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.

8

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

23

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

6

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

3

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

7

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

0

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

10

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

7

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

6

The bull trap for banks

Today the AFR does its usual preening act this time for banks: Ahead of a week when the major banks are expected to report combined earnings of about $30 billion this financial year, fund managers dismissed comments from the banking regulator that they should lower expectations. “It makes sense in financial theory, but when you

14

We need more than capital to secure banks

Cross-posted from Martin North. Regulators here and overseas are forcing banks to hold more capital in order to make the banking system “more secure”. In Australia, because of the lack of true competition, this will in practice mean the banks passing additional costs through to borrowers, thus maintaining the high (on an international basis) shareholder

64

CBA delivers new rate shock

CBA hikes 15bps: We recently raised $5.1 billion to strengthen our capital position in line with new regulatory requirements implemented in response to the Financial System Inquiry. We have now reviewed our home loan pricing in light of these changes. As Australia’s largest home lender, we are committed to delivering competitive products and services to

102

APRA: We acted too late on dodgy lending

By Leith van Onselen Australian Prudential Regulatory Authority (APRA) head, Wayne Byres, has given testimony today to the Senate Standing Committee on Economics in Canberra, whereby he admitted that APRA had acted too late in addressing lending standards, which in some cases had fallen to “horribly low” levels that lacked “common sense”. From The AFR:

46

Joye: More rate hikes coming

From the AFR: The government’s response to the financial system inquiry endorses its recommendation that the major banks must have “unquestionably strong” capital in the top quartile of internationally active peers and implicitly paves the way for rate increases. As a capital importing nation with banks reliant on offshore funding and focussed on residential mortgage lending,

41

S&P warns on property bubble

From S&P: Increasing Property Prices — A Key Risk Factor For Malaysia, Australia, and New Zealand Similar to Hong Kong, we consider a risk that ultimately could have a bigger adverse impact on bank ratings is the one associated with a continuing surge of residential property prices rather than short-term property price deflation. As well

3

How exposed are banks to the mining bust?

From the RBA’s suddenly bearish FSA: In contrast to the benign overall conditions in much of the business sector, risks appear to have increased further in the resource-related sector over the past six months. The sustained falls in coal, iron ore and oil prices are weighing heavily on the earnings and cash flow of producers

35

Bank CEOs circle bubble wagons

From Fairfax: AB chief Andrew Thorburn said that while the weaker global economy and local regulatory caps on lending to property investors would see the rate of price growth slow, prices in Sydney and Melbourne would rise at high single digit rates due to strong demand and limited supply of housing close to the city centres. …Westpac chief Brian Hartzer said conditions

7

Pascometer screams bubble top for housing

From the contrarian indicator The Pascometer today: The de facto tightening is a negative, but this week’s NAB business confidence survey again told a story of business conditions actually remaining fairly good with employment intensions turning positive and capacity utilisation on the up. As for signalling the end of the Sydney/Melbourne property boom: Um, maybe. Maybe not. There’s a

30

Westpac comedy complete as Gail talks it up

From Victoria Thieberger: One of the trickiest tasks in keeping the Australian economy growing into a 25th year is preventing shaky business and consumer confidence sliding into bleak pessimism, despite clear signs of a cooling housing market. The Reserve Bank knows this, and the government knows it. There are tentative signs that PM Turnbull’s positive

12

Dumb bubble headline of the day

From Chanticleer: Westpac Banking Corp’s decision to share the pain of higher capital charges with shareholders and home loan borrowers will deliver a big jolt to the economy. Westpac customers with about $185 billion in mortgages will face higher monthly repayments from November. While the customers share the pain, shareholders are being asked to pay

12

Is the banks’ thirst for wholesale money waning?

By Leith van Onselen The AFR’s Clancy Yeates published an article over the weekend contending that Australia’s banks have begun to shun wholesale debt markets amid rising funding costs: The big four banks will this year have $110 billion in wholesale debt reach maturity, meaning they must either replace the debt by issuing new bonds,

34

Genworth CEO disappears

Ah yes, ye auld peak of cycle moment, from the AFR: Genworth Mortgage Insurance Australia faces investor and analyst backlash on Monday after the lenders mortgage insurance giant revealed late on Friday that its chief executive, Ellie Comerford, was leaving the company. Genworth, which has a market valuation of $1.6 billion, announced Ms Comerford was retiring

44

The RBA readies its bank bailout mechanism

From Banking Day: The Australian Prudential Regulation Authority has released details of Committed Liquidity Facility arrangements between authorised deposit-taking institutions and the Reserve Bank, which form part of the new liquidity coverage ratio regime. APRA has estimated that the 13 ADIs covered by the LCR rule would suffer a cash outflow of more than A$400