Via UBS. (Click to enlarge)
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
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.
What do you know – Australian banks punch way above their weight, according to new figures that show Australia’s four big retail banks and Macquarie, the investment bank, have raised a combined $82bn of government-guaranteed debt since October.
As the FT reports on Monday, the five banks accounted for more than 10 per cent of total global issuance of guaranteed debt since the collapse of Lehman Brothers, according to Dealogic – far more than their global position in terms of assets or capital. Read more
Bankers to Aviva have received first-round bids for the UK insurance group’s A$1bn ($778m) Australian life assurance business. The auction of Aviva’s Australian assets is now down to a handful of bidders, including some of Australia’s biggest banks. NAB and Westpac are bidding alongside other parties including insurers Axa Asia Pacific and Australia’s AMP. It is unclear whether a joint venture between ANZ bank and ING is still in the auction.
CBA, Westpac and ANZ raised $5.7bn this week selling stock and bonds to boost balance sheets dented by rising defaults, reports Bloomberg . CBA, the second-biggest bank by market value, offered government-backed debt as part of a A$1.25bn ($824m) bond sale Tuesday and said Wednesday that it would sell up to A$750m in stock to Merrill Lynch. Westpac, the biggest, sold A$2.5bn in stock at an 11% discount and $1.5bn of three-year 3.25% notes, sending its shares down by as much as 10% in Sydney. ANZ, the No. 4 bank, sold $1.25bn of three-year 3.2% bonds and $500m of two-year floating-rate notes. Australian financing costs declined for the first day in six as the money raised eased banks’ need to hoard cash to meet year-end funding requirements. Lex meanwhile notes the “new benchmark for banking conservatism” set by National Australia Bank and ANZ, where recent book-builds have raised tier one above 8%, and says raising money when a bank can, in an up-market, is “justifiable”.
Westpac, Australia’s second-largest bank, plans to raise A$2.5bn ($1.7bn) in a share sale, taking stock offerings by the nation’s four biggest lenders to more than A$10bn this year, reports Bloomberg. The sale to institutional investors will boost Westpac’s Tier 1 capital, a key measure of financial strength, by as much as 157bp to about 8.3%, the bank said Tuesday. The world’s biggest financial companies have raised almost $890bn since the global credit crisis began last year, squeezing debt markets and slowing economies. That is forcing lenders to bolster capital on expectations that bad loans and investment losses will rise further. Westpac, which completed the A$14bn takeover of St. George Bank last month, reported a 93% increase in bad debts last fiscal year after making loans to failed companies including Allco Finance and ABC Learning Centres.
Westpac, which has bid $17.6bn for St George Bank in the biggest banking takeover ever in Australia, is bracing for rival offers to emerge that could push the price tag even higher, reports Reuters. Westpac chairman Ted Evans told Australian television Sunday “never say never” when asked whether the bid would be raised. Soon after the interview, Westpac issued a statement saying it “reserves the right to review its offer if it considers that circumstances warrant this”. Westpac’s offer of 1.31 of its shares for every St George share was accepted by the St George board last week but speculation has been rife that another bank may start a bidding war.
Westpac, the Australian bank, brushed aside concerns that its proposed A$18.6bn ($17.4bn) offer for St George, its smaller rival, would run into difficulties with regulators. The all-paper deal unveiled on Tuesday between the two groups would create Australia’s largest bank by market value and its biggest mortgage and credit card provider. Gail Kelly, Westpac chief executive – who was until nine months ago chief executive of St George – said significant preliminary work had already been done on competition issues and that she was “very confident” the enlarged group would not be required to sell assets. Analysts dismissed the prospect of a counter bid, despite speculation, saying Westpac had offered a full price, and said it was unlikely the move would spark other banking mergers.
Deals “don’t get much more opportunistic than this”, says Lex of Monday’s news that Australia’s Westpac Banking Corporation is in talks to buy smaller domestic rival St George in a move that would create the country’s largest bank with a market value of about A$65bn ($61bn).
Even though it is being billed as a “merger”, it would also be the biggest takeover in Australian corporate history – and one of the most symbolic. Australia’s “four pillars” policy, which has long prevented mergers between its four top banks, has been a basic tenet of the country’s banking system – and a source of much frustration for acquisitive bankers. Read more
Australia’s Westpac Banking Corporation is in talks to buy smaller domestic rival St George in a move that would create the country’s largest bank with a market value of about A$65bn ($61bn). Trading in shares of both banks was suspended on Monday ahead of a further announcement, possibly within 24 hours. The proposed all-share deal, which could herald a wider shake-up in Australia’s financial services sector, would require the approval of a range of regulatory authorities as well as the federal treasurer. The Australian government has so far prevented mergers between the country’s four largest banks. However, St George, a former state building society, ranks fifth in the market.
Rams Home Loans, the Sydney-based mortgage lender badly hit by the US subprime crisis, on Tuesday effectively gave up on its efforts to get back on track, agreeing to sell the best parts of its business to Westpac. The Australian bank will buy the Rams’ brand and its franchise distribution business, including its branch network, for A$140m ($124m) in cash and will provide up to A$2bn in funding for new and existing mortgage lending. Rams, which only listed in Sydney in July, will continue to manage its A$14.5bn mortgage book and retain its listing. From Westpac’s point of view, says Lex, the deal looks smart and also offers something to Rams’ long-suffering shareholders, although it will take a “brave buyer” to assume the lender’s funding burden.
Westpac, one of Australia’s leading banks, is to hive off its investment management unit into a newly-listed business as part of its efforts to retain talent amid intense competition in fund management. BT Investment Management, Westpac’s boutique investment unit, has nearly A$40bn ($34bn) under management and is being spun out to form more incentives for top staff with equity in their own business. It has an expected value of A$800m-A$900m with Westpac retaining a majority stake in a float scheduled for later this year or early next.
KKR and General Electric have offered as much as A$1bn ($831m) to buy Australia’s RAMS Mortgage Corp, reports Bloomberg, citing people with knowledge of the matter. Westpac, Australia’s fourth-biggest bank, Macquarie Bank and Carlyle Group also made bids for the closely-held home lender. RAMS makes loans through branches and mortgage brokers.