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.

6

Pre-nationalisation Genworth booms

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

5

NAB misses, warns, cuts dividend

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

13

ANZ’s mortgage book is sinking

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

10

Westpac, ANZ warn

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

1

Bank results to suck

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

7

UBS: NAB to cut dividend, sell it

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

12

NAB joins lending standards crackdown

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

3

UBS: Avoid banks as NAB warns

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

5

APRA releases new lettuce leaf

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

8

ANZ job cuts to dwarf CBA?

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

20

McKinsey works to shred CBA workforce

Via The Australian comes CBAmageddon: There is an army of shadowy McKinsey consultants working on Matt Comyn’s hitherto secret plan to cut in the order of $2 billion of costs out of Commonwealth Bank. …While understandably reluctant to publicise their dramatic plans to slash staff numbers, the toe-cutting is already under way. A range of

36

More on CBA’s titanic job cuts

Via The Australian: Margin Call understands internal work on the project at the bank — which last year made a net profit of $9.23bn — has been underway for some time, with the closure of up to 300 of the bank’s national network of almost 1000 branches said to be under consideration. A reduction of

32

CBA readies 10k job cuts

Via The Australian: Commonwealth Bank boss Matt Comyn is believed to be working on a plan to cut more than 10,000 employees, about $2 billion of costs, at Australia’s biggest and most profitable bank. No wonder Comyn wants to keep the plan secret — at least until after the May 18 election. Margin Call has

1

BOQ canary croaks on banks

The AUD is a little soft this morning: The lunatic RBA has paralysed bonds for now: XJO is down moderately: Dalian is soft: And Big Iron: Big Gas is still enjoying its deluded political risk holiday: Big Gold is mixed: Big Banks are sick: Made that way by the croaking BOQ canary which has broken

7

Greg Medcraft’s “absolute rubbish”

Via the AFR: The former corporate regulator Greg Medcraft has broken his silence on the Hayne royal commission, warning that using the courts against the banks could backfire given justice moves so slowl. He also described the recommendation to kill broker commissions as “absolute rubbish” because it overlooked the crucial role competition plays curbing misconduct.

3

Mortgage arrears rise coast-to-coast

Via S&P: Australian prime home-loan arrears rose in January, according to a recently published report by S&P Global Ratings. The Standard & Poor’s Performance Index (SPIN) for Australian prime mortgages rose to 1.45% in January from 1.38% a month earlier. January is typically the peak of the arrears cycle, reflecting the after-effects of Christmas and

29

How far will specufestor mortgages fall?

Via the AFR today: As Credit Suisse analysts pointed out recently, investors are genuine net new buyers and invest for capital gains rather than net rental yield. The Labor policies are seen as negative for the investment housing market and sales will slow, leaving residential developers such as Mirvac and Stockland most exposed. On the upside,

7

Budget delays ASIC funding to protect banks

Via Banking Day: Aggrieved financial services consumers might have to wait several years before regulators are adequately resourced to mount court actions against misbehaving and negligent institutions. While community expectations are high that ASIC will launch a wave of civil and criminal actions against financial institutions over the next 12 months, the truth is that