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 S&P: Australian prime home-loan arrears rose in March, according to a recently published report by S&P Global Ratings. The Standard & Poor’s Performance Index (SPIN) for Australian prime mortgages increased to 1.51% in March from 1.48% a month earlier. Arrears are up by 14 basis points year on year. Across the country, arrears movements
Via Banking Day: ANZ in New Zealand has been rebuked by the Reserve Bank, with the RBNZ on Friday announcing that it “revoked ANZ Bank New Zealand Limited’s accreditation to model its own operational risk capital requirement due to a persistent failure in its controls and attestation process”. ANZ NZ is now required to use
Macquarie has dug into the bank’s negative equity reporting and found, guess what, chaos: ANZ’s negative equity data was the highest of the big four at 5 per cent, or 4.25 per cent when offset accounts are factored in. Macquarie said ANZ’s approach – which used combined customer debt secured by property divided by property
Why this is even allowed I don’t know, via The Australian: Property chiefs have appealed directly to the Reserve Bank and the Australian Prudential Regulation Authority during a private meeting for a loosening of the strict lending policies imposed on banks, as a credit squeeze starts to bite key parts of the industry. Their input
Scummo revealed at Domain: A $500 million plan to help first-home buyers into the market did not go through cabinet and has not been modelled for its impact on property prices, as experts warn the policy will struggle to meet its objectives. The first some members of cabinet heard about the plan, which will see
Yuck and getting yuckier from CBA: Down 3%: Though it has this one great support: And with the national team increasingly coming to the rescue of The Bubble, perhaps the old girl can fake it a little longer.
Via Banking Day: Government attempts to accelerate housing loan applicants into the market could potentially retard or complicate the process through which banks make responsible lending decisions. If the new support scheme leads to fewer borrowers being able to demonstrate consistent savings patterns then lenders might be forced to reject more applications on grounds that
Via the ABC comes fear and lot’s of it: A new crackdown on property lending has emerged in the wake of the Banking Royal Commission, with borrowers now being asked for deposits of up to 30 per cent and banks throwing greater scrutiny on location and living expenses when assessing loans. The pull back on
Via The Australian comes further snippets of ASIC versus Westpac on responsible lending standards yesterday: Jeremy Clarke SC, for ASIC, argued that from 2011 to 2015 Westpac didn’t make an adequate assessment of customers’ ability to repay mortgages when they changed from interest-only to principal and interest. Westpac’s Robert Love, head of credit risk optimisation, admitted
Via Fitch today: Housing Downturn Fears Escalate:Within the space of a year, falling house prices have risen to be the most serious threat to Australian credit markets, according to Australian fixed-income investors. Fitch Ratings’ 2Q19 survey reveals that 70% of investors rank a domestic housing-market downturn as the top risk to Australian credit markets over
Via Banking Day: Citigroup Pty Ltd, the principal operating entity of the American banking giant in Australia, has reported a slide in full year profit after almost no loan growth and a spike in operating costs. Financial accounts lodged with Australian regulators show that Citigroup recorded a net profit of A$157 million in the 12
By Leith van Onselen Last week, we reported that the major banks are lobbying APRA to lower its interest rate buffer, in a bid to raise borrowing capacity and support house prices: ANZ chief executive Shayne Elliott urged the prudential regulator to scale back the buffer requiring new borrowers have the capacity to pay a
The WBC result is out: A little miss on expectations. Impairments rising steadily: Outlook gloomy: Market will probably love it.
Via the AFR comes National Australia Bank chief executive Philip Chronican: …who has dismissed calls for an interest rate cut when the Reserve Bank of Australia meets next Tuesday, saying it was unnecessary and would do little to stimulate the economy. …”Whether or not there is an interest rate cut I don’t think it will have
Via some very temporary factors, via Banking Day: Australia’s largest direct provider of lender’s mortgage insurance, Genworth, has recorded a sharp turnaround in first quarter profit after crystalizing monster gains on its investment portfolio. Genworth boosted its March quarter profit by A$39 million to $47.8 million as growth in new insurance written also improved during the
As expected, it is the major banks that are behind the push to corrupt APRA lending standards, via the AFR: ANZ chief executive Shayne Elliott urged the prudential regulator to scale back the buffer requiring new borrowers have the capacity to pay a 7.25 per cent interest rate, warning it was forcing the bank to
Not much fun here: In short: profits missed consensus of 3.2bn big; big divi cut, deeper than expected by those few who did; NIM down sharply; more big remediation charges; impairments up sharply; arrears down for 90-day but I’m not sure overall and, a dour CEO outlook. And NAB has been the last of the
First, ANZ’s mortgage book is literally disappearing, as I noted yesterday vis investor loans: Second, it is sinking below the water much faster than the RBA said that it should: ANZ Banking Group chief executive Shayne Elliott is concerned about a spike in customers struggling to repay their mortgages, warning “stubbornly low” wage growth in
Cripes, again, again, again: Fourth warning in the past six months or so. And it is still not over. Then there is ANZ this morning: The headline number is a little better than consensus but on falling loan loss provisions and job losses. That ain’t going to last. And Mr Elliott is hardly upbeat about
Stopped dead in March: ANZ CBA MQG NAB WBC BOQ BEN SUN Mar-19 78470 132904 12372 105379 152393 11333 12722 11724 Feb-19 78936 132916 12320 105645 152368 11352 12649 11755 Jan-19 79366 132960 12223 105757 152323 11364 12597 11745 Dec-18 79790 133045 12103 105869 152453 11366 12554 11784 Nov-18 80187 132812 11938 106081 152318 11534
Via Banking Day: Revenue trends among the big banks reporting their half-year results over the coming week will be weak, according to one analyst’s preview of the results. And NAB will cut its dividend. Macquarie Securities expects all three of the banks – ANZ, NAB and Westpac – to report lower net interest income and
Via Chris Joye today: If the RBA cuts interest rates, which financial markets are handicapping as certain by July, Australia’s housing bust will be over. The RBA’s own internal research estimates that a 1 percentage point reduction in the cash rate would boost house prices by 28 per cent, assuming it is fully passed on
Via UBS’s excellent Jonathon Mott: NAB announced on Thursday that it will take an additional $749m pre-tax charge for increased provisions related to its customer remediation program, 91% of which is wealth related and the remainder banking…Importantly, NAB is yet to provide for customer refunds related to aligned advisers. NAB has the highest number of
The last of the major four banks has joined the credit standards crunch, NAB via AFR: …From next Monday it will introduce a debt-to-income ratio to improve understanding of the borrowers’ full financial circumstances by considering existing long- and short-term debt commitments. Total debt may consist of a new loan limit, existing home loans, lines
Via Banking Day: While there have been plenty of lenders dropping fixed rates in recent months, few have cut their variable rates. That changed last week when ANZ, AMP Bank and Bendigo and Adelaide Bank bucked the trend. ANZ cut the discount on its Simplicity Plus principal and interest rate for new loans with loan
Via Banking Day: Fact and exaggeration over the extent of branch closures and job cuts at Commonwealth Bank will be flushed out before the Fair Work Commission. The Finance Sector Union yesterday lodged a dispute with the FWC, which will drag CBA’s bank’s plans or lack of them into the public eye early next month.
Another bank profit warning: UBS remains highly skeptical: …underlying trends are likely to remain very soft and deteriorating: (1) Volume growth should continue to slow as the credit squeeze continues and banks move to improve expense verification (reduced reliance on the HEM benchmark). (2) A bounce in NIM is expected following mortgage repricing. But how
Via Martin North: The Australian Prudential Regulation Authority (APRA) has released details on the future role and use of enforcement activities in achieving its prudential objectives. Guiding principals include “risk-based”, “forward-looking”, “outcomes-based” and deterrence impact. Of course the question is, will it really make any difference? Here is the release. APRA’s new Enforcement Approach, published today, sets
Bit dodgy this: In the next three years ANZ CEO Shayne Elliott will get rid of another 8000 of the bank’s employees — almost a quarter of the big four’s workforce. …When Elliott took over the Melbourne-headquartered bank in January 2016 its total workforce was just over 50,000, according to its annual report. As of
CLSA’s excellent Brian Johnston is on the money here: Veteran CLSA bank analyst Brian Johnson said while funding costs had fallen, margins were still under pressure due to increased costs as investors coming to the end of their interest-only periods are forced to switch mortgage products to pay off both the principal and interest. Switching
