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.


CBA disappoints

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”;


Fitch warns on bad loans over mining cliff

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


ANZ goes 27bps!

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


Citi: Regulatory risk rising for banks

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


Pascometer burns red on bank bubble

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


Bank boom and bust

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


Genworth mulls self harm

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


Australian deposit growth firms in March

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


ANZ delivers

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)


Moody’s downgrades QBE

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


RBA: Bank offshore borrowings won’t increase

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


Securitisers ready for more

From Banking Day today comes a glimpse of the future as the AOFM withdraws from the RMBS market: You might expect the financial services industry to argue that, long term, a market should be allowed to fail if it cannot support itself without government support, but there are a large number of industry participants who


Fitch: Mortgage arrears rise in December

The December 2102 quarter of Fitch’s Dinkum Index is out today: Fitch Ratings-Sydney-09 April 2013: Fitch Ratings says that mortgage performance in Australia deteriorated slightly in Q412, despite a low interest rate environment, stable house prices and living costs as well as low unemployment. The Dinkum Index, which records 30+ delinquencies in the Australian prime


Government drops support for RMBS market

By Leith van Onselen In September 2008, only days after the Collapse of Lehmann Brothers in the US (marking the beginning of the Global Financial Crisis), the Australian Treasurer, Wayne Swan, directed the Australian Office of Financial Management (AOFM), the Australian Treasury’s financing arm, to commence purchasing residential mortgage-backed securities (RMBS) from smaller (mostly non-bank)


APRA invites banks to expose their deepest secret

APRA released a discussion paper on Basel III reforms today and it included the following tid bit: In addition, APRA accepts that ADIs may wish to disclose further information on regulatory capital ratios. It therefore proposes to provide anaddendum that compares capital ratios under APRA’s requirements (after applying national discretions) and under Basel III rules


Bank West’s “catastrophic” expansion

The wild west of Australia’s pre-GFC banking expansion is on display today at Banking Day: HBOS Australia and Bankwest incurred lending losses over the four years to 2011 equal to more than one fifth of their loans, a review by a UK parliamentary committee into HBOS, the bank’s then owner, found. The UK committee released


How to fix the CLF

There’s been much recent discussion on MB and from contributors to this blog on the merits of the RBA’s conditional liquidity facility (“CLF”), as well as more broadly recently following a series of articles by Chris Joye at the AFR. I’d like to try and make clear the importance of the CLF and the interconnectedness


Swan appoints new APRA chairman as well

In a probable challenge to Joe Hockey, who I suspect has not been consulted, Wayne Swan has not just reappointed Glenn Stevens today but a new Chairman of APRA as well and several new positions at the RBA: Today I announce the reappointment of Mr Glenn Stevens as Governor of the Reserve Bank for a


What price bank liquidity?

By Leith van Onselen Early last month, the AFR’s Chris Joye wrote a timely article questioning the merits of, and processes around, the RBA’s Committed Liquidity Facility (CLF) for Australia’s banks: The Reserve Bank of Australia’s unique Committed Liquidity Facility – a little-known, taxpayer-backed “line of credit” to help banks overcome solvency crises – creates


Hockey deleveraging

Talking to the ABC this morning, incoming Treasurer Jo Hockey said: “I, like others, have taken advantage of the lower interest rates to try to pay down the principal. But I know, like everyone else, that that’s just a temporary feature.” Well, Joe, if you continue to pay your mortgage ahead of schedule it won’t be


Westpac still hot for deposits

After the RBA’s irresponsible exhortation to the banks to ramp up wholesale borrowing last week it is something a relief to see Westpac today declare that deposits will remain a key focus. From the AFR, according to senior executive Brian Hartzer: Mr Hartzer said on Tuesday that the bank was prioritising growing deposits and strengthening