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.


Banks face fear of global investors

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


Chris Joye’s big short

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


Judo Capital: Aussie bankers biased towards property

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


ANZ’s Lord Ponzi battles ASIC

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


Chris Bowen goes raw prawn on mortgage broker commissions

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,


UBS: Westpac warning “alarming” for interest only reset

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


Deutsche: APRA fudging mortgage data?

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


UBS: Banks wealth exit “warm up” to house price “main event”

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.


Mad Macquarie kills Bank of Mum and Dad

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


APRA must immediately ban ANZ’s new ponzi-mortgages

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


S&P: Mortgage arrears to remain elevated

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


How mortgage brokers corrupted Hayne in record time

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


Mortgage brokers roll Recessionberg

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.


Labor commits to all but one Hayne recommendations

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


UBS: Credit crunch to intensify

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


UBS: Banks won’t pass on rate cuts

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


ASIC lines up money laundering CBA executives

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


CLSA: Suncorp mortgage bond failure ‘a canary’

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


ASIC takes aim at dodgy mortgage lending

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: Mortgage arrears rising across Australia

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