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.

8

Pray Warren Buffet does not buy Aussie banks

From the SMH: Goldman Sachs Asset Management has invested in local banks as concerns about capital levels and a weak economy battered their shares, bettingefforts to improve efficiency will bolster earnings. The US firm, which oversees about $6.5 billion in Australia, added holdings as the big four sank and price swings became the widest in

45

CBA tightens mortgage standards

From Fairfax: Commonwealth Bank of Australia informed mortgage brokers on Friday of changes that will mean new borrowers’ existing debts and their incomes are assessed more stringently. CBA will apply a “servicing loading” of 20 per cent to all repayments on existing home loans and lines of credit held by customers. …It will accept only

14

Are the banks a big short?

From Morgan Stanley: Banks – After The Fall? The Australian Banks sector has underperformed the ASX 200 over thelast two months by ~10% as higher capital and tighter regulation seeearnings and dividend profiles flatten.Whileyield remains a support, weremain cautious with an UW sector bias: not only does capital/regulation remain a longer term issue but consensus earnings outlook fails to carry

4

Citi: APRA set to tighten mortgage risk weights

From Citi: The recent speech from APRA Chairman, Wayne Byers has provided the best indication yet that the much anticipated changes to IRB mortgage risk weights for Australian major banks are imminent. With NAB recently deciding to undertake a large capital raising, partly in anticipation for these risk weights changes, investors are questioning whether the

10

RBA mulls Australia’s GFC bank run

RBA deputy Phil Lowe gives a nice speech today canvassing Australia’s 2008 bank run and what has been done since then to prevent a repeat occurrence. It is worth reading in full and remember while you do so that this is why regulators are now moving to slow mortgage credit growth (far too late in

13

Moody’s praises MP tightening, wants more

From Moody’s: Sydney, May 26, 2015 — Moody’s Investors Service says that recent changes by Australia’s four leading banks to their criteria for residential investment lending are credit positive for these institutions, but they will also need to implement additional changes to fully address the risks in the housing market. “In our view, these initiatives are credit positive since

33

BOQ joins macroprudential retreat

Cross-posted from Martin North’s DFA blog: Bank of Queensland Limited (Bank of Queensland) has improved its lending practices following ASIC’s concerns about the way it assessed applications for home loans. ASIC was concerned that Bank of Queensland was using a benchmark figure, the Henderson Poverty Index (HPI), to estimate the living expenses of consumers applying

12

Westpac joins stampede behind APRA’s property investor line

Last week CBA, NAB and ANZ all capitulated to APRA on its 10% line on the sand for property loan portfolio growth. Today it’s a full house, from the AFR: Westpac is cutting the lucrative interest rate discounts offered to new housing investors, as lenders act to slow the rapid growth in lending to property investors by charging them more for credit.

14

ANZ joins investor lending retreat

More good news on housing from the AFR: ANZ Bank on Thursday said it would no longer offer interest rate discounts to new property investor borrowers who did not also have an owner-occupied home loan with the bank. …An ANZ spokesman said the change in discounting, effective immediately, meant the bank would no longer offer discounts off its advertised

24

MS: Banks need $31 billion

From Morgan Stanley via The Australian: Morgan Stanley says Australia’s major banks will need to raise a further $31bn of equity capital by the end of FY17 – a potential concern for any investors with overweight holdings of bank shares. “While APRA has flagged the prospect of higher mortgage risk weightings, we also assume that

21

Banks scuttle behind APRA’s investor loan limit

From Banking Day: Commonwealth Bank subsidiary Bankwest has imposed a loan-to-valuation ratio cap of 80 per cent on investor mortgages, as it tightens its lending standards to meet regulatory pressure to limit the growth of investment property lending. Bankwest said in a statement that the change would not affect existing investment mortgage customers or customers

17

RBNZ directly targets Auckland mortgages

More humiliation today for the Reserve Bank of Australia and the Australian Prudential Regulatory Authority as its counterpart in New Zealand does exactly what they should be doing and aren’t, from the RBNZ: New Zealand’s financial system is sound and operating effectively, but faces significant risks, Reserve Bank Governor, Graeme Wheeler, said today when releasing the

10

IMF declares FIRE sector a growth killer

The IMF has come a long way: Financial development increases a country’s resilience and boosts economic growth. It mobilizes savings, promotes information sharing, improves resource allocation, and facilitates diversification and management of risk. It also promotes financial stability to the extent that deep and liquid financial systems with diverse instruments help dampen the impact of

11

Millionaires club profit jumps

  by Chris Becker The fifth pillar in the Australian banking sector, Macquarie Group (MQG) announced its 2nd highest profit result ever (yes, the other one was before the GFC). Here are the juicy details: net profit up 27% to $1.6 billion operating income up 14% to $9.3 billion operating expenses up 12% to $6.8

8

Madometer issues bank sell signal

The Madometer is putting out a contrarian bank sell signal: …Remember that most of the arguments against holding the banks weren’t necessarily attached to any intrinsic worries over earnings. In fact the key case against them was that that the yield play had simply gone too far — that the banks were just too expensive. …in an

30

Ken Henry is too big to fail

From the AFR: Former Federal Treasury secretary Ken Henry says he’s thriving on the cut and thrust of the corporate world and will be “decisive” as the new chairman of National Australia Bank. “You don’t get rewarded for sitting on the fence,” Dr Henry said on Thursday. NAB chairman Michael Chaney, who will step down after

7

IMF: Australian banks need capital and macroprudential

From the IMF’s new Regional Economic Outlook: Asynchronous monetary policies in major advanced economies in response to divergent cyclical conditions have contributed to large and rapid exchange rate realignments. Robust growth and the prospect of higher interest rates in the United States, coupled with the start of quantitative easing in the euro area and further

27

Ken Henry joins the oligarchs

Apparently Ken Henry is to succeed Michael Chaney as NAB chairman at the end of this year. I’m a bit torn by this. On the one hand, Henry is a sensible policy-maker with a strong sense of the public good, and may be well placed to help NAB navigate the very difficult times ahead. On

8

NAB shocks

by Chris Becker The last cab off the rank in the banking oligopoly, National Australia Bank (NAB), which routinely has been the worst performer, has surprised the market this morning on two fronts. First, it announced a $5.5 billion capital raising getting ahead of its peers in terms of shoring up a paper thin capital

19

Time to dump bank stocks?

by Chris Becker  Its hard to predict, especially the future, but there’s a combination of factors out there, embiggened by the RBA’s rate cut debacle yesterday, that suggest the top is in for bank stocks. Let’s count them off. Three of the majors have reported flat profits this week as they struggle to combine record low

2

CBA dud profit smashes banks

by Chris Becker Commonwealth Bank (CBA) is the next cab off the banking ologopoly rank to report some pretty flat but still fat and taxpayer supported profits this morning. Following ANZ’s steady but squeezed result and Westpac shores up its increasing expensive capital with an equity raising, the biggest mortgage holder/pusher in the land offered

10

CBA keeps some rate cut

From the SMH: The Commonwealth Bank is only passing on part of Tuesday’s cut in official rates to home loan customers, but has taken the unusual step of raising some deposit interest rates. The country’s biggest bank on Tuesday said it would lower its standard variable mortgage rates by 0.20 percentage points to 5.45 per cent,

17

Fitch pounces on rate cut, demands MP

Onya Fitch: Fitch Ratings-Sydney-05 May 2015: Fitch Ratings says the Reserve Bank of Australia’s (RBA) recent interest rate cut is likely to lead to a strengthened macro-prudential response from the Australian Prudential Regulatory Authority (APRA) for the Australian banking system, although implementation will probably remain targeted and occur on a bank-by-bank basis. Today’s rate cut

3

ANZ boosts profit but margins squeezed

by Chris Becker ANZ has followed Westpac this morning with its first half profit result which along with a positive Wall Street lead should drag the financials up this morning. The headline and bottom line results look very firm: first-half profit rose 3.4% net profit of $3.51 billion (up from $3.39 billion) cash profit up