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

G20 versus Megabank

From Banking Day today: In a reminder of its activist work program, the Financial Stability Board has amplified its view of the priorities for the Brisbane Group of 20 summit of political leaders in November. Mark Carney, who is head of the Bank of England as well as of the FSB, wrote in a letter

12

Who pays in the credit card business?

Cross-posted from DFA Blog. Today we continue our series on credit cards, looking at the economics of the business on a customer segment basis. We are using data from our household surveys, as well as industry cost and revenue benchmarks we maintain. This is segmented analysis, because consumer behaviour has a profound impact of the profitability of the

30

Credit card rates are far too high

By Martin North, cross-posted from the Digital Finance Analytics Blog Today we begin to look at the economics of credit cards. We start by looking at interest rates charged on cards. Whilst many households pay off the entire balance each month, those who revolve balances on the card are being hit with relatively high rates.

25

Too-big-to-fail banks are crushing competition

Cross-posted from the MARQ Services Blog Since the global financial crisis, the Basel Committee on Banking Supervision has devised numerous reforms to ensure that taxpayers will never again have to rescue banks teetering on the brink of collapse. Yet despite these moves, explicit and implicit government exposures to banks are substantial and are distorting competition.

26

Bank on guv’ment!

The AFR has a nice banking panegyric today timed for the G20: The big four banks are among the most highly rated financial institutions in the world; superannuation assets, which have grown to $1.7 trillion, represent the world’s third-largest pool of investable assets; the Australian interest rate derivatives market is the world’s fourth-largest and the largest in Asia;

15

APRA warns Murray

From the AFR, Australian Prudential Regulation Authority chairman John Laker has warned in a speech today that: “The impact of seeking to retreat from the status quo on the hard won reputation of the Australian banking system … will I am sure be carefully weighed by the inquiry,” Dr Laker told an audience at the Institute

15

Murray myopia seizes Kohler

Alan Kohler nicely illustrates the closed-shop nature of Australian elite thinking today in arguing that the Murray Inquiry has no point: Joe Hockey committed the Coalition to a “Son of Wallis” or “Granddaughter of Campbell, whatever you will” in a speech the AIG National Forum in October 2010. It was the ninth point of a

23

CBA: No bubble, no China slowdown, no worries!

From AB+F: In a conference call with journalists following the lender’s interim results, Narev put the hot potato issue of Australian house prices in the freezer by declaring: “we don’t think we have a housing bubble.” “The reasons we don’t think we have a housing bubble is not just because a lot of the incidences

8

Is David Murray conflicted?

From Crikey today let’s hope there is more drum beating about the fix that’s in for the Son of Wallis inquiry: When then-treasurer Peter Costello appointed Stan Wallis to conduct a sweeping review of Australia’s financial system shortly after the 1996 federal election, the former Amcor CEO sensibly disposed of all his personal shareholdings in financial

0

Securitsation market sucks in foreign capital

Yesterday we were warned by UBS that bank lending standards are slipping. Today there is another sign that a little exuberance may be creeping back into Australian non-banking as well. From Banking Day: The favourable conditions that prevailed in the securitisation market last year look like they will continue, with the first mortgage-backed securities deal

12

Are bank fees excessive?

Cross-posted from DFA blog. Today the Federal Court ruled on the class action against ANZ relating to the bank’s penalty fees. The core of the case was that fees charged for exception transactions were higher than the costs of providing the service. ANZ was found to have charged excessive fees on late payments made to

3

The banker’s age of entitlement is powering

In my last post, I pointed out the gross inadequacy of APRA’s treatment of Mega Bank as Australia’s D-SIB (Domestic Systemically Important Banks). In essence APRA have stated that although Mega Bank needs to carry a meagre 1% extra capital because it’s a D-SIB, because of other spurious reasons Mega Bank does not actually need

3

BIS warns banks on internal risk models

From Banking Day: The Basel Committee on Banking Supervision will make changes to its Pillar 3 (capital adequacy and risk disclosures) regime this year, with the aim of improving the transparency of the banks’ risk-weighted asset modelling practices, and reducing inconsistencies in risk-weighted asset calculations. Speaking at a conference in South Africa last week, the

1

Dissecting APRA’s monthly banking statistics

By Martin North, cross-posted from the Digital Finance Analytics Blog Today APRA published their statistics on the banking business of individual banks in Australia. We see the continued dominance of the four largest players in the market, with CBA winning out on home loans and deposits. Total housing lending now stands at $1,333 bn according

24

APRA embraces too-big-to-fail

I’ve come out of my self imposed exile, to point out the howler of bank regulation of 2013. There’s been no or little main stream press on this and no comment that I could find and little wonder. APRA saw fit to release this Information Paper on 23 December 2013. This paper is very important

6

Comprehensive credit reporting: friend or foe?

  By Martin North, cross-posted from the Digital Finance Analytics blog. Australia’s current credit reporting regime is over twenty years old and permits the collection of only “negative” data. However in March 2014 the credit assessment of potential borrowers is set to change as a result of legislation passed in 2012. Behind the scenes, players are

24

ASIC to rein in housing spruikers

The AFR has a happy piece this morning on the efforts of ASIC to reign in mortgage fraud: The Australian Securities and Investments Commission is stepping up action against dishonest mortgage ­brokers as part of a strategy to head off an expected surge in fraud in the hot housing market. The corporate regulator will announce on

0

Who’s winning the mortgage war?

Cross-posted from DFA blog. Information about mortgage industry market share data is hard to come by, especially amongst smaller banks and non-banks. So we welcome the arrival of the Australian Financial Group (AFG) Competition Index. AFG is a substantial player in the mortgage market, as an aggregator with than 1,800 brokers nationally, processing around $3 billion of mortgage finance

0

Fitch lukewarm on Aussie banks

By Leith van Onselen Credit rating agency, Fitch Ratings, has released its 2014 Outlook for Australian banks, which warns that a weakening domestic economy and heightened competition could create a more challenging environment for Australia’s banks: Profit growth is likely to be modest at best – due to higher impairment charges and net interest margin

27

Chalk-up another win for our too-big-to-fail banks

By Leith van Onselen The AFR’s Chris Joye is maintaining his rage over Treasurer Joe Hockey’s “Son of Wallis” Financial System Inquiry, which is increasingly looking like a lame duck. Following Joye’s stellar effort over the weekend, arguing that no meaningful reform would take place as long as banking interests lead the inquiry, he has

11

Hockey’s Financial Inquiry will pander to big banks

By Leith van Onselen The AFR’s Chris Joye has delivered a detailed critique of the Coalition’s “Son of Wallis” Financial System Inquiry, which he claims will maintain the status quo and be friendly towards the big banks at the expense of taxpayers: Anyone with exposure to Australia’s $450 billion banking sector should understand the threshold

6

RBA blows smoke for bank price hikes

The RBA’s Guy Debelle is on the hustings promoting banking price rises today: Remarks on Liquidity Guy Debelle Assistant Governor (Financial Markets) Address to the Australasian Finance and Banking Conference Sydney – 17 December 2013 Thank you to Fari for again organising a good conference. Today I will make a few points about liquidity. I have

1

Fitch: RMBS arrears ease

Fresh from Fitch: Mortgage delinquencies continued to improve, dropping 20 basis points in the third quarter (3Q) of 2013. Strong 2013 issuance and seasonal factors drove improvements across all arrear buckets in 3Q, while 90+ days arrears have benefited from the strong housing market over the past 6 months. Fitch’s Dinkum RMBS Index recorded 30+

4

The mystery of the missing non-bank lending

Cross-posted from DFA blog. The Australian Bureau of Statistics provides lending for housing statistics each month, and they provide some good data points. However, when you start to dig into the data, it gets quite interesting. We know from our surveys that non-bank lending is on the rise, and that some of the higher loan to

29

Keating backs macroprudential

From The Australian: “The world is fundamentally unled…Fiscal policy is not led in America by the secretary of the Treasury and there is no European fiscal union…Therefore central banks have stepped up to take the responsibility for the absence of political leadership in fiscal policy.” …He also warned the government not to be too aggressive

5

Bank offshore borrowings rose in Sept quarter

By Leith van Onselen The release today of the quarterly balance of payments data by the Australian Bureau of Statistics (ABS) revealed that gross external liabilities held by depository corporations (mostly banks, but also building societies, credit unions, and registered finance corporations) rose by $9.8 billion over the September quarter of 2013 to $642.9 billion,

7

Banks easing standards on competition

Cross-posted from Martin North’s Digital Finance Analytics Blog. Within APRA’s voluminous quarterly ADI data is information of the flow of new loans written by value, separated into LVR bands. With the caveat of course that this does not include non-bank lending, which is rising; it paints an interesting picture of the state of play. As I have

9

Credit supply or demand limiting business?

Mac Bank speculates that it is credit supply not demand that is behind recent weak bank business lending: While weak business confidence and borrowing intentions have been considered the drivers of weak business credit growth, we believe an all-too-overlooked factor in weak business credit growth is banks‟ willingness to lend, which is really a reflection of bank

2

Securitisation comeback’s financial stability risk

By Leith van Onselen Last week, Bank of Tokyo-Mitsubishi announced the first major salvo by a Japanese bank into the Australian mortgage market, extending a $500 million one-year mortgage-backed facility to AMP Ltd. Today, The AFR reports that US banking giants Citigroup and JP Morgan, who are flush with liquidity following the Federal Reserve’s quantitative easing