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.

29

Keating backs macroprudential

From The Australian: “The world is fundamentally unled…Fiscal policy is not led in America by the secretary of the Treasury and there is no European fiscal union…Therefore central banks have stepped up to take the responsibility for the absence of political leadership in fiscal policy.” …He also warned the government not to be too aggressive

5

Bank offshore borrowings rose in Sept quarter

By Leith van Onselen The release today of the quarterly balance of payments data by the Australian Bureau of Statistics (ABS) revealed that gross external liabilities held by depository corporations (mostly banks, but also building societies, credit unions, and registered finance corporations) rose by $9.8 billion over the September quarter of 2013 to $642.9 billion,

9

Credit supply or demand limiting business?

Mac Bank speculates that it is credit supply not demand that is behind recent weak bank business lending: While weak business confidence and borrowing intentions have been considered the drivers of weak business credit growth, we believe an all-too-overlooked factor in weak business credit growth is banks‟ willingness to lend, which is really a reflection of bank

2

Securitisation comeback’s financial stability risk

By Leith van Onselen Last week, Bank of Tokyo-Mitsubishi announced the first major salvo by a Japanese bank into the Australian mortgage market, extending a $500 million one-year mortgage-backed facility to AMP Ltd. Today, The AFR reports that US banking giants Citigroup and JP Morgan, who are flush with liquidity following the Federal Reserve’s quantitative easing

3

Deposit growth stable

APRA has released its monthly banking statistics for October and deposit growth has stabilised. Monthly growth eased: But year on year growth is stable above 6%: The aggregate trend is solid: And households are sustaining their savings habits nicely: Amid falling income growth across the nation this says to me that households remain prudent.

27

APRA warns banks on bubbles

Fresh from the ABC: The financial regulator says it is “working assertively” with banks to make sure they do not slash their home lending standards to chase more business. The Australian Prudential Regulation Authority’s chairman John Laker has told an economics lecture that banks need to remember the lessons of the US housing meltdown. He

6

Japan enters Aussie mortgage market

By Leith van Onselen Bank of Tokyo-Mitsubishi has launched the first major salvo by a Japanese bank into the Australian mortgage market, extending a $500 million one-year mortgage-backed facility to AMP Ltd. Under the arrangement, Bank of Tokyo-Mitsubishi will provide AMP with short-term “warehouse” financing while mortgages wait to be split into pools and then

6

Interests swarm Murray Inquiry

Banking Day today briefly lists the positions taken up by various interests around the Murray Inquiry: …The Customer Owned Banking Association aired a long running gripe. “While ‘systemic risk’ is covered, there is no explicit reference to the massive hidden subsidy the Big Four banks receive in the form of an implicit government guarantee,” Louise

11

Bank lobby endorses Murray Inquiry

From the AFR: Australian Bankers Association chief executive Steven Münchenberg said it was important to debate new ideas, but warned that any changes had to support growth and development. “Any new measures must pass the test of ensuring benefits to customers clearly outweigh costs and they should not present risks to system stability or reduce

10

Genworth tightens up on SMSF property

From the LMI sector today: Being a prudent Lenders Mortgage Insurance provider, we are always assessing the market and emerging trends to ensure our policy is aligned to market conditions. As a result we have made the following changes to our Underwriting Policy in relation to Lenders Mortgage Insurance for Self Managed Super Funds: The

7

Are we running out of money for credit?

From Banking Day: Mortgage lender FirstMac Ltd has had to pay a slightly higher margin on its latest issue of residential mortgage-backed securities. FirstMac priced the top tranche of its latest deal at 115 basis points over the bank bill swap rate. This compares with pricing of 110 bps over swap in June. On Friday,

12

S&P threatens banks with downgrade

From Banking Day: Any inference that there may be less explicit government support for banks in a crisis may warrant a cut in the long-term credit rating of five banks, Standard & Poor’s believes. In a report on “Australia’s Developing Crisis-Management Framework”, S&P pointed to a “hypothetical rating impact” should the “government’s willingness to support banks” be

2

Moody’s: Arrears improve in August

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

0

Macquarie pleases

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

18

IMF pushed APRA conservatism

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

0

Deposit growth stable

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

3

NAB concedes APRA may hit dividends

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

5

NAB $6 billion

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

13

APRA moves to boost bank capital

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

14

More claims of CBA “spying”

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

5

Boys club closes on Son of Wallis

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

6

When banking tribes go to war!

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

3

Fitch: Mortgage delinquencies ease

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,

4

RMBS market surges back

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

26

RBA blows smoke for banks

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