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.

9

Westpac drops latest bank shocker

Westpac out with the latest bank shocker More on the charge: Profit smashed. CET1 at 10.8% is only OK for now. Still, it’s solid start to building provisions thanks to no dividend. I wouldn’t expect it come in the second half either. One positive was NIM holding up. Another is that new CEO Peter King

2

ASIC slaps down credit cavalier, Evil Anna

Via Banking Day: The Australian Securities and Investments Commission has cautioned lenders not to make too many assumptions about how quickly consumers’ income will recover post-pandemic when making loan application assessments. ASIC has published a letter it sent to the Australian Banking Association in response to a series of questions from the ABA about the

13

ANZ warns, defers dividend

Via ANZ: More: And more: CET1 capital got belted but with dividend deferral it’s avoided having to raise capital. I very much doubt that that dividend will ever see the light of day given its loan loss provisions are still far too low and still think it will need capital later this year.

32

Huge bank losses ahead

The AFR has the wrap: Banking analysts fear that if the COVID-19 crisis worsens, the cost to the big four banks of bankrolling “Team Australia” could exceed the $10 billion estimated for this year and $35 billion over three years. Many business customers stung by the economic shutdown are expected to struggle to repay debts

23

Westpac braces for wall-to-wall property bust

Via Chanticleer: The bank believes we are heading for a severe downturn in commercial property valuations, which will trigger a sharp rise in loan losses in Westpac’s business and institutional banking divisions. …Chanticleer understands the economic forecast underpinning the $1.6 billion impairment includes a spike in mortgage defaults along with a 10 per cent to

4

Australian mortgage arrears rise into the virus

Via S&P: The Standard & Poor’s Performance Index (SPIN) for Australian prime mortgages increased to 1.41% in February from 1.36% a month earlier. Arrears typically rise in February, reflecting the end of the summer holidays and post-Christmas spending period. Increases in arrears were more pronounced in New South Wales, Queensland, and Victoria, reflecting the effect

10

Moody’s downgrades little banks

Via Moody’s: “We changed our outlook for the broader Australian banking system to negative in early April, reflecting our view that the economic impact of coronavirus-related disruptions will strain banks’ loan performance,” says Tanya Tang, a Moody’s Analyst. “Today’s rating actions are prompted by this change in outlook on the broader banking system.” As a

20

Banks choke stimulus

Via Ian Rogers at Banking Day: The muted, even trivial, supply of urgently needed business finance from banks – especially for SMEs – in the face of an epic contraction and a national consensus to minimise job shedding has turned into a flash point between the industry and the Australian government. Barely six weeks has

11

Latitude offers debt jubilee

Or does it? Via Banking Day: Latitude Financial Services yesterday became the first Australian lender to offer debt waivers to its most troubled borrowers. The lender confirmed to Banking Day last night that it will waive half of the outstanding balances on credit cards where customers are able to repay 50 per cent of their

5

The bank’s problem is risk-weighted

Via Tom Ng at BlackPeak Capital: Over the Easter break there was a fair amount of airtime on bank dividends.  Despite the ominous backdrop, local banks came out fighting to continue pumping out dividends. See for example, the Financial Times on April 9 “ANZ chief defends right of Australian banks to pay dividends”.  APRA and RBNZ actions have subsequently

55

The bank losses begin

Via The Australian: ANZ chair David Gonski says he will not take a short-term view during the coronavirus crisis as he addresses concerns shareholders will bear the brunt of bank actions through the pandemic. Less than two weeks out from the bank’s half-year result, which investors fear will see its dividend slashed, Mr Gonski said

1

Credit crunch deepens as banks dawdle on capital

Via Domain: Banks have become more wary about lending to workers in industries hit by the coronavirus outbreak, mortgage brokers say, as the pandemic leads to tighter credit conditions in the $1.7 trillion home loan market. Several major lenders have this month implemented tougher vetting of prospective customers in response to the pandemic, with brokers

61

Let bank shareholders burn

Via the AFR comes the big, aged whinge: Australian Shareholders Association chairman Allan Goldin said members, including self-funded retirees and those on part pensions, were increasingly concerned with the possibility that bank dividends may be suspended. “These payments we are talking about, it’s what they live on, they aren’t being used to take overseas holidays,”

36

And now for the banking crisis

This crisis is moving unbelievably fast. We’ve had our capital markets credit crisis and bailout (to a sufficient extent) via nationalisation all in two months.  Next up is the banking crisis that is moving just as quickly. Via ZeroHedge: For many years after the financial crisis, US commercial banks were mocked when instead of generating

20

Credit Suisse: Financial crisis over

Via Zoltan Pozsar at Credit Suisse: The Fed’s liquidity injections are working. Global dollar funding conditions have eased, and U.S. dollar Libor-OIS spreads started to tighten. We don’t think that lower prices on the CPFF or the MMLF are necessary for Libor-OIS to tighten more – other factors can tighten it further. First, positive Libor-Libor

91

How to compensate young Australians for saving the aged

Via the AFR: The treasurer has dismissed calls for an increase in the GST to stop young Australians footing the bill for the coronavirus recovery. The head of a tax policy think tank says the government should up the GST, introduce a land tax and reduce personal and corporate income tax rates. Tax and Transfer

8

RBA does the balance sheets at risk

RBA FSR: Household and Business Finances in Australia Australian businesses and households are mostly well placed to face the large contraction in economic activity associated with the COVID-19 pandemic although it will test their financial resilience. As a result of the shock, many businesses have limited or no income, and many workers have been stood down,

16

Banks to report fake virus profits

I think I’m reading this right but it’s so bizarre that perhaps I’m missing something. Via Banking Day: The unfolding economic crisis is throwing up curveballs for investors trying to grasp the logic behind emergency measures that will reshape the way banks report their financial results this year. Bank of Queensland’s chief executive, George Frazis,