The Aussie banks are very good companies. They are profitable, resilient, well capitalised, well managed, shareholder focused and have a very strong industry and regulatory structure. However, following the significant leveraging of the Australian & NZ households over the last thirty years they are now low growth and remain heavily exposed to housing, funding markets & unemployment risk. Read more
Commonwealth Bank of Australia, the nation’s biggest bank by market value, said first-half profit rose 19 per cent as fewer loans soured, reports Bloomberg. Net income in the six months to December 31 climbed to A$3.62bn from A$3.05bn a year earlier, beating the median estimate of seven analysts surveyed by Bloomberg News for profit of A$3.51bn. Chief executive Ian Narev, who took over from Ralph Norris in December, is among Australian bank chiefs battling the weakest demand for home loans since 1977. Rising wholesale funding costs, fueled by Europe’s debt woes, led Commonwealth Bank to boost its mortgage lending rate by 10 basis points this week, a move independent of the central bank, which kept borrowing costs unchanged last week.
There was a bit of a furore in Australia this month when the big banks looked like — shock, horror — they would not immediately pass on an official interest rate cut in full to their mortgage clients.
In the end, the big four banks eventually did pass on the 25bps cut to borrowers, but dropped big hints that they may not bow to public pressure in future. Read more
There might be some wiggling about liquidity but the worldwide work of getting banks ready for Basel III goes on. Though there’s been an interesting development in Australia recently.
Australian banks and other savings institutions were this week given some guidance on how they’ll be expected to meet Basel III capital requirements when the Australian Prudential Regulatory Authority (Apra) came out with a discussion paper (PDF) which suggested an accelerated timeline for adopting new rules. Read more
A data point for the Australian housing bubble debate.
Bank of America Merrill Lynch analysts have a great report questioning how Australian banks calculate mortgage approvals. It’s been picked up by Macro Business, Banking Day and Naked Capitalism. Read more
Fresh from Moody’s — a threat of bank downgrades Down Under (sorry).
The start of the rating agency’s statement: Read more
Australia’s centre-left Labor government has announced an overhaul of banking regulations aimed at boosting competition even as rising mortgage rates fuel a political backlash against the nation’s four big banks, reports the FT. Treasurer Wayne Swan on Sunday unveiled steps to inject a further A$4bn ($3.9bn) into securitisation markets and help smaller financial institutions better compete, among other measures. The move comes amid public anger after the top four banks – CBA, NAB, ANZ and Westpac – recently raised mortgage interest rates beyond increases in the central bank’s cash rate. The cornerstone of the measures require changes to the Banking Act to allow the issuing of covered bonds – on-balance sheet securitisation common in Europe. The WSJ adds that the moves fell short of public expectations of penalties for banks charging excessive interest on loans.
UK banks haven’t done much well this year, but they do at least know how to run a rights issue/placing with clawback. It is a different story down under.
Overnight, Commonwealth Bank of Australia was forced to scrap and then relaunch a $1.4bn fund raising after an amazing bust up with its lead adviser Merrill Lynch. Read more
Royal Bank of Scotland’s efforts to offload businesses suffered a setback on Wednesday when the UK banking group scrapped the sale of its operations in Australia and New Zealand after the last remaining bidder dropped out. Commonwealth Bank of Australia, the country’s biggest mortgage lender, blamed uncertainty in world financial markets as it withdrew from talks to buy the business. RBS had earmarked them for disposal as part of a programme designed to boost its capital reserves by £4bn.