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.
APRA’s monthly banking statistics have nothing but bad news for house price. Here are the year on year growth rates in investor mortgages in the big eight banks: ANZ CBA MQG NAB WBC BOQ BEN SUN Total Feb-19 -4.5 0.0 43.2 0.6 0.4 0.2 7.3 -1.3 0.4 Jan-19 -4.2 -0.1 44.4 0.7 0.9 0.8 7.0
From Chanticleer trailing bank executives in Hong Kong: The message from the bank executives was clear: housing isn’t a disaster area, and we are certainly open for business. …macro-prudential measures introduced three or four years ago have flowed through the industry – and trimmed 10 per cent to 15 per cent off the maximum a
After Chris Joye’s big short post yesterday, some readers wanted to know more about how to short Aussie house prices. There are a number of ways but note that this not investment advice. The most obvious methods are to do what the MB Fund is doing. Get long government bonds and short the Australian dollar.
Via Livewiremarkets: In assessing whether to get long or short residential mortgage-backed securities (RMBS), we undertake a great deal of quantitative analysis, including revaluing the homes that protect these bonds at regular intervals and developing globally unique RMBS default and prepayment indices. (Regular readers will know that we exited most of our RMBS in February
By Leith van Onselen Judo Capital founder Joseph Healy has told a banking and wealth summit that a generation of bankers lack sufficient knowledge of the lending requirements of the small business sector, as they favour lending to property buyers. From The AFR: The co-founder of challenger SME lender Judo Capital said bankers were addicted
MB has had an on again, off again affair with David Murray. As the big four CEO he led the development of Australia’s external funding imbalance and house price bubble. But as policy maker he did a good job of helping rectify the very same problems. But today we must part ways again, via Banking
Via the AFR comes the chutzpah of the roving cavaliers of credit: ANZ Banking Group chief executive Shayne Elliott has rebuffed Australian Securities and Investments Commission chief prosecutor Dan Crennan’s ambitions to lock bankers in jail, arguing regulators should prioritise a “fully functioning financial system” to support the economy. Mr Elliott warned the corporate regulator’s
Via The Advocate: In a clear stance on Labor’s trail position, Chris Bowen MP has said that the government’s response to the banking royal commission has “got it wrong”, particularly in regard to its “backflip” on removing trail from next year. Speaking at the AFR Banking & Wealth Summit this morning (26 March), Chris Bowen,
Via UBS’ excellent Jonathon Mott: WBC is finding it very difficult to estimate the potential remediation requirements for customers served via aligned planners, especially as many planners no longer work under BTFG Licences and in many cases have left the industry. WBC indicated that it generated fees of $966m from this channel in the decade
It’s been running for a few years: the widening spread between the cash rate and bank funding costs expressed through BBSW. This has led to impaired monetary transmission for the RBA as banks are forced to wither hike rates out of cycle, or not cut when it does. Recent weeks have seen the spread compress
Push it, mate. Push it! No pain, no gain! No more from NAB: In a statement issued yesterday the bank said it will end its ‘Introducer’ payments program, effective October 1 this year. “This means NAB will no longer make referral payments to introducers,“ the bank said. These fees are paid to groups in particular
By Leith van Onselen Analysts at Deutsche bank believe they have found a major flaw in APRA’s mortgage data, which significantly understates average loan size. Basically, because APRA has failed to adjust for split-loans, the $276,000 average loan size figure has been understated by around 40%, according to Deutsche, thus giving regulators a false sense
Lol, the LNP is so corrupt it is difficult to know where to look. Via Banking Day: Which would you prefer? Bill Shorten’s town hall tour of Australia to wrap up the Hayne royal commission into banking? Or policy making of the kind dished up by Josh Frydenberg on Friday? The government has decided not
This wont improve the market mood: There’s nothing quite like an open ended profit warning.
By Leith van Onselen Australia’s four major banks are able to access wholesale funding at cheaper rates because of an implied guarantee that the federal government will not let them fail because of their size. ME Bank CEO Jamie McPhee says governments should tax the bigger banks because they get cheaper funding as a result
Via the excellent Jonathon Mott at UBS: We have cut FY19E EPS by 3% given exit costs and larger losses from the Advice business, but we upgraded FY20E by 0.6% (exit from loss-making business). However, our forecasts are yet to incorporate further customer remediation charges (fee-for-no-service) for aligned advisers which are very difficult to estimate.
Via the AFR: Macquarie Bank is axing popular “Bank of Mum and Dad” financing and borrowing for self-managed super fund investment property as it continues to overhaul its residential property operations. The bank, which recently announced it was no longer underwriting new “home-branded” loans for several household-name lenders, stopped offering family loan guarantees on Monday
Not according to the CoreLogic leading index this week: Down just as heavily year on year this year as it was last year. New listings are very slow but total listings is still climbing anyway: No panic selling here yet. But a full blown buyer’s strike. Full report.
Today I am in shock, which isn’t easy these days. Via the AFR comes the ASIC chief referencing post Hayne Royal Commission bank reform efforts: “I am still not convinced that there’s enough wherewithal and ownership by leaders of these financial institutions to actually finish the job,” Mr Shipton told the Australian Competition and Consumer
Via S&P: Arrears on the mortgages underlying Australian residential mortgage-backed securities (RMBS) have increased year on year, while prepayment rates have slowed, according to S&P Global Ratings’ latest edition of “RMBS Performance Watch: Australia.” In particular, arrears that are in an advanced stage (more than 90 plus days) reached a record high of 0.75% in
Via the AFR: …For months, brokers have phoned the offices of federal politicians, fired off angry emails and held town-hall style meetings to berate MPs for an attack on their livelihoods after both sides promised to implement most of the commission’s recommendations on broker pay. At the same time, TV personality Bouris, a business ally
Desperation, thy name is Recessionberg, via AFR: The federal government has backflipped on a key recommendation of the banking royal commission and will no longer ban trail commissions for mortgage brokers from 2020, as it promised to do last month. Instead, it will hold a review into whether trail commissions should be kept from 2020 onwards.
By Leith van Onselen Shadow financial services minister Clare O’Neil will use a Committee for Sydney speech on 12 March to reveal that Labor will reject only one recommendation in the Hayne royal commission’s final report if it wins the upcoming federal election. Labor has joined the Coalition in opposing the proposal to shift the
Via The Australian comes UBS’s George Tharenou: “My framework here is that the regulatory tightening is accelerating, so the only effective policy lever available in the near term to stimulate the economy is the cash rate,” he says. “There’s a view that the royal commission was benign because it didn’t change law, but we never
Via UBS’ excellent Jonathon Mott today: The recent reporting season highlighted the revenue pressure the banks are under. The substantial mortgage repricing undertaken by the banks over the last six months has already been largely offset by: higher funding costs; front-book discounting; switching from Interest-Only to P&I; mix changes from Investors to Owner Occupiers and
The ABC seems to think so: When Renee Vanson went to her bank, she thought she was in a strong position to refinance her loans. “If you’ve got no outstanding debts, you’ve got your insurance, school fees for the year, power, phone, petrol — and you’re still saving money as well — who’s to say that
Via Nathan Lynch of Reuters via Banking Day: The Australian corporate regulator is pushing ahead with a landmark case against some of Commonwealth Bank’s existing and former board members over the organisation’s anti-money laundering (AML) failures. The civil case is shaping up to be one of the first under the Australian Securities and Investments Commission’s
By Leith van Onselen Queensland-based Suncorp Group has advised that a $120 million residential mortgage bond may not be able to repay all investors. The bond’s distributions have been thrown into doubt because the proportion of borrowers in arrears had reached a ‘trigger’ point. The bond dates back to 2010, so borrowers have been meeting
By Leith van Onselen The noose is slowly fastening around Australia’s mortgage industry. The Hayne royal commission found that mortgage lenders had not adequately assessed borrowers’ capacity before extending credit, instead relying on the Household Expenditure Measure (HEM) – a relative poverty measure that estimates expenditure at the lower end of the income scale. This
Westpac’s excellent February 2019 Housing Pulse contains interesting information on mortgage arrears, which are rising across the four major markets: Mortgage arrears provide a timely indicator of urgent or distressed sales – the presence of which can precipitate significant price weakness. For most existing home owners there is a degree of optionality when it comes
