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.
The Australian bank funding cost rocket is still refusing to cool off. Yesterday CBA CDS prices were unchanged at 120bps: Meanwhile, our US and European cousins are seeing enormous relief: Australian banks continue to lead developed market funding stress in this cycle now with an eye-popping spread to the US and Europe. This may mean
From Deutsche today: Inside the Bank Vault this week we highlight key valuation trends in the bank sector over the last month as well as take a look at the week’s global bank regulation news. The major banks on average are currently trading at a ~2% discount to their 5 year historical avg absolute PER
The Australia bank funding cost rocket is back after just one day’s relief. CBA CDS recovered most of its losses from the day before to end up 8% to 130bps: Global spreads continue to out-perform Australian: I still think we’re likely to see improvement before things get worse again. It’s really all about oil. From Banking
Yesterday saw a step change in the CBA CDS price which finally contracted materially by -9% to 120bps: This is tracking improved global credit spreads as the bear market rally in commodities eases fears of bad loans flowing into banks: However, very steep up-trends remain in place and Australian banks are still clearly leading the widening.
From Banking Day: Specialist Chinese-language mortgage broker N1 Loans has closed its initial public offering, raising equity capital of A$5 million, and will list on the Australian Securities Exchange on March 18. N1 plans to use the proceeds of the float to help invest in a more prominent online presence and increase its marketing activity.
A few readers have asked me if the wholesale funding squeeze Australian banks are caught is any worse here than elsewhere. Well, here is your answer in a chart of 5 year CDS prices for CBA versus Wells Fargo in the US and Credit Agricole in Europe (data from Bloomberg): These three banks are all too-big-to-fail
It’s the fly in the ointment that just won’t go away. Despite the iron ore rally, rampant RBA barracking, above trend GDP, wall-to-wall bullish triumphalism and the big move in for global credit spreads, the CBA CDS price just does not want to fall. In fact, yesterday it rose 2 points to 132bps and is
When I used to ask some in the industry who was the best business journo in Australia they almost uniformly used to reply “Trevor Sykes”; Mr Pierpont was a legendary probe into the malfeasance of big boardrooms. Alas, today, he has been transformed. We’ve probably given him a hard enough time for his ill-timed investment advice
From Brian Johnson at CLSA, the best in the business: BJ notes that having significantly underperformed since the peak in April 2015 the Australian banks have rallied hard in late February/early March 2016 with the rally likely reflecting a prior degree of “over-shorting” and easier global credit conditions. That said, Australian bank funding costs, both
From the AFR: Lenders are increasingly nervous about lucrative incentives being offered by developers to off-the-plan buyers struggling to pay their deposits, according to lenders and property specialists. Rebates, special conditions, furniture, televisions and cars are among the inducements offered by some developers to ensure that buyers, who typically made a deposit when the project
From the CBA senior economist Michael Blythe: The tendency is to accentuate the size of the moves by looking at trough‑to‑peak or peak‑to trough moves. Comparing like‑with‑like gives a better feel for underlying trends. The dominance of the larger cities means Australia should be more susceptible to housing booms. Price:income ratios are still historically high. Our consistent
From CLSA: ASIC have commenced proceedings against ANZ for alleged market manipulation in setting the bank bill reference rate on 44 separate days between 9 March 2010 and 25 May 2012. ANZ have rejected the assertions and will vigorously defend itself effectively claiming that “our practices in the BBSW market were consistent with Australian market
From Deutsche some good news for savers before the RBA snuffs it out again: Average term deposit spreads for the majors (on “best rates” within the broadly defined short term and medium term categories) improved slightly during the last month. In both the short term and medium term categories spreads improved by 5bps. These trends
Amid the now wild bear market rally in everything commodities, one price is proving to be surprisingly resilient to the downside. It is the CDS spreads for Australia’s major banks with CBA CDS widening on Friday 3% to 130bps: The major bank CDS price has so far missed out on the entire spread compression transpiring
From MPA: National Australia Bank will announce a rate rise for a group of its property investors, according to the Australian Financial Review. Street Talk has revealed that NAB will up rates by 0.15 of a percentage point for property investors who are paying off principal, as well as interest. The rate increase is part
From the AFR: Short positions in the banks have skyrocketed over the past 12-months – and are now worth more than $8 billion. While that $8 billion is still only about 3 per cent of the Big Four’s combined market capitalisation, it is the biggest short position since the corporate regulator started compiling data in 2010.
From The Australian: A New York-based portfolio manager with the world’s biggest investment management company has described the Australian banks’ exposure to the local housing market as “a little worrying,” expressing concern that the rising levels of household debt in Australia continued to buck global trends. Justin Christofel, manager of the BlackRock Global Multi-Asset Income
From the AFR comes an ASIC response to the Variant Perception report, from Michael Saadat, the senior executive for deposit takers, credit and insurers: Mr Saadat admits ASIC did not send out a team to the western suburbs of Sydney to talk to taxi drivers and “shadow shop” as Tepper and Hempton did in their report but he
Cross-posted from Martin North: My post yesterday “The Truth about Mortgage Brokers” created quite a a number of requests for more information, especially around my comment that broker originated loans tend to have higher loan-to-income and loan-to-value ratios compared with bank originated loans. So today, I am posting further data on these two dimensions, drawing