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

IMF: Australian banks need capital and macroprudential

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

27

Ken Henry joins the oligarchs

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

8

NAB shocks

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

19

Time to dump bank stocks?

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

2

CBA dud profit smashes banks

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

10

CBA keeps some rate cut

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,

17

Fitch pounces on rate cut, demands MP

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

3

ANZ boosts profit but margins squeezed

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

2

Westpac money printer breaks as equity runs short

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

24

Chris Joye: It’s time to act on bank capital

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

10

Wake up APRA!

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

5

Banks laugh at APRA’s investor loan limits

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

9

APRA can’t act soon enough on bank capital

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

41

Bank’s rorting APRA a “molotov cocktail”

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

6

One banker’s take on gloomy consumers

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

128

Deposits levy a sound idea

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,

32

Aussie banks borrow offshore like drunken sailors

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

74

Murray exposes Australia’s total regulatory failure

I know that I have given former Commonwealth Bank CEO, David Murray, a bit of curry over the years. Having described yesterday the capture of Australian financial regulators, I could also be accused of hypocrisy in endorsing a former bank CEO as a major political force. But in all broken systems there are always outstanding

21

Australia’s captured regulators

In its recent quarterly review the eminently sensible Bank of International Settlements (BIS), the central bankers central bank as it were, stated the following: The evidence from our long historical data set sheds new light on the costs of deflations. It raises questions about the prevailing view that goods and services price deflations, even if

17

MS: Banks loan losses about to bottom

From Morgan Stanley: We think retail bank revenue growth will slow and the outlook for business banking remains challenging. The banks are increasing their focus on cost control, but loan losses are bottoming. As such, we think the upgrade cycle has ended. We outline some feedback from recent meetings with bank industry participants: Retail bank margins: Competition is increasing

35

APRA turns bubble manager

From APRA chairman Wayne Byers today: Sound Lending Practices for Housing When we made our last appearance, we were still contemplating potential actions with respect to emerging risks in the housing market. We have since written to all authorised deposit-taking institutions (or ADIs) encouraging them to maintain sound lending standards, and identified some benchmarks that

25

Fitch says NZ macroprudential credit positive

What is Fitch on about? Fitch Ratings views positively the Reserve Bank of New Zealand’s (RBNZ) consultation on the capital treatment for mortgages to residential property investors. Higher capital requirements for investor loans combined with the existing loan to value ratio (LVR) limit could help protect banks against material losses in the event of a property

15

Bank funding costs fall with ECBQE

I keep a regular eye on the major Australian banks wholesale funding costs as guide to how markets are perceiving Australian risk. Since mid last year we have seen a rising trend which pitched sharply upwards as Grexit concerns took centre stage. But the last week and more has seen those concerns evaporate and we