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 Chris Joye: The chaos has come and it undoubtedly yields opportunity: Aussie shares delivered no return in 2015 and are down a stunning 10 per cent in the first 43 days of 2016. The question is where is value to be found. I firmly agree with the Reserve Bank of Australia governor Glenn Stevens’ sentiments:
The Sykesnado continues to shred shares as banks, miners and gas all fall. For the first, CBA is down -0.7%, while WBC, NAB and ANZ remain in free fall down -1.9%, -1.7% and -2.1%. The mid-tiers in BOQ and BEN are the same at -3% and -4.3%. SUN is going the other way: The CBA holdout
From Captain Glenn in his Q&A in Parliament: “At least for our banks, to date, there’s no evidence that funding markets are impaired though a little bit of pressure on the cost.” The CBA CDS chart today is at 127bps: Rather laconic from the Captain given “pressure on cost” is impairment at some point. I
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
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
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
The Australian bank funding cost rocket is entering the outer atmospheres now, up another 4% yesterday and in clear crisis territory now at 128bps: As you can see, we have only been here before during the intense phases of previous crises. CBA acknowledged the threat yesterday, from Banking Day: Repricing of Commonwealth Bank’s investment lending
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
From Domainfax: CBA chief credit strategist Scott Rundell said credit markets were “skittish” and there had been a global spike in bank CDS spreads. The Australian lenders were getting caught up in the trend, he said. “We are getting caught up in this global uncertainty at the moment. The banks are the next perceived risk,” he said.
The Skyesnado is back today tearing apart blue chip portfolios this time in banks with CBA rogered for -2.2% and forming what looks like a big, fat head and shoulders top, WBC is hit -3.3%, ANZ and NAB are in free fall with the former pounded -3.5% and the latter -4.2%: However, our winner today
And funding markets claim their first victim: Looks like a profit warning to me!
From Gotti (chart from ZH): …one way or another, the current energy, emerging country and hedge fund/investment banking losses will end up with the global banking community. The market believes Citigroup (shares down one third in three months), Bank of America (31 per cent) and Deutsche (down more than 50 per cent in six months) will
Ah, here it comes. The Mining GFC firetail hurled CBA CDS clear of the launch pad Friday and is now tearing a hole in the sky, up 10% to 114.93bps: It is interesting to do some comparisons with other global banking systems. The following charts help benchmark the Australian majors, from from Zero Hedge. They are
Brent oil eased again Friday night to $34.13 and Henry Hub firmed a little: The action was despite a renewed plunge in the US rig count down down -31 to 467. So, with rigs plunging again, where are we on the market balance question? The IEA’s January Oil Market Report is now available to the
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
The Mining GFC is increasingly appearing in bank funding costs globally as the fear of bad loans, derivative contagion and a growth downturn mount. Locally the CBA CDS price hit a 2.5 year high yesterday rising 3% to 104.66. The other majors are all higher with NAB and WBC at 105.66 and ANZ on 107.56: Recall
Last night the Mining GFC ran smack into worries about quantitative failure. From RBS: Seeing relief off lows but fading again, as thematically we just saw essentially ‘the’ crowded ’15 macro trades come unglued on obvious unwinds: long stocks (SPX -1.3%, Estoxx -2.3%), long HY (HYG -0.2%), long Dollar (DXY -1.4%), short UST (+0.4%), short
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
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
A crisis is coming or I’m no judge. Yesterday CBA CDS launched 5% to a new post-European crisis high of 101.42bps: And look at that rock solid trend! At some point I still expect some kind of commodity debt accident in global markets to send this index ballistic. It’s kind of remarkable to note that CDS
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
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
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,
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
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,
The Sykesnado began last August when former journalist legend turned Domainfaxman, Trevor Sykes, pushed all and sundry to enter the big 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
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
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
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
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
