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.
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
Chinese seven day repo markets have eased again today, to 6.5% at last count: Australia’s major banks, however, continue to see their CDS spreads rise, up to 132 bps yesterday, the highest since October last year. Updated And just to illustrate the perils of reporting dynamic markets, China 7-day repo is now at 10%.
From Banking Day: Bluestone is getting back into non-conforming lending five years after suspending new loans from its cornerstone product range. …Peter Wood, general manager of asset management for Bluestone, said the firm researched the market for more than a year to work out its options for resuming lending.”We found some niche pockets that were
From Banking Day: Sean Keane, of Triple T Consulting, wrote in his bulletin for Credit Suisse on Friday that “it has become very noticeable in recent days that the level of enquiry about the risk to Australian bank funding has substantially increased.” “Given the geographic dispersion of the source of these enquiries there is little
From Fitch just now: Fitch Ratings-Sydney-19 June 2013: Fitch’s Dinkum Index, which records 30+ days delinquencies in the Australian prime RMBS sector, remained largely stable in a low interest rate environment, with 30+ days arrears increasing by 2bp to 1.48%. Q113 saw 30-59 and 60-89 days arrears increase by 4 and 3bp respectively, while 90+
A couple of stories today raise questions about the possible transmission of a mining bust into bad loans for banks. At the AFR, the news is good: The head of business banking at National Australia Bank, Joseph Healy, says a slowdown in the mining sector is yet to trigger an increase in bad debts. Mr
By Leith van Onselen Macquarie bank has called an end to the Big Four Aussie banks’ yield driven rally following expectations that the US Federal Reserve will reduce its quantitative easing program. From Interest.co.nz: …with financial markets undergoing a shift as investors speculate on the Fed tapering off its QE programme, the Macquarie analysts note
From the AFR this morning comes a new headache for the major banks: Australia’s big banks are vigorously fighting a new regulation for derivatives proposed by international financial regulators that would add hundreds of millions of dollars to their funding costs and may lead to higher interest rates being passed on to consumer and business
The usually sound Jonathon Shapiro at the AFR, today does a royal gloss job on the history of Australian shadow banking: The term “shadow banking” is being uttered with increased frequency by politicians and central bankers as they sound warnings about the next big scourge on the stability of the financial system. Clearly, there’s a dark
From Moody’s this morning come news of a possible downgrade for Australian banks in what looks to be blow back from Europe and Cyprus in particular. While it does not have an immediate direct impact on bank creditors one wonders how long senior unsecured debt holders, who are subordinated to both deposits less than $250,000 and
By Leith van Onselen Last year, The Australian newspaper published some great articles questioning the commonly held view that Australia’s banking sector is conservative. In April 2012, The Australian uncovered how Australia’s largest banks were being forced to forgive mortgage debts of borrowers granted loans based on falsified or fraudulent information supplied by mortgage brokers.
APRA has released April deposit growth figures and we are seeing possible stabilisation at around the 7% year on year level, though the down trend is intact: Months on month is still trending down as well: And the aggregate growth rate leveling off: Still, at least growth did not show any adverse
By Leith van Onselen Late last year, the Reserve Bank of Australia (RBA) released a paper examining the macro-prudential policy actions by in 57 economies over the past 30 years against time series data on housing prices, rent, housing credit and interest rates. The paper found that macro-prudential policy tools, such as caps on loan-to-value
The Australian has an interesting snippet today: In recent weeks, global investors have been gradually repatriating funds from the local stockmarket as the dollar cools against the US dollar and Japanese yen, with the banks a key target after their 20 per cent outperformance against the broader market in the past year. A rally in
CBA is out with it quarterly update this morning and although the result is in line it is not glowing. From Credit Suisse: Cash earnings of circa $1.9bn (Credit Suisse 2H13E run-rate $1.914bn; consensus $1.900bn); Reported Profit circa $1.9bn Revenues: 1) CBA stated that trading income 3Q13 “was at a level consistent with the 1H13 run-rate”;
From Fitch: Recent results at the four big banks were strong, and such consistent earnings are one of the sector’s key rating strengths. Such earnings performance, together with surplus capital and conservative loan provisions, provide substantial buffers to absorb pressure on earnings in a modest downturn – which is already factored into our ratings. The operating
In a good piece at the AFR this morning, Chris Joye challenges the RBA’s current approach to monetary policy by comparing it with that of New Zealand: The RBNZ is actively selling Kiwis in the foreign exchange markets and buying foreign currency while refusing to cut its cash rate beyond the current 2.5 per cent level,
From our second RBA today comes the news that they’ve added on 2 basis points to the RBA cut: ANZ May 2013 Interest Rate Review – Reduces variable mortgage rate by 0.27%pa – ANZ today announced it will lower interest rates for variable rate mortgages by 0.27%pa following its monthly interest rate review. Effective Friday
By Leith van Onselen Fitch Ratings agency has today warned Australia’s banks that that they need to improve their funding mix if they are to meet Basel III liquidity requirements and retain their coveted AA- credit ratings: Fitch Ratings-Sydney/Singapore/London-09 May 2013: Australian banks need to continue to improve their funding mix to meet Basel III
It’s very much worth watching how the RBNZ’s new macroprudential policies roll out given the increasing likelihood that they’ll end up over here as well. Banking Day reports that the banks have begun their fight against the new regime: Economists said the changes would have only a small immediate effect on interest rates for high LVR
Oh yeh, now we’re getting somewhere. The early moves are starting to grasp that the MB agenda for rates cuts and macroprudential policy as solution for Australia’s looming economic ills has an implicit logic. Logic that can’t be denied forever. From Citi: RBNZ mortgage RWA adjustments highlight rising regulatory risk – the RBNZ today announced
Regular readers will know that the MB office has a red warning light on the ceiling for trade timing. Called the Pascometer, it is a remarkably useful gauge of when to sell out of an asset, just as Michael Pascoe tells you to buy. Today the Pascometer flashes red on the bank bubble (h/t The
There was more creepy coverage of banks at the AFR over the weekend. First was Matthew Stevens: The global financial crisis and the frightening structural risks and uncertainties it triggered appear to be over at last. Only three days after ANZ Banking Group lifted its dividend ratio, Westpac added shareholder-sating sparkle to its own increased interim
From the AFR: US-listed Genworth Financial is seeking “more evidence of a good IPO market” in Australia as the company continues to mull an $800 million partial float of its Australian operations. Chief executive Thomas McInerney told analysts that Genworth had not seen a lot of initial public offering activity in Australia. The local division’s
APRA has released its monthly banking statistics for March and growth improved slightly on the month to 0.6%, the best score this year: It is good to see life in the market despite the lure of rising asset prices. Still, the trend towards lower growth is well intact in the year on year chart at
At least that’s the verdict of Credit Suisse with the half year result today: Event: ANZ reported (company defined) cash earnings of $3,182mn (up 10% on $2,896mn 1H12) 2% short of our top of market $3,253mn estimate but 1% better than the $3,135mn consensus average. Interim DPS of $0.73 (up 11% on the $0.66 pcp)
From Moody’s today comes a not unexpected downgrade for QBE. The negative outlook is a bit more surprising: New York, April 21, 2013 — Moody’s Investors Service has downgraded the issuer and senior unsecured debt ratings of QBE Insurance Group Limited (QBE; QBE.AX) to Baa1 from A3. The action completes a review for downgrade initiated on
By Leith van Onselen The Q&A session of Tuesday’s speech by RBA Assistant Governor, Guy Debelle, contained an interesting tid-bit on bank offshore borrowings, which Debelle believes will not grow from their current level, and might even fall slightly, over the foreseeable future: Certainly, Debelle’s comments that bank offshore borrowings have peaked are backed-up by
