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

Brian Johnston: Don’t buy banks now!

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

27

ASIC abandons responsible mortgage lending

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

66

CBA targeting property investors to sell

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

95

RBA wrong on mortgage risks

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

39

CBA to begin “encouraged” property sales

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

13

Game of Mates comes-a-cropper at AMP

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

52

Responsible mortgage lending is dead

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.

4

UBS: ANZ issues moral hazard dividend

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

22

Mortgage deferrals hammer Aussie banks

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

16

Homebuilders demand lower mortgage standards

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

61

Westpac canary drops dead

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.

86

The great mortgage extend and pretend

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

49

Aussie banks caught in mortgage squeeze

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

12

Joye: Default tsunami coming in March

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

2

UBS: Aussie banks mull “artificial dividends”

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

20

Does Australia need Labor’s new bank?

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

4

Australia’s mortgage market rebounds

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

1

UBS: SME crash a banking smash

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%

44

The Specufeckoning: 36% of investor mortgages in deferral

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