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.


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


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,


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


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


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


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


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


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


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


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


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


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


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


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,


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


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


Banks to pay more for offshore debt

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: Dump boys club for bank inquiry

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


BoQ pleads for equalisation of bank capital rules

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


Australian non-banks looks to thwart RBNZ

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


RMBS safe from LMI downgrades

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


Son of Wallis takes shape

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


UK muscles up on bankster punishment

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


Term deposits going nowhere

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


Time to bring the regulators to account

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


Australian banks lobby against macroprudential

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


APRA slaps wrists as RBNZ pulls a revolver

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