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.
Fresh from the CRA: Sydney, November 05, 2013 — Moody’s Investors Service says that delinquencies in excess of 30 days in the Australian prime residential mortgage market measured 1.35% in August, down from 1.39% in July, and an improvement from 1.24% in August last year. “Looking ahead, we expect the performance trends witnessed to date
Credit Suisse on MQG: MQG reported 1H14 Reported Profit of $501mn (up 39% on $361mn pcp) which was 2% better than our $492mn estimate and guidance for earnings “broadly in line” with 2H13 ($490mn). Interim DPS of $1.00, 40% franked (up 33% on $0.75 pcp) was short of our $1.16 estimate; proposed distribution also of
More on APRA’s move to shore up bank capital today from the AFR: A visit to Australia last year by officials from the International Monetary Fund was the catalyst for the bank regulator to harden its position on dividend payments by the banks. The Australian Prudential Regulation Authority (APRA) initially reacted cooly when the IMF called for Australia’s
Chris Joye has another barnburner today at the AFR about the Son of Wallis inquiry: Fearful that the implicit subsidies from which they benefit will be properly priced, banks are furiously lobbying Hockey and his advisors to focus on “how to fund Australia”, which is code for getting them cheaper and more stable money. Having
APRA has this morning released its September monthly banking statistics and the results show some stability. Month on month growth rebounded to 1%: However, year on year is still only tracking at just above 6%: The aggregates have returned to trend: In terms of the major segments, not much to report. The household growth rate
From the AFR: National Australia Bank has admitted that it could be forced to re-assess its future dividend payment plans in response to tough new rules that will require banks to hold billions of dollars more in capital as it posted an annual profit of almost $6 billion. As it released its full year profit
Credit Suisse on the NAB result: NAB reported (company defined) cash earnings of $5,936mn (up 9% on $5,433mn FY12) which was in line with our $5,963mn estimate and the $5,942mn consensus average. Final DPS of $0.97 (up 8% on $0.90 pcp) was $0.02 better than our estimate and $0.01 better than the consensus average. Refer
By Leith van Onselen The Australian Prudential Regulatory Authority (APRA) has told Australia’s “too-big-to-fail” banks to limit their dividend payouts to investors to allow them to comply with new rules requiring them to maintain higher capital thresholds. According to the AFR, APRA sent a letter to banks last week warning them to “maintain adequate capital
From the SMH, this could get ugly: A customer who claims he was spied on by the Commonwealth Bank is threatening legal action that could expose records of further covert surveillance operations by the bank. Geoff Shannon, the founder of the Unhappy Banking advocacy group, said he had legal advice that the alleged spying could
Jeez, the Son of Wallis inquiry is going to be barrel of laughs if this morning is any guide. From Banking Day: When Ian Harper sat on the Financial System (Wallis) Inquiry committee in 1996 the deregulatory push of the 1980s was still driving change. Things have changed since then.Harper, who is a partner in
It’s always amusing to watch elites blow their top. From The Australian: ANZ Bank chief executive Mike Smith has hit back at JPMorgan and its analysis of the bank’s super-regional strategy, urging the US giant to look in its own backyard where it is negotiating a $US13 billion ($13.4bn) settlement with US regulators. …The former
Fresh from Fitch: Mortgage delinquencies have remained low and stable in Australia’s current environment of low interest rates, robust house prices and low unemployment. Fitch’s Dinkum Index decreased in Q213, with improved 30+ days arrears of 1.39%, down from 1.48% in Q113. Fitch believes the performance of prime mortgages is unlikely to see further improvements,
The Australian has a good story today on what’s driving Australia’s little credit rebound: HOME-LOAN lenders are on track to this year raise the most money from securities backed by mortgages since the global financial crisis, boosting competition as the property market picks up steam. …Last week, non-bank lender Pepper Australia upsized a non-conforming RMBS
This morning Luci Ellis, Head of Financial Stability Department at the RBA, gave a speech titled Stability, Efficiency, Diversity: Implications for the Financial Sector and Policy. It’s an elegant ramble through the philosophies of risk but there are really only two lines of argument that matter in the entire presentation. I’ve bolded them below: More Stability Is
The US fiscal debacle is one of the few recent crises to not have caused Australian bank bond rates to spike. Throughout the past two weeks, bank CDS prices hovered around 107bps, neither up nor down on the previous period. However, there is area where the banks’ offshore borrowing are about to become more expensive
Chris Joye continues his renaissance today with a deconstruction of the dangers, limits and appropriate parameters for the forthcoming Son of Wallis inquiry. He outlines how the RBA’s governance arrangements will likely be included though not the recent bribery allegations. The rest of Joye’s argument is as vital as it is rare in Australia: It is
By Leith van Onselen Bank of Queensland (BoQ) chief, Stuart Grimshaw, has urged the Federal Government to boost competition in the home loan market, claiming that the bank capital rules are unfair, since they enable the Big Four banks to hold far less capital than smaller deposit-taking institutions. From the AFR: …the government’s planned inquiry
From Banking Day: Australian non-bank mortgage lenders, such as Resimac and Pepper, are looking to ramp up their New Zealand businesses to take advantage of the new Reserve Bank of New Zealand limit on low deposit loans by banks. But analysts say restrictions on funding, a lack of mortgage insurance and the sheer scale of
From Moody’s: Sydney, October 08, 2013 — Moody’s Investors Service says most Australian residential mortgage-backed security (RMBS) transactions with lenders’ mortgage insurance (LMI) insuring the mortgage loan payments are insensitive to changes in the credit quality of mortgage insurers. “We analyzed 215 Australian RMBS notes with LMI and found that the ratings of only 11
From Banking Day: Suncorp Metway was “very close” to a bank run at the height of the financial crisis, in 2008, the bank’s former managing director, John Mulcahy, told the Sunday Mail. …The Sunday Mail reported on an October 2008 briefing from the Reserve Bank of Australia and the Australian Prudential Regulation Authority, obtained under Freedom
From the AFR: Senior bankers in Britain could face a jail term of up to seven years if their bank fails and they are subsequently found guilty of “reckless misconduct”, draft laws suggest. The sentence was included in a wide-ranging set of proposed amendments to the Banking Reform Bill which the coalition government is seeking
Another data point from today’s RBA credit aggregates is term deposits, which I’m a bit surprised have stopped growing and not recently: Basically as soon as the rate cuts started, term deposit growth stopped. The “other” deposit category accelerated at the same time. Mortgage offset accounts perhaps? A longer term view of term deposits shows
APRA has released its monthly banking statistics this morning and deposit growth slowed sharply in August. The deceleration was driven largely by ongoing falls in the segment in the financial corporations segment. One might speculate that this equates to less idle cash in the banking system: As you can see, the recent rebound in household
Three years ago I coined the term “invisopower” to describe Australian financial regulators’ weirdly opaque post-GFC tightening of bank regulation. The changes wrought by regulators were (and remain) far larger than the public sales pitch of “exceptionalism” trumpeted worldwide. The largest of these changes was APRA’s insistence that banks lend dollar-in dollar-out, deposits for loans, which
By Leith van Onselen In the wake of APRA’s warning to banks not to lower lending standards, and the increased speculation that Australia’s financial regulators might follow New Zealand in adopting macro-prudential controls on higher risk mortgage lending, the head of the Australian Bankers’ Association (ABA) – lobby group for the banking sector – has
By Leith van Onselen The Australian Prudential Regulatory Authority (APRA) has released a paper warning banks about not letting their lending standards slip. From The Australian: THE banking regulator has moved to head off the build-up of systemic risk as record low interest rates and hot competition fuel property prices, and has warned banks not to
By Leith van Onselen As expected, former Future Fund chairman and CBA CEO, David Murray, and Ian Harper have put his hand up to join or lead the new Government’s promised financial system inquiry. From the AFR: David Murray, a former CBA boss and Future Fund chairman, and professor Ian Harper, a panel member of the
For some reason the SMH is floating the idea that former CEO of CBA David Murray will head any post-election Wallis Inquiry: The former chief executive of Australia’s biggest bank says he would consider chairing a review of the country’s financial system if he were asked. David Murray, who steered the Commonwealth Bank through privatisation
By Leith van Onselen Following-up on yesterday’s short post questioning the long-term safety and stability of Australia’s banking system, The Australian’s Adam Creighton published an detailed article arguing that Australia’s banks have become far too-big-to-fail, placing taxpayers and the economy at risk of a future financial crisis: LABOR leader Ben Chifley’s quixotic 1947 plan to
A snippet from Mac Bank on the ANZ result below: Subject: ANZ Bank (ANZ AU) (Outperform) – Using the levers to stay on track Stock: ANZ AU Name: ANZ Bank Price: A$30.36 (at 6:10, 15 Aug 13 GMT) Market Cap (m): A$83,295 Current valuation (DDM/PE): A$33.52 12mth price target: A$35.50 Recommendation: Outperform Volatility index: Low Event
