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.
From the AFR, Genworth has launched its IPO: Lead broker Goldman Sachs said the Australian business was worth $1.9 billion to $2.4 billion, or 0.8-to-1-times the company’s book value. It forecast Genworth to record $235 million net profit after tax in the 2014 financial year, and said the valuation implied an eight-to-10-times on a price-to-earnings
The push by the politico-housing complex to spruik slower house price growth is joined by ANZ’s Phil Chronican today who sounds positively like a regulator: Phil Chronican, head of Australian operations for ANZ, says the bank has grown mortgage market share for 16 consecutive quarters and expects to further increase after doubling the number of
Former Governor of the Reserve Bank, Ian Macfarlane, today goes to bat for his employer, the ANZ, in a submission to the conflicted Murray Inquiry. From The Australian: In a personal submission to the financial system inquiry, made in his capacity as an ANZ non-executive director, Mr Macfarlane questions why the Australian Prudential Regulation Authority
By Martin North, cross-posted from the Digital Finance Analytics Blog One interesting comment in APRA’s submission to the Financial Services Inquiry is found right in the summary. And its a biggy. APRA’s independence, a critical requirement as envisaged by Wallis, has been eroded. “APRA has substantial independence from Government in most respects but, over time,
From the AFR: Lenders’ mortgage insurer Genworth will launch its $800 million initial public offering next week, with pre-marketing research due to hit fund managers’ desks as early as Monday. Sources said investor meetings had been arranged for Sydney and Melbourne next week, with general lunches and one-on-one sessions organised by brokers Goldman Sachs, Macquarie Capital,
By Leith van Onselen The Reserve Bank of Australia (RBA) yesterday posted its submission to the Government’s Financial System Inquiry, which as expected denied the need for Australia to implement macroprudential controls on high risk mortgage lending: In carrying out its duties as Australia’s integrated supervisor of financial institutions, it should be remembered that APRA
It’s a second and much welcome black eye for me today as the AFR‘s Jonathon Shapiro takes it to the conflicted Murray Inquiry: How an inquiry conceived by an opposition treasurer to rein in the big banks has handed them a once-in-a-generation opportunity to push for dominance may be a question we are forced to
By Leith van Onselen Business Spectator’s Stephen Bartholomeusz (‘Bartho’) has written a broad-ranging article today in which he questions the Big Four banks’ over-exposure to housing, and argues for an increase in capital requirements on mortgages: The exposure of the system to housing is an increasingly topical issue as prices continue to rise, affordability continues
From the AFR: The International Monetary Fund has renewed its push for Australia’s four largest banks to fund loans with more shareholder equity and less debt….The Washington-based institution has also controversially suggested governments consider levying a new tax on bank liabilities to discourage excessive risk-taking and to pre-fund future financial bailouts. …The IMF says banks
Cross-posted from DFA blog: APRA just released their monthly banking statistics, for February 2014 which shows that of the $1,231 billion lent in the month, 84.3% of investment and owner-occupied loans were from the big four banks. CBA led the way on owner occupied loans, whereas Westpac lent the largest volume of investment loans by value.
The Australian plutocracy is really on fire today. Here’s David Murray appearing on AFR TV outlining his vision for a banking inquiry in which is emphasises efficiency over regulation, performance over competition, international problems over Australian leverage, exceptionalism over responsibility and banks over equities. Very big-bank biased stuff: Tougher banking capital rules designed for Europe
We recently seen that Australian bank regulators are discussing the macroprudential policies that we need. From the RBA minutes: Lending to housing investors had been increasing for some time in New South Wales, and over the past six months it had also picked up in some other states. While such a pick-up would be unhelpful
A few days ago, Joe Hockey announced the appointment of the international advisory board to the Murray Inquiry. It included former Westpac chief executive David Morgan, now based in London, chief executive of hedge fund Convertible Quantitative Strategies Sir Michael Hintze; ; JPMorgan Chase global chairman of technology, media and telecoms Jennifer Nason; and Andrew Sheng,
By Leith van Onselen In a positive development this afternoon, Finance Minister Mathias Cormann has frozen the Government’s proposed wind-back of Labor’s future of financial advice (FoFA) reforms amid heavy criticism from the industry and community. From Chris Joye at The AFR: Senator Cormann, who took over responsibility for the policy last week, said he
Cross-posted from DFAblog. The RBA published their quarterly bulletin today. It included information of bank margins and funding costs. “The main findings are that the absolute levels of banks’ funding costs and lending rates have fallen over the past year, and spreads between these rates and the cash rate have narrowed marginally. They highlight a fall
From Banking Day, the conflicted head of the banking inquiry, David Murray, made sense yesterday: “Wallis was more about the regulation of the system. It had narrower terms of reference than we have. It made progress on regulatory structures. Campbell had to deal with how to manage a system that was almost fully regulated and was
The recent Bank of England paper embracing post-Keynesian endogenous money creation has Steven Keen punching Paul Krugman on the nose today at locked-Business Spectator: Stage one in the textbook money creation model is that the Fed (or the Bank of England) gives the banks additional reserves — say $100 billion worth. Then in stage two,
From Banking Day: Lenders have resorted to talk of intense competition and deep rate cuts to create interest in a stagnant mortgage market where the cash rate has not moved for six months. However, a review of the data shows not much is actually going on. Since the start of the year 26 lenders have
From Moody’s: Moody’s Investors Service says that the prime 30-days plus arrears rate for Australian RMBS rose during Q4 2013 to 1.37% in December from 1.28% in September, mainly as a result of seasonality. However, on a year-on-year basis, this figure decreased compared to the 1.44% recorded in December 2012. The increase in Q4 2013
By Leith van Onselen From Fairfax’s Clancy Yates comes news today that Australia’s banks are increasingly offering cashbacks to home buyers in a bid to sell mortgages and expand their market share: Among the major banks, NAB’s UBank is offering new customers $2,014; the Commonwealth Bank has a $1,000 rebate for first home buyers; Westpac-owned
Fitch has released its quarterly Dinkum Index and RMBS mortgage arrears are up slightly with 30 days arrears up 2 bps at the end of 2013. 30-59 and 60-89 days arrears rose by 1bps and 2bps respectively, 90+ days arrears improved by 1bps. 1.21% of total loans are behind on repayment.
From Banking Day: …For the ABS, a first-home buyer is anyone who applies for a first-home owner grant. However, several states have changed the conditions of their grants, so that only people buying newly-built properties are eligible.A first-home buyer buying an established house or unit may not be captured in the ABS data. Mortgage Choice
Sighhhh. I’ve written about this in detail a few years ago but nothing has changed and the deceit continues. All of Mega Bank’s divisions continue to present to the market deceptive figures about the strength of their balance sheets and the amount of capital Mega Bank holds compared to banks in other parts of the
By Martin North, cross-posted from the Digital Finance Analytics Blog Today APRA released its quarterly authorised deposit-taking institution (ADI) statistics for December 2013. They report, “over the year ending 31 December 2013, ADIs recorded net profit after tax of $31.0 billion. This is an increase of $6.1 billion (24.4 per cent) on the year ending
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
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
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.
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.
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;
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
