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.
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
From the AFR, NAB is in a $3 billion rights issue: The equity is expected to bolster NAB’s balance sheet and give new chief executive officer Andrew Thorburn and chief financial officer Craig Drummond optionality as they study a number of potentially significant deals. NAB last raised equity in 2008 when it took $3 billion in an institutional placement
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
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
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,
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
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
As we head into further RBA rate cuts, today or in the next few months and then again next year, macroprudential measures are going to take centre stage first to control the narrowing number of housing markets in blowoff and then later to provide further easing. MB has noted how useless has been APRA’s 10%
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
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
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
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
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
Lenders mortgage insurer Genworth has just released its Q3 update and boy is its business shrinking: To be clear, that’s a 17% year on year fall in new business. This would be great news for systemic financial stability were it not for the fact that much the business being displaced by even more risky zero interest
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
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
APRA released its February lending data today and there may some good news about APRA’s wet lettuce macroprudential. There are still a bunch of banks lending well above the 10% year-on-year growth threshold for investment loans: ANZ BOQ BEN CBA HSBC ING MAC NAB SUN WBC 10.2 3.1 7.3 9.2 6.5 2.0 71.0 13.3 14.1
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,
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
A follow up to this morning’s post is required. What a prize statement from David Murray yesterday: “What bothers me most is that we’re not allowed to have a debate about how debt and deficit should work their way through the cycle, given the character of our economy.” That could be a subheading to the
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
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
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
It gets worse from Wayne Byers: “Consistent with the fact we don’t want to advertise that any financial institution might have some issue that requires our intervention, we do not disclose [imposing additional capital through the PCR] and, within our powers, we have the capacity to tell [banks] that they should not disclose it as
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
From The Australian: “The reported growth rates are backward looking, whereas we are focused on lenders’ plans for 2015,” he told The Australian on the sidelines of a Centre for International Finance and Regulation event in Sydney. “In many cases, people are drawing down on loans where the approval may have been granted before our
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
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
From Morgan Stanley comes the growing bank bubble (my words not theirs): Or, more to the point, rampaging CBA: As I’ve said before, these valuations can be seen as quite rational in a low interest rate environment. The problem in Australia’s case, and what makes these valuations bubbly, is the economic adjustment associated with the
Today I thought I’d have ago at what kind of impact APRA’s declared 10% growth limit for bank lending to property investors actually means for house prices. To begin, the top ten banks in Australia have seen property investor growth of $44.7 billion in the year to January 2015. In descending order, Mac Bank miles ahead on
