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.
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
From Jonathon Shapiro at the AFR: Friday’s $1 billion sale of mortgage backed bonds by Firstmac is a big deal for more reasons than one. First and foremost it’s the clearest sign yet that the non-banks whose business models rely on access to cheap and abundant wholesale markets, are back as a force, to at least
APRA chairman Wayne Byers spoke today and said nothing very reassuring: I’d like to use my time today to talk about two issues of relevance to all ADIs: credit risk and capital. In the world of banking supervision, these are at the heart of what we do: credit risk because it is far and away
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
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
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
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
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
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
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
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
From the AFR, NAB is in a $3 billion rights issue: The equity is expected to bolster NAB’s balance sheet and give new chief executive officer Andrew Thorburn and chief financial officer Craig Drummond optionality as they study a number of potentially significant deals. NAB last raised equity in 2008 when it took $3 billion in an institutional placement
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
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
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,
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
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
As we head into further RBA rate cuts, today or in the next few months and then again next year, macroprudential measures are going to take centre stage first to control the narrowing number of housing markets in blowoff and then later to provide further easing. MB has noted how useless has been APRA’s 10%
by Chris Becker Is Westpac ringing a bell here for banking stocks a day before the RBA will most likely give the oligopoly another boost? The first half net profit of the country’s second biggest mortgage holder was completely flat, unchanged at $3.6 billion as it reported this morning. Just as flat analysis points to
By Leith van Onselen The AFR’s Chris Joye has written a ripper article this afternoon, slamming the major banks’ tiny capital buffers and demanding action from APRA: …the majors carry real, or non-risk-weighted, equity capital of just 3.7 per cent of assets. Perversely, you cannot get a home loan from the same banks providing that
As I pointed out yesterday, most major banks are giving the bird to APRA and its 10% ceiling on investor mortgage growth. Mac Bank today reckons the regulator will act: New figures showed the banks expanded loans for property investments in the year ended March by 10.4 per cent, the highest rate since 2008 and more than the
APRA has released its monthly banking statistics and it’s time they discontinued the series given it is humiliating their so-called macroprudential line in the sand of 10% growth in investor mortgages. Of the biggest six banks, only Bank of Queensland and Commonwealth are below the line and the others are accelerating above it with Macquarie leading
By Leith van Onselen From Fairfax comes news that the Australian Prudential Regulatory Authority (APRA) will act “sooner rather than later” and lift bank capital requirements: At The Australian Financial Review Banking & Wealth Summit in Sydney on Wednesday morning, Mr Byres said the inquiry chaired by David Murray and reforms being pushed by the
Lenders mortgage insurer Genworth has just released its Q3 update and boy is its business shrinking: To be clear, that’s a 17% year on year fall in new business. This would be great news for systemic financial stability were it not for the fact that much the business being displaced by even more risky zero interest
From the AFR: Under guidelines issued by APRA in December, banks are not meant to issue mortgages to borrowers unless stress testing shows they can afford to repay the loans on all their properties if mortgage rates hit 7 per cent. A confidential NAB mortgage calculator obtained by The Australian Financial Reviewshows NAB isn’t applying
Here’s the antidote to that Chovanec doomsayer, from Craig James at COMMSEC According to the latest data, Aussie consumers turned gloomy over the past week. There is no major explanation for the change. Data showed that home prices continued to rise. And there weren’t too many reasons for fresh concern about the global economy. But
APRA released its February lending data today and there may some good news about APRA’s wet lettuce macroprudential. There are still a bunch of banks lending well above the 10% year-on-year growth threshold for investment loans: ANZ BOQ BEN CBA HSBC ING MAC NAB SUN WBC 10.2 3.1 7.3 9.2 6.5 2.0 71.0 13.3 14.1
By Leith van Onselen As revealed over the weekend, Treasurer Joe Hockey has suggested the Government will implement Labor’s planned deposits levy of five basis as part of the May Budget, which could raise up to $500 million a year. From The AFR: The bank tax, as proposed by Labor ahead of the 2013 election,
By Leith van Onselen The release of the Australian Bureau of Statistics (ABS) National Financial Accounts yesterday revealed a large $33 billion (5%) jump in Australian banks’ gross external liabilities (offshore borrowings) in the December quarter, with borrowings now at all time record levels. This surge in offshore borrowings was driven by increases in One
A follow up to this morning’s post is required. What a prize statement from David Murray yesterday: “What bothers me most is that we’re not allowed to have a debate about how debt and deficit should work their way through the cycle, given the character of our economy.” That could be a subheading to the
