s latest monthly update, the number of mortgage deferrals had fallen by around one-third, from a peak of 488,249 mortgages in May to 324,894 mortgages in September. CBA’s latest update also showed that

12

Get set for a mortgage refinancing tsunami

The Reserve Bank of Australia’s (RBA’s) indicator lending rates show that the average discount mortgage rate was only 3.65% in October and the average 3-year fixed rate was only 2.39%: The wide gap between variable and fixed rates, alongside the bevy of fixed mortgage deals below 2%, is projected to cause a mortgage refinancing boom

16

APRA wet lettuce wilts on banker pay

Because the Australian banks are in the process of being nationalised via government guarantees and the RBA TFF, you’d be right to expect that banker bonuses will be slashed as well to avoid moral hazard. You’d be wrong. Via AFR: The prudential regulator has generously watered down a planned overhaul of banker pay and bonuses,

23

Criminal mortgage lending push in trouble?

Via the AFR comes Labor’s finance spokesman Stephen Jones has torpedoed the scrapping of responsible lending laws: “If there are serious issues about the flow of credit, we’re willing to look at it but rolling back consumer protection is a no-go zone.” …Centre Alliance senator Stirling Griff said he would consider whether “additional safeguards” were

9

Australia’s mortgage cliff continues to shrink

At the beginning of this month, the Australian Prudential Regulatory Authority (APRA) released data revealing that the number of mortgage deferrals had shrunk by around one-third, from a peak of 488,249 mortgages in May to 324,894 mortgages in September. Yesterday, CBA updated the market on its loan deferral program, which showed that the number of

24

The great bank bust begins

Via Banking Day: The full year results of Australia’s big four banks show the negative effects of a low interest-rate environment on earnings, as the banks bunker down and brace for the full economic impact of the COVID-19 crisis to hit. This is a common thread running between reports from two major professional services firms:

29

Get ready for a fixed rate mortgage boom

Fixed-rate loans dominate the UK mortgage market, accounting for around 90% of home loans. By comparison, 70% to 90% of property borrowers in Australia opt for variable interest rates. However, National Australia Bank CEO Ross McEwan believes that the trend toward fixed-rate loans will continue to gather pace and they may soon account for about

0

UBS on NAB’s new profit hit

Via Jonathon Mott at UBS: ONE LINER Solid result. Better revenue. Credit provision build. Dividend in line. KEY NUMBERS (FY20, continuing operations) (1) FY20 Cash NPAT from continuing operations $3,710m (8% below Visible Alpha Cons; 1% below UBSe); (2) Cash Basic EPS continuing 121cps (Cons 132cps, UBSe 123cps); (3) Final dividend 30cps (Cons 28cps, UBSe

23

CBA kicks mortgage cliff to Q3 2021

With repayments on $133 billion worth of mortgages from 325,000 borrowers still deferred, according to APRA, Australia’s largest bank – CBA – has extended a moratorium on forced sales until September 2021: In an email between CBA and Financial Counselling Australia (FCA) obtained by News Corp, the bank confirmed customers still impacted by the health