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.

1

Previewing bank profits

From Citi: Share price strength sees the recommendations for WBC & NAB reduced — We are downgrading our recommendations for WBC to a Neutral and NAB to a Sell with no change in our TPs. Over the past 3 months, the sector has continued to outperform the broader market, with WBC being the standout performer.

10

Mortgage war intensifies

By Leith van Onselen The Australian Finance Group (AFG) has released its Competition Index for March 2013, which revealed that major lenders continue to dominate mortgage lending, despite some recent market share gains by non-major lenders (see below tables). According to AFG:  “Competition has been partly restored in the past two years, with non-major lenders

47

McCrann monsters Joye

Terry McCrann has booked a shocker today: OH dear. One of the Fin’s portfolio of — let’s be generous — idiosyncratic columnists, Christopher Joye, is at it again, pushing his loony line that all our banks, and indeed every bank in the world, is functionally insolvent. Now to most normal people, the very notion is

13

Conflicted Murray Inquiry bashed

There are three articles around this morning aimed at the big banks and the Murray Inquiry. Opening us up is Chris Joye who slams everyone, quite rightly, but especially Ian MacFarlane: Consider, for example, how rapidly our “game-keepers” become “poachers”: the last two Reserve Bank of Australia governors, Ian Macfarlane and Bernie Fraser, and the

3

GST lessons from across the pond

Cross-posted from The Conversation When long-time Kiwi expat John Clarke was asked why he left New Zealand, he said: “Because it was there.” Clarke at least knew what being “there” meant, in contrast to most of his new compatriots, whose interest in and knowledge of their ANZAC cobbers (or “bros”, as we would say) extends

9

Genworth launches IPO

From the AFR, Genworth has launched its IPO: Lead broker Goldman Sachs said the Australian business was worth $1.9 billion to $2.4 billion, or 0.8-to-1-times the company’s book value. It forecast Genworth to record $235 million net profit after tax in the 2014 financial year, and said the valuation implied an eight-to-10-times on a price-to-earnings

5

ANZ echoes RBA on mortgage calculators

The push by the politico-housing complex to spruik slower house price growth is joined by ANZ’s Phil Chronican today who sounds positively like a regulator: Phil Chronican, head of Australian operations for ANZ, says the bank has grown mortgage market share for 16 consecutive quarters and expects to further increase after doubling the number of

4

Inflationista Macfarlane slams APRA

Former Governor of the Reserve Bank, Ian Macfarlane, today goes to bat for his employer, the ANZ, in a submission to the conflicted Murray Inquiry. From The Australian: In a personal submission to the financial system inquiry, made in his capacity as an ANZ non-executive director, Mr Macfarlane questions why the Australian Prudential Regulation Authority

3

APRA falls short on independence

By Martin North, cross-posted from the Digital Finance Analytics Blog One interesting comment in APRA’s submission to the Financial Services Inquiry is found right in the summary. And its a biggy. APRA’s independence, a critical requirement as envisaged by Wallis, has been eroded. “APRA has substantial independence from Government in most respects but, over time,

24

Genworth rings the bell for a housing top

From the AFR: Lenders’ mortgage insurer Genworth will launch its $800 million initial public offering next week, with pre-marketing research due to hit fund managers’ desks as early as Monday. Sources said investor meetings had been arranged for Sydney and Melbourne next week, with general lunches and one-on-one sessions organised by brokers Goldman Sachs, Macquarie Capital,

26

RBA hoses macroprudential

By Leith van Onselen The Reserve Bank of Australia (RBA) yesterday posted its submission to the Government’s Financial System Inquiry, which as expected denied the need for Australia to implement macroprudential controls on high risk mortgage lending: In carrying out its duties as Australia’s integrated supervisor of financial institutions, it should be remembered that APRA

13

Shapiro slams conflicted Murray inquiry

It’s a second and much welcome black eye for me today as the AFR‘s Jonathon Shapiro takes it to the conflicted Murray Inquiry: How an inquiry conceived by an opposition treasurer to rein in the big banks has handed them a once-in-a-generation opportunity to push for dominance may be a question we are forced to

29

Big bank mortgage capital needs to rise

By Leith van Onselen Business Spectator’s Stephen Bartholomeusz (‘Bartho’) has written a broad-ranging article today in which he questions the Big Four banks’ over-exposure to housing, and argues for an increase in capital requirements on mortgages: The exposure of the system to housing is an increasingly topical issue as prices continue to rise, affordability continues

5

IMF at odds with conflicted Murray inquiry

From the AFR: The International Monetary Fund has renewed its push for ­Australia’s four largest banks to fund loans with more shareholder equity and less debt….The Washington-based institution has also controversially suggested governments consider levying a new tax on bank liabilities to discourage excessive risk-taking and to pre-fund future financial bailouts. …The IMF says banks

1

Big banks make 84.3% of loans in February

Cross-posted from DFA blog: APRA just released their monthly banking statistics, for February 2014 which shows that of the $1,231 billion lent in the month, 84.3% of investment and owner-occupied loans were from the big four banks. CBA led the way on owner occupied loans, whereas Westpac lent the largest volume of investment loans by value.

13

Conflicted Murray mulls Basel divorce

The Australian plutocracy is really on fire today. Here’s David Murray appearing on AFR TV outlining his vision for a banking inquiry in which is emphasises efficiency over regulation, performance over competition, international problems over Australian leverage, exceptionalism over responsibility and banks over equities. Very big-bank biased stuff: Tougher banking capital rules designed for Europe

6

Murray Inquiry and regulatory capture

A few days ago, Joe Hockey announced the appointment of the international advisory board to the Murray Inquiry. It included former Westpac chief ­executive David Morgan, now based in London, chief executive of hedge fund Convertible Quantitative Strategies Sir Michael Hintze; ; JPMorgan Chase global chairman of technology, media and telecoms Jennifer Nason; and Andrew Sheng,

8

Cormann freezes FoFA changes

By Leith van Onselen In a positive development this afternoon, Finance Minister Mathias Cormann has frozen the Government’s proposed wind-back of Labor’s future of financial advice (FoFA) reforms amid heavy criticism from the industry and community. From Chris Joye at The AFR: Senator Cormann, who took over responsibility for the policy last week, said he

7

RBA: Bank funding costs fall

Cross-posted from DFAblog. The RBA published their quarterly bulletin today. It included information of bank margins and funding costs. “The main findings are that the absolute levels of banks’ funding costs and lending rates have fallen over the past year, and spreads between these rates and the cash rate have narrowed marginally.  They highlight a fall

21

Conflicted Murray makes sense on inquriy

From Banking Day, the conflicted head of the banking inquiry, David Murray,  made sense yesterday: “Wallis was more about the regulation of the system. It had narrower terms of reference than we have. It made progress on regulatory structures. Campbell had to deal with how to manage a system that was almost fully regulated and was

1

Phony war in mortgage market

From Banking Day: Lenders have resorted to talk of intense competition and deep rate cuts to create interest in a stagnant mortgage market where the cash rate has not moved for six months. However, a review of the data shows not much is actually going on. Since the start of the year 26 lenders have

5

Moody’s: Mortgage arrears up on seasonality

From Moody’s: Moody’s Investors Service says that the prime 30-days plus arrears rate for Australian RMBS rose during Q4 2013 to 1.37% in December from 1.28% in September, mainly as a result of seasonality. However, on a year-on-year basis, this figure decreased compared to the 1.44% recorded in December 2012. The increase in Q4 2013

18

Banks offer cash-backs to mortgage customers

By Leith van Onselen From Fairfax’s Clancy Yates comes news today that Australia’s banks are increasingly offering cashbacks to home buyers in a bid to sell mortgages and expand their market share: Among the major banks, NAB’s UBank is offering new customers $2,014; the Commonwealth Bank has a $1,000 rebate for first home buyers; Westpac-owned

2

Fitch: Mortgage arrears stable

Fitch has released its quarterly Dinkum Index and RMBS mortgage arrears are up slightly with 30 days arrears up 2 bps at the end of 2013. 30-59 and 60-89 days arrears rose by 1bps and 2bps respectively, 90+ days arrears improved by 1bps. 1.21% of total loans are behind on repayment.  

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FHBs are fine!

From Banking Day: …For the ABS, a first-home buyer is anyone who applies for a first-home owner grant. However, several states have changed the conditions of their grants, so that only people buying newly-built properties are eligible.A first-home buyer buying an established house or unit may not be captured in the ABS data. Mortgage Choice

22

The dark heart of Australian banking

Sighhhh. I’ve written about this in detail a few years ago but nothing has changed and the deceit continues. All of Mega Bank’s divisions continue to present to the market deceptive figures about the strength of their balance sheets and the amount of capital Mega Bank holds compared to banks in other parts of the

5

Bank profits power ahead

By Martin North, cross-posted from the Digital Finance Analytics Blog Today APRA released its quarterly authorised deposit-taking institution (ADI) statistics for December 2013. They report, “over the year ending 31 December 2013, ADIs recorded net profit after tax of $31.0 billion. This is an increase of $6.1 billion (24.4 per cent) on the year ending