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.

34

APRA ignores offshore funding elephant

By Leith van Onselen APRA chair, Wayne Byres, appeared before Senate Estimates today and gave the Australian financial system a clean bill of health, stating it remains “fundamentally sound”. From Business Spectator: Appearing before a senate committee this morning, Australian Prudential Regulation Authority (APRA) chair Wayne Byres said nothing that had occurred in the last

7

Suncorp’s dividend omen

Suncorp released its results this morning which included a 21% cut to the dividend: Suncorp Group Limited (Suncorp) today reported net profit after tax (NPAT) of $530 million (HY15: $631 million) for the six months to 31 December 2015. Profit after tax from business lines was $544 million (HY15: $681 million). Chairman Ziggy Switkowski said Suncorp

16

Is CBA really worth it?

Deutsche Bank has a very good take on CBA today (and a Hold rating): Defensive qualities on show but PE rel vs peers very elevated CBA’s 1H16 result was somewhat of a mixed bag. While its net interest margin disappointed due to weakness in Insto & NZ, cost growth was stubbornly high and impairment expense increased, this

5

CBA bad debts begin to rise

From Watermark Funds Management’s investment via The Australian on the CBA result this morning: Cash earnings came in ahead of estimates “Cash earnings grew by 6% sequentially and 4% on the prior corresponding period and came in 1% ahead of consensus expectations. However, EPS was in line with expectations due to dilution from the capital raising last

9

Genworth chucks more money out the door

Genworth today released its full year 2015 accounts and chucked more money at shareholders: It’s been hosing shareholders with money when APRA should be raising its counter-cyclical buffers: Why? Because its delinquencies are currently at bottom of the cycle lows: But it has insurance in force of $320 billion: And a regulatory capital position of just $3.6

13

CLSA: Foreign funds selling OZ banks

From pretty much the best in the business, Brian Johnson at CLSA: The four-year rally in Australian banking stocks had been fuelled by near-relentless buying from structurally underweight international institutions chasing dividends as funds have flowed into international income funds.  Recently however, China contagion risk, weaker equity markets, rising bank funding costs, incremental data points

4

Deutsche: NAB gunna cut dividend

From Deutsche: With NAB to trade ex CYBG on Wednesday, we have updated our forecasts to reflect the loss of earnings and impacts on capital and returns. Ex the UK business, NAB’s outlook looks challenging to us (highlighted by margin pressure in the Business Bank), which is reflected in the subdued 4yr forecast EPS CAGR

29

Term deposit rates rise as funding squeeze bites banks

From Banking Day: After cutting their deposit rates for most of last year, some banks have started to increase their rates. Comparison site Mozo found that the number of term deposit rate increases outnumbered falls in January. Greater Building Society, Maitland Mutual, ING Direct, ME and Big Sky all increased rates last month. ME bumped

15

Banks tighten on SMSF property loans

From BS: AMP Bank advised mortgage brokers it would no longer lend for properties less than six months old, including off-the-plan developments. It also lowered its maximum loan-to-valuation ratio from 80 to 70 per cent, and stipulated a minimum SMSF fund size of $200,000 for DIY superannuation borrowers. …These stricter loan conditions come after NAB

42

Moody’s warns on bank costs, bad loans

A double warning today for Australia’s banks from Moody’s: Moody’s Investors Service says that the unwinding of the global commodities cycle is heightening the macroeconomic risks faced by Australian banks, as the regions and sectors most exposed to mining are starting to see some signs of stress. “Although the banks’ direct exposure to the resources sector is relatively low,

63

What idiot said macroprudential wouldn’t work?

Glenn Stevens for one. Yet today’s credit data slaps him square across the face. APRA’s December bank breakdown has investor loans stalling out completely in annual growth rates: ANZ CBA MAC NAB SUN WBC Dec-15 5.0 4.2 40.6 53.7 -2.5 -7.2 Nov-15 6.0 4.9 45.5 55.1 0.5 -6.4 Oct-15 7.1 6.1 48.5 55.6 5.2 -6.0

3

More on the bank dividend Sykesnado

From Bloomie: Some of the world’s fattest bank dividends are at risk as Australia’s four dominant banks, which together raised a record amount of equity capital last year, come under pressure to add more amid a potential rise in bad debts. …“There’s certainly more capital raisings to come from the banks this year,” Sean Fenton,

16

The fuse is lit under bank funding costs in 2016

From Banking Day: Spreads agreed on newly minted wholesale bank debt from Australian names priced at much wider levels than prevailed in 2015. Philip Bayley, in his weekly DCM Review, chronicled the vibrant start to the fixed income market over the opening weeks of January 2016. Commonwealth Bank raised A$2 billion for five years at

12

Why you shouldn’t expect much interest rate relief

By Leith van Onselen The SMH reported yesterday that funding costs are rising for Australia’s banks, which could preclude them from passing on any cuts to official interest rates by the RBA: While the ructions in world financial markets are increasing the odds of a central bank interest-rate reduction, they’re also pushing up the price

17

Fitch deluded on Aussie banks, economy

By Leith van Onselen Fitch has released its 2016 outlook for the Australian banks, which maintains a stable outlook for the sector. Below are extracts from the press release [my emphasis]: Fitch Ratings maintains a Stable sector outlook on Australia’s banking sector in 2016. We expect strengthened capitalisation and recently tightened underwriting standards to offset

129

How do banks create money?

Cross-posted from Science Direct: (h/t to Delusional Economics for bringing this important work to our attention) 1. Introduction Thanks to the recent banking crises interest has grown in the details of how banks operate. In recent decades, the empirical and institutional micro-structure of how banks operate had not been a primary focus of attention by