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.

7

APRA confronts its dumbest bubble

From the AFR: Australian banks have a funding problem and will need to work on shifting their deposit bases and lengthening their maturity profiles, the Australian Prudential Regulation Authority has warned. APRA chairman Wayne Byres said the funding profile of authorised deposit-taking institutions had improved since the financial crisis but the strengthening of liquidity profiles

50

Chris Joye: Abbott wrong to drop deposits tax

By Leith van Onselen The AFR’s Chris Joye has slammed the Abbott Government’s decision to drop the bank deposits tax, claiming that it is at odds with moves internationally and embeds moral hazard into Australia’s banking system: So let me get this straight. After the four peak government agencies that oversee Australia’s financial system recommended

20

Our financial regulators are captured

By Leith van Onselen Wayne Byres, Chairman of APRA, presented a speech on Wednesday entitled “Banking On Housing“, whereby he outlined the current state of play with regards to the supervision of housing lending. Byres began by noting that Australia’s banks are overly concentrated in housing lending: The Australian banking system is noteworthy for the

5

Bank property exposures jumped in June

By Martin North, cross-posted from the Digital Finance Analytics Blog: APRA released their latest quarterly ADI property exposure data today. The publication contains information on ADIs’ commercial property exposures, residential property exposures and new housing loan approvals. Detailed statistics on residential property exposures and new housing loan approvals are included for ADIs with greater than

29

Australian bank funding costs breakout on EM jitters

And here comes the next Australian domino. As the global fixed interest market turns uber-bullish, Fed rate cuts are at best postponed and Australian sovereign bonds rally like nobody’s business, Australian bank bonds are going the other way, watching yields climb. The CBA CDS price jumped 7.5% on Friday to 78.5bps its highest level in

43

ASIC finds widespread interest-only rorting

Cross-posted from Martin North. ASIC today released a report that found lenders providing interest-only mortgages need to lift their standards to meet important consumer protection laws. They identified a number of issues relating to bank underwriting practices. We would also make the point that despite the low losses on interest-only loans to date in Australia,

3

QBELMI hit by macroprudential

From QBELMI: “We have revised our FY15 gross written premium expectations down by around five per cent or $200 million,” QBE’s chief executive of Australia & New Zealand operations Colin Fagen said. “This is due to the delayed inception of the aforementioned new business opportunities, an industry-wide downturn in lenders’ mortgage insurance new business volumes,

107

Australia’s mortgage black spot

From Fairfax: …In its 40 hotspots, NAB is conducting a more stringent assessment of loan applications, including increasing the amount of equity that borrowers require. NAB would not disclose what postcodes are on its watchlist. But Martin North, principal at Digital Finance Analytics…said postcodes in NSW that banks would be wary about include Blackville, Caroona, Colly Blue, Pine Ridge, Quirindi,

8

Joye joins queue to take money from Sykes

Chris Joye did some bank stress testing on Friday after Trevor Sykes’ recent sell at the paper: A simple stress-test is to imagine that non-residential loan losses reach, say, two-thirds of their 1991 marks coupled with a rise in residential arrears to, say, 2 per cent (compared to 0.6 per cent presently) with 30 per

2

Westpac tightens on interest-only loans

More incremental tightening today from Westpac, via the AFR: Westpac is tightening credit policies for interest-only mortgages, an area where financial regulators have raised concerns about bank underwriting standards. The country’s biggest lender to landlords last week told brokers of changes requiring new interest-only borrowers to be tested against their ability to make principal, and

6

CBA unveils its pump and hike strategy

From CBA CEO Ian Narev via the AFR: With the Reserve Bank of Australia previously branding the current investor-led surge in house prices “unbalanced” and governor Glenn Stevens describing Sydney’s market as “crazy”, Mr Narev said actions from the Australian Prudential Regulation Authority to cap the lending growth to housing investors would in the short

4

How to take money from Trevor Sykes

The AFR has rolled out its biggest gun of all, the legend Trevor Sykes, to defend the banks: Broadly, all the Big Four enjoyed a run from 2011 until early this year, but since then they have slid quite abruptly. There were two reasons for the fall. The first was that the Australian Prudential Regulation

20

CBA bad debts begin to climb

From Watermark via Fairfax: Cash earnings grew by 5% for the full year but declined by 2% in the second half. Cash earnings and underlying profits were all in-line with consensus expectations for both the second half and full year. CBA experienced flat jaws [move in revenue v costs] on a full year basis but negative

5

NAB beats ANZ

The NAB trading update is out, from Watermark via Fairfax: Overall, the result was on the soft side with the bottom line being assisted by lower bad debts. However, NAB still exhibited growth in this quarter in contrast to ANZ’s update last week. Cash earnings of $1.75b for the quarter were in line with consensus

16

The ridiculous Genworth

From UBS on Genworth: We continue to believe GMA can return surplus capital, a core feature of our investment thesis. With the low hanging fruit now delivered on this front we’re downgrading to Neutral, recognising that further significant returns could be dependent on no material deterioration in the economic backdrop. We’re into uncharted waters from here – macro-prudential, investment

86

ANZ to raise $3 billion

Another bank bites the regulatory bullet, from the AFR: Deutsche Bank, Citi and JPMorgan are raising up to $3 billion for ANZ Banking Group via a placement and a share purchase plan. ANZ shares are in a trading halt. Remind me again how it was that Genworth issued a special dividend yesterday? Meanwhile, Bryan Johnson of CLSA reckons

8

Why is APRA letting Genworth pay a special dividend?

From The Australian: Genworth Mortgage Insurance Australia has urged the Abbott government to adopt the recommendations of the Financial System Inquiry, after reaffirming its full-year growth target and flagging a special dividend for shareholders as part of its interim results. In the six months to June 30, Genworth (GMA) delivered a net profit of $113.05

11

No fire sale for AOFM RMBS

From Banking Day: The Australian Office of Financial Management will not conduct a fire sale to meet the Government’s deadline for divestment of its holdings of residential mortgage-backed securities. In the May Budget the Government announced that the AOFM would divest its RMBS holdings, valued at A$4.6 billion at the time. The AOFM’s plan is

1

Moody’s praises bank tightening

From Moody’s: Over the past week, three major Australian banks increased their lending rates for residential property investment loans and interest-only (IO) loans. Australia and New Zealand Banking Group Limited and Commonwealth Bank of Australia each lifted the standard variable investor rate by 0.27%. National Australia Bank Limited increased the rate it charges for IO