Max Walsh is a considered commentator but I have to disagree with him today. He writes in the AFR: Post GFC many central banks and prudential regulators have widened their macroprudential arsenals beyond the interest rate weapon of monetary policy (MoP). Macroprudential tools are not new, and they have had a mixed record in the
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 crowded financial sector looks set to get two new entrants – in the form of the supermarket duopoly behemoths of Coles and Woolworths. From Fairfax: On Monday the supermarket group claimed the alliance with Visa and Macquarie Bank would ”set a new benchmark” for retailer credit cards, as it transfers its Woolworths
How long is the memory of a nation? Six years it seems. From the AFR: …the nation’s lenders have raised more than two-thirds of a combined $51 billion of funding in the offshore markets so far in 2014, according to Thomson Reuters. At the same point in 2013, the banks had raised just $35 billion, of which just
By Leith van Onselen The AFR is reporting this afternoon that the ECB’s decision to charge European banks negative interest rates for funds deposited with the central bank will likely lower Australian banks’ wholesale funding costs and potentially reduce mortgage rates: …analysts believe Europe’s lenders will also be encouraged to invest in higher-returning assets overseas,
From the SMH blog: While standard variable mortgage rates have not moved since August last year when the Reserve Bank cut official rates, some borrowers have been able to get a better deal by securing a discount off the headline rate. The discounts are typically offered by banks as part of a package deal, and the
Australian banking is in a mad scramble to squeeze the last drop of juice from the massive mortgage lemon: Macquarie Group’s domestic mortgage book will almost double to $30 billion in two years, transforming the investment bank into one of most significant players in the market, and allowing it to nip at the heels of the
Nomura asks today if APRA can tighten the screws on the banks: The draft report from APRA released earlier this week is a timely reminder for banks, that lending standards must be maintained, particularly given the rise in house prices in the last year. Moreover, in light of annual wage growth sitting at record lows of 2.6%
Yesterday, by invitation, MacroBusiness presented a risk scenario at an internal Australian Prudential Regulatory Authority (APRA) conference. Called Headwinds for the Australian Economy and Financial System, the presentation is our assessment of the primary risk scenario confronting the Australian economy and its banks. The presentation is being made available to MB members in either PPT or PDF.
The Australian Prudential Regulatory Authority today (APRA) today declared that: APRA Chairman Dr John Laker says credit standards in residential mortgage lending have been a major focus of APRA’s prudential supervision of ADIs, particularly in the current environment of strong pricing pressures in some housing markets and very active competition between lenders. ‘In this environment,
From Banking Day: Under the revisions made to S&P’s bank rating methodology in late 2011, the major banks have a stand-alone credit profile (SACP) of ‘a’. To this, S&P applies two notches of rating uplift for a high likelihood of sovereign support for the banks, should they be in need. This results in the ‘AA-‘
CLSA’s Brian Johnson is the probably the best bank analyst in the country. His latest take is well worth your reading. Having sat through the recent Australian bank reporting season we sensed a potentially dangerous degree of “optimism in perpetuity” with management expecting loan losses to stay low and a seeming increase in regulatory capital
From Kevin Rudd’s witness statement yesterday, Rudd recalled the fateful post-Lehman weekend meeting of the Strategic Budget and Planning Committee of Cabinet: “Cabinet was informed that unless the Government moved immediately to provide a Government guarantee for every Australian’s bank account, there was a real prospect of a run on the banks, as had occurred
Here’s one to make the you lick your lips, from the AFR, the Genworth float is flying: According to sources, strong demand from international and domestic investors means Genworth’s US parent is unlikely to take advantage of a mechanism to buy back shares under a so-called greenshoe arrangement. The mortgage insurer issued 220 million share and reserved
Mac Bank on the CBA update: Overall, CBA reported a strong 3Q14 trading result of $2.2bn which was above consensus ($2.14bn) and in line with our forecast driven by improved impairment. Perhaps more pleasing was the quality of the top line, where trading profits normalised and margins were down only slightly, despite a 5% increase in
From Credit Suisse: Event: NAB reported (company defined) cash earnings of $3,150mn (up 9% on $2,903mn 1H13) which was in line with the $3,158mn Bloomberg consensus but 2% short of our $3,216mn estimate. Interim DPS of $0.99 (up 6% on $0.93 pcp) was in line with the Bloomberg consensus but $0.04 short of our estimate.
Looks like the RBA’s growth plan for the next three years has found an unwanted enemy. From Moody’s today: Moody’s Investors Service says that the recent appreciation in Australian house prices is not yet a concern for Australian banks but, if it persists at the current pace, could become credit negative within 12 months. “Australian
From Deutsche on another bumper bank profit: A strong result but in line after adjusting for one-offs and lower bad debts WBC delivered a strong 1H14 result, with cash earnings of $3,772m ~4% ahead of our forecast of $3,633m and Bloomberg consensus of $3,636m. Revenue growth was stronger than expected (partly due to higher performance
From Banking Day: Managing “public expectations of when and where governments will intervene” is emerging as one of the chief themes of the Financial System Inquiry. David Murray, chair of the inquiry, said yesterday: “the GFC shifted public expectations …. The question for us now is whether we are content to accept that shift.” He
From Credit Suisse: Event: ANZ reported (company defined) cash earnings of $3,515mn (up 11% on $3,179mn pcp) which was 1% better than our $3,495mn estimate and 2% better than the $3,437mn Bloomberg consensus average. Interim DPS of $0.83 (up 14% on the $0.73 pcp) was $0.03 better than our consensus estimate. Refer detailed financials attached.
From Citi: Share price strength sees the recommendations for WBC & NAB reduced — We are downgrading our recommendations for WBC to a Neutral and NAB to a Sell with no change in our TPs. Over the past 3 months, the sector has continued to outperform the broader market, with WBC being the standout performer.
By Leith van Onselen The Australian Finance Group (AFG) has released its Competition Index for March 2013, which revealed that major lenders continue to dominate mortgage lending, despite some recent market share gains by non-major lenders (see below tables). According to AFG: “Competition has been partly restored in the past two years, with non-major lenders
Over the weekend, Chris Joye responded to Terry McCrann’s impolitic attack of late last week and, in fairness, here it is from the AFR: Terry McCrann of the Herald Sun…had a panic attack when I questioned the hand that had fed him for so long. McCrann was once known as the “shadow governor” for reliably getting
Terry McCrann has booked a shocker today: OH dear. One of the Fin’s portfolio of — let’s be generous — idiosyncratic columnists, Christopher Joye, is at it again, pushing his loony line that all our banks, and indeed every bank in the world, is functionally insolvent. Now to most normal people, the very notion is
There are three articles around this morning aimed at the big banks and the Murray Inquiry. Opening us up is Chris Joye who slams everyone, quite rightly, but especially Ian MacFarlane: Consider, for example, how rapidly our “game-keepers” become “poachers”: the last two Reserve Bank of Australia governors, Ian Macfarlane and Bernie Fraser, and the
Cross-posted from The Conversation When long-time Kiwi expat John Clarke was asked why he left New Zealand, he said: “Because it was there.” Clarke at least knew what being “there” meant, in contrast to most of his new compatriots, whose interest in and knowledge of their ANZAC cobbers (or “bros”, as we would say) extends
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