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.


Captured APRA squibs counter-cyclical capital

From Martin North: APRA has today announced that the countercyclical capital buffer applying to the Australian exposures of authorised deposit-taking institutions (ADIs) from 1 January 2016 will be set at zero per cent. The countercyclical buffer was included within the ADI capital framework as part of the Basel III reforms that were introduced by APRA


Bank funding costs warm up again

As expected, as the Mining GFC has intensified in this past week we have again seen Australian bank funding costs begin to rise. After yesterday’s US and emerging market high yield bond sell off the CBA CDS price (which is a good proxy for underlying five year bank bond rates) jumped 3.9% to 87.6bps and is in


Gotti: Banks gunna cut dividends

Some more good work from Gotti today reading the market right: …market fear was highlighted yesterday when Australian shares were falling and the low points of NAB and ANZ gave a yield of 10 per cent after adjusting for franking credits. Westpac’s yield peaked at just under 9 per cent and even CBA topped 7 per


APRA waves wet lettuce at securitisation

I almost wrote to expect this this morning but hope got the better of me, from APRA: The Australian Prudential Regulation Authority (APRA) has released for consultation a discussion paper on its proposals to revise the prudential framework for securitisation for authorised deposit-taking institutions (ADIs). APRA is also releasing a draft Prudential Standard APS 120


Fitch praises macroprudential success

From Fitch: Early Signs of Success for Regulatory Intervention in Australian Mortgages Fitch Ratings believes Australian banks have tightened mortgage underwriting in 2015, largely due to regulatory intervention. However, risks have built within the mortgage portfolios over the past 24 months, leaving the portfolios more susceptible to a significant increase in unemployment or a sharp rise


Securitisation takes heat

From Banking Day: After years of delays, Australian Prudential Regulation Authority is expected to release as early as Thursday its plans for reforms to the regulation of securitisation, according to a report in the AFR Street Talk column. Small lenders in particular, including credit unions and non-bank lenders, are sweating on how long APRA will


CLSA: Avoid banks

Courtesy of The Australian: Stay Underweight the bank sector says CLSA’s top-rated banking analyst, Brian Johnson. While the sector has come back to a more attractive valuation around 11.4 times FY16 EPS, Mr Johnson says the sector faces a more challenging structural environment than it has done for a while and the majors will most likely


Joye: Australia at risk of sovereign debt crisis

They should shut the AFR and just publish Chris Joye instead, much cheaper, more interesting and insightful: One of the higher probability future crises Australia could confront is a concurrent sovereign and financial credit calamity in which foreigners dump bonds issued by our government and banks, catastrophically escalating costs for both. …The embedded financial stability


Banking sector collects its rents

By Leith van Onselen Fairfax’s Michael West has written a series of great articles (here and here) examining how the Australian banks, in particular, are fattening themselves on superannuation fees: Being a super fund manager is hard yakka. You have to sit around being showered with millions of dollars of other people’s money week-in, week-out,


Is the great Australian bank short a ‘widow maker trade?’

Dumbfax thinks so: But to take a short position in the banks was “dangerous”, he said, the biggest reason against the move was the $600 billion strong army of self-managed superannuation funds which still value these stocks for their irresistibly high dividend yield. “In addition, Aussie banks are some of the safest and most profitable in the world,” he


Bank funding costs rebound

From Banking Day: Speaking in Hong Kong, Byres considered a principal legacy of the recent crisis. “The expectation of a government backstop has been one area where, unfortunately but necessarily, expectation has been matched by reality,” he said. “Some governments were even forced to bail out the holders of capital instruments. And by allowing over-leveraged


Back in my day, banks only went up

I’m not sure what Trevor Sykes’ high reputation is based upon given recent poorly reasoned endorsements of Aussie banks, including another today from the AFR: The gurus have been pointing out that the Australian economy is likely to slow, the housing boom is peaking, and the banks’ performances will be crimped because they’ve had to


Bank funding costs on the charge

From Banking Day: 

The highlight of the week in the debt capital markets was ANZ’s tier two capital issue, which was launched without a desired volume being specified but came with a very juicy indicative credit spread of 270 basis points. This was well wide of comparable secondary market levels of 220 bps and a


Is somebody going to be sacked for the mortgage data debacle?

Today Miranda Maxwell rightly points out that Australia’s mortgage data debacle is deep: In February, the ABS had to admit first home buyer statistics had been flawed since October 2012 after underreporting by Australia’s banks on the number of loans made to first home buyers. Banks are supposed to report monthly on the total number of homes


APRA warns again on bank funding

From Banking Day: The chairman of the Australian Prudential Regulation Authority, Wayne Byres, put the banking industry on notice yesterday that its work on making authorised deposit-taking institutions “unquestionably strong” would involve more than requiring them to hold plenty of capital. Speaking at a Finsia conference in Sydney yesterday, Byres said another area of focus


CBA arrears good fortune can’t last

The CBA’s first quarter profit result of +4% has underwhelmed markets, from the AFR: Like the other majors, growth is slowing and the bank’s net interest margins fell slightly, although not as much as some of its competitors. Commonwealth Bank’s credit quality was a stand-out. Loan impairment expense was 0.13 per cent of assets in the


Basel comes for our bubble

By Leith van Onselen The Chairman of the Basel Committee on Banking Supervision, Stefan Ingves, has signaled that rules governing the internal models used to calculate the capital requirements of the world’s biggest banks could be tightened as the global regulator prepares to release its latest proposed iterationions of the Basel Capital Accord – know


Westpac growth under pressure

Cross-posted from Martin North. Westpac Group today announced statutory net profit for the 12 months to 30 September 2015 of $8,012 million, up 6% over the prior year.  The Group benefited from some one-off items, stable NIM, but lower non-interest income whilst credit quality improved. The the real challenge is finding future growth, in an


Disgraceful Genworth pisses away capital

This was out Friday, from The Australian: Mortgage insurer Genworth’s year-to-date earnings have slumped, as it launches a $150 million share buyback amid strong headwinds. …The recent surprise exit of chief executive Ellen Comerford, 18 months after the company’s stock exchange debut, had set off alarm bells, and followed a slide in the company’s share


Pascometer screams bank sell

Weeoo, weeoo, weeoo: The pattern of the bank reporting season over the past few years has been for the CEOs to somewhat apologetically announce their billions of dollars of fat and growing profits, after which the analyst community shakes its collective head, warns that the outlook isn’t as good as the recent past and talks