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 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
Mac Bank offers an alternative view of the CBA result: CBA ‘s FY13 result came in a little better than expectations at $7.8bn vs MRE$A7.7bn (consensus – $A7.6bn). Majority of the beat was on impairment (17bp vs. our expectation of 23bp) which was driven by a better outcome in BankWest where there were some provision releases, despite 90 days past due
Commonwealth Bank is out with its annual profit result and has everyone buzzing. Here is BBY: CBA had so much expected of it in this result and it largely delivered: 1. Income growth was 7% from FY12 to FY13 but a more modest 2.5% from 1H13 to 2H13; 2. This was achieved through an increase in NIM
APRA yesterday released its new criteria guidelines for access to the RBA’s Committed Liquidity Facility (CLF), which is designed as the fall back for banks should the global financial system ever seize again. Other nations are forcing banks to hold a prescribed portion of liquid assest in the form of government bonds. The shortage of
By Leith van Onselen Speaking at the Westpac business lunch yesterday, the chief of Westpac Bank, Gail Kelly, urged businesses to brace for a prolonged period of sluggish growth, low interest rates, and ongoing consumer caution. From the AFR: “We’ve got to get used to this, it’s going to be this arena [low growth, low
Deputy Governor of the RBA, Guy Debelle, gave a good speech last night that sensibly provided support for Australia to adopt the structures of global financial re-regulation: The BIS Committee on Global Financial Stability, on which I sit, has published some work on that recently, but there is more to be done. This is just
By Leith van Onselen Despite all of the bleating over the Rudd Government’s proposal to implement a modest levy on deposits to cover the cost of any future bank bailout, an analysis by NAB’s head of fixed income and credit, Michael Bush, has shown that the funds raised would not even cover the costs of
J.P. Morgan has a useful note this morning on the impact of the proposed bank levy: Who Wins and Loses? The introduction of the FCS was intended to ‘level the playing field’ to allow all ADIs to have insured deposits to remove ‘depositor bias’ toward larger financial institutions. However, ironically, the insurance fee relative to
There is the usual bleating from the lobby but for the most part Treasurer Chris Bowen’s new bank levy is being well received. Several serious commentators give it the tick of approval. Chris Joye claims it as his own: The political and economic ramifications of the move are interesting. For years I’ve been calling on
Here’s a quiet correction that’s been issued but not confessed by the AFR. Here the new bank levy story: The proposed levy would be between 0.05 per cent and 0.1 per cent. Presently, the government guarantees deposits up to $250,000 without charging the banks. Here’s the original: The proposed levy is between 0.5 per cent
John Kehoe at the AFR has a much better take than the initial reporting on the new bank deposit levy that appears to be coming: While Labor’s move looks like a blatant cash grab as it tries to fill a budget hole ahead of the federal election, there are reasonable economic grounds for charging banks
The AFR is reporting that the government is set to announce long overdue charges for backstopping banks: The Australian Financial Review has learned that the government’s economic statement, set to be released Friday, will contain a deposit insurance levy as recommended by the Council of Financial Regulators, which will raise funds to underwrite any Australian bank
APRA has released its monthly deposit statistics and growth has stabilised over two months now at around 0.7% month on month: Year on year we are flattish around 6%: And the trend line continues on up after stalling late last year:
Another interesting tidbit from Credit Suisse this morning. We all know that banks have been keeping more and more of the spread between the cash rate and mortgage rates over time. And that the likelihood of out-of-cycle interest rate cuts is virtually nil so that the power to maintain net interest margins is not eroded.
By Leith van Onselen From UBS today comes results from the latest semi-annual bank survey, which revealed that bank loan officers and CFOs expect loans to grow at only 2.2% over the next 12 months – significantly less than predicted in prior surveys: We were struck by the significantly more bearish outlook the CFOs and CROs
From the SMH: Victoria-based lender Gippsland Secured Investments has frozen $150 million of savings from mostly local investors, putting the future of savings among thousands of rural Victorians in doubt. The move represents the latest regional lender to come under strain following the collapse last year of Banksia Securities, another debenture house which put $660
A new note from Westpac makes it clear today that although interest rate cuts have so far failed to generate much economic return in traditionally sensitive sectors, they are at least reducing arrears at a good clip. This is good news. Any renewed downwards momentum in property prices will have to come from rising unemployment.
Former Future Fund chairman and CBA CEO David Murray has given everyone a post-GFC caning this afternoon: “Governments in Europe an the US have not faced up to structural reform and fiscal discipline as they should have and that’s raised the questions of what is the role of the central bank. If central banks think these [quantitative
The emerging debate about bank funding is heating up. The big splash by the Australian Centre for Financial Studies and its Funding the Future project has set things off but NAB wades in today: A senior National Australia Bank executive says global requirements to hold more capital mean banks may not have the funds needed
Citi asks the question today: How will bank dividends hold up during the Australian rebalancing? Their answer is positive. From our base case – which forecasts the sector delivering EPS growth of ~ 4% in FY14/FY15 — Our base case over the next two years assumes i) an economy in transition from the resource capex
Here is how Wikipedia defines rent-seeking: In public choice theory, rent-seeking is an attempt to obtain economic rent by manipulating the social or political environment in which economic activities occur, rather than by creating new wealth. One example is spending money on political lobbying in order to be given a share of wealth that has already been created. A famous example
The Australian picks up a useful story today on the move by the Bank of International Settlements on the use of internal risk weighting asset models to lower capital reserves. Long term readers will know that this is the dirty little secret at the heart of Australian banks’ ability to stretch their leverage. THE banks’
Noticed the following chart from Macquarie Equities today: That’s some relatively very expensive banks still, clearly not discounting any disruption in Australian economic re-balancing, which is pretty absurd.
Cross-posted from The Conversation In October 2008, at the height of the Global Financial Crisis (GFC), the federal government decided to guarantee bank deposits. The ‘financial claims scheme‘ (FCS), was an emergency measure to protect the banking system. Initially, deposits up to $1m at ‘authorised deposit-taking institutions’ (ADIs) were insured by the government at no
It’s never been formerly announced but it’s been commented on repeatedly by bankers that for the past few years APRA has insisted that major banks match new deposits to loans on a one-to-one basis. This move has helped shift bank liquidity profiles away from the wholesale funding dependence that has repeatedly caused funding cost spikes
APRA is out with its May Banking Statistics and deposit growth took a turn for the better in May, snapping its recent strong down trend. It was 0.7% on the month: And 7.3% on the year: The aggregate trend is looking less peaky too: I’m a bit surprised by this. I thought
If you want a lesson in why it is bad idea – a very bad idea – to offer government banking guarantees, such as those on offer in Australia, then you cannot go past the tapes recently revealed by the Independent in which executives at Ireland’s Irish Anglo bank joke as they plan their abuse
