K62 Finance

Iron, coal rebound to lift rates

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Original article by David Rogers, Barry FitzGerald
The Australian – Page: 19 & 22 : 29-Nov-16

Coal and iron ore are currently trading at prices that are significantly above the forecasts made in the Australian Government’s May 2016 Budget. Based on current prices, the nation’s export earnings in 2016 will be about $A80bn higher than in 2015. Tim Toohey of Goldman Sachs says this should be sufficient to avert the risk of Australia’s credit rating being downgraded. Financial markets believe that there is also now a better-than-even chance of an increase in the cash rate by the end of 2017.

CORPORATES
GOLDMAN SACHS AND PARTNERS AUSTRALIA PTY LTD, RESERVE BANK OF AUSTRALIA, AUSTRALIAN NATIONAL UNIVERSITY, BHP BILLITON LIMITED – ASX BHP, RIO TINTO LIMITED – ASX RIO, BLOOMBERG LP

Rally in local bank shares won’t last: CLSA

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Original article by David Rogers
The Australian – Page: 30 : 25-Nov-16

The share prices of Australia’s four major banks have risen by an average of nearly seven per cent since Donald Trump’s presidential election win. However, Brian Johnson of CLSA does not expect this to be sustained, noting that local and international banks are facing a number of headwinds. He adds that Australian bank stocks are expensive compared with their overseas peers, while their common-equity tier-one capital must be increased by some $A27bn.

CORPORATES
CLSA AUSTRALIA PTY LTD, AUSTRALIAN PRUDENTIAL REGULATION AUTHORITY, AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – ASX ANZ

Shares to feel the jolt as ‘bondcano’ fires up

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Original article by David Rogers
The Australian – Page: 31 : 17-Nov-16

The yield on 10-year Australian government bonds has retreated from a high of 2.74 per cent in the wake of Donald Trump’s presidential election win. The so-called "bondcano" has seen the yield on 10-year bonds rise by 51 per cent since August 2016, and Credit Suisse estimates that the recent sell-off is the 13th biggest since 1970. Hasan Tevfik of Credit Suisse expects bond yields to keep rising over the long-term, and identifies stocks such as Sydney Airport, APA Group and Healthscope as those most at risk from higher yields.

CORPORATES
CREDIT SUISSE (AUSTRALIA) LIMITED, SYDNEY AIRPORT – ASX SYD, APA GROUP – ASX APA, HEALTHSCOPE LIMITED – ASX HSO, ASX LIMITED – ASX ASX, BWP TRUST – ASX BWP, TELSTRA CORPORATION LIMITED – ASX TLS, WESTFIELD CORPORATION – ASX WFD, SCENTRE GROUP – ASX SCG, TRANSURBAN GROUP LIMITED – ASX TCL, STANDARD AND POOR’S ASX 200 INDEX, CROWN RESORTS LIMITED – ASX CWN, AUSNET SERVICES LIMITED – ASX AST, VICINITY CENTRES – ASX VCX, CHARTER HALL GROUP – ASX CHC, QANTAS AIRWAYS LIMITED – ASX QAN, NUFARM LIMITED – ASX NUF, MYER HOLDINGS LIMITED – ASX MYR, FORTESCUE METALS GROUP LIMITED – ASX FMG, LEND LEASE GROUP LIMITED – ASX LLC

Private equity buyers focused on health, leisure, tech assets

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Original article by Joyce Moullakis
The Australian Financial Review – Page: 16 : 14-Nov-16

A new report from law firm Minter Ellison notes that there has been an increase in deal-making activity by private equity firms. Sectors such as health, technology, leisure and child care are tipped to attract strong interest from buyout firms. However, Minter Ellison partner Glen Sauer says it is too soon to forecast the impact that Donald Trump’s presidency will have on the private equity sector’s investment in Australia.

CORPORATES
MINTER ELLISONJP MORGAN AUSTRALIA LIMITEDSAI GLOBAL LIMITED – ASX SAIBARING ASIA PRIVATE EQUITYGENESIS CARE PTY LTDMACQUARIE GROUP LIMITED – ASX MQGCHINA RESOURCES (HOLDINGS) LIMITEDKKR AND COMPANY LPCITIGROUP PTY LTDDEALOGIC (AUSTRALIA) PTY LTDDICK SMITH HOLDINGS LIMITEDSPOTLESS GROUP HOLDINGS LIMITED – ASX SPOESTIA HEALTH LIMITED – ASX EHEVITACO HOLDINGS LIMITED – ASX VITPATTIES FOODS LIMITEDSHANGHAI PHARMACEUTICAL HOLDING COMPANY LIMITEDPRIMAVERA CAPITAL GROUPPACIFIC EQUITY PARTNERS PTY LTD

Buck doesn’t stop with top execs

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Original article by Richard Gluyas
The Australian – Page: 25 : 11-Nov-16

When the CEOs of Australia’s four major banks appeared before an economics committee in October 2016 they revealed that no senior executives have been sacked over scandals that have plagued the sector. National Australia Bank has sacked 43 financial planners, while Westpac has sacked 139 of the 885 employees it has investigated for potential breaches of its code of conduct. Meanwhile, just 16 of the employees that have been dismissed by the Commonwealth Bank were executive managers.

CORPORATES
NATIONAL AUSTRALIA BANK LIMITED – ASX NAB, WESTPAC BANKING CORPORATION – ASX WBC, COMMONWEALTH BANK OF AUSTRALIA – ASX CBA, AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – ASX ANZ, COMMINSURE, AUSTRALIA. HOUSE OF REPRESENTATIVES STANDING COMMITTEE ON ECONOMICS, FINANCE AND PUBLIC ADMINISTRATION, LIBERAL PARTY OF AUSTRALIA

CBA pay revolt triggers first strike at AGM

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Original article by James Eyers, Julie-anne Sprague
The Australian Financial Review – Page: 2 : 10-Nov-16

At the Commonwealth Bank of Australia’s AGM in Perth on 9 November 2016, the bank received a "first strike" when 49 per cent of votes and proxies rejected the remuneration report. Shareholders objected to the introduction of performance measures that would be difficult to measure and quantify. The meeting was disrupted by environmentalists who chanted a slogan "Act on climate, CommBank can".

CORPORATES
COMMONWEALTH BANK OF AUSTRALIA – ASX CBA, INSTITUTIONAL SHAREHOLDER SERVICES INCORPORATED, AUSTRALIAN SHAREHOLDERS’ ASSOCIATION, AUSTRALIAN YOUTH CLIMATE CHANGE COALITION LIMITED

Banks stare at low growth as pressures rise

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Original article by James Eyers
The Australian Financial Review – Page: 15 & 19 : 9-Nov-16

The combined cash earnings of Australia’s four major banks fell by 2.5 per cent in 2015-6, to $A29.6bn. They recorded net interest income growth of 5.5 per cent, to $A60.3bn, but non-interest income was down 3.1 per cent at $A23.5bn. Michael Rowland of KPMG says the banks are facing a number of headwinds, including the prospect of lower growth in revenue and return on equity, growing competition and an increase in regulatory costs.

CORPORATES
KPMG AUSTRALIA PTY LTD, COMMONWEALTH BANK OF AUSTRALIA – ASX CBA, NATIONAL AUSTRALIA BANK LIMITED – ASX NAB, AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – ASX ANZ, WESTPAC BANKING CORPORATION – ASX WBC, PM CAPITAL LIMITED, ERNST AND YOUNG

Westpac returns hit by need to build capital

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Original article by James Eyers
The Australian Financial Review – Page: 11 & 15 : 8-Nov-16

Westpac has posted a 2015-16 cash profit of $A7.8bn. Its return on equity fell by 1.85 per cent to 14 per cent in the year to 30 September 2016, and its ROE target has been scaled back from 15 per cent to 13-14 per cent due to factors such as new capital requirements for the banking sector. PwC estimates that the combined ROE of the four major banks fell by 127 basis points to 13.75 per cent in 2015-16. Meanwhile, Westpac will seek to reduce its cost-to-income ratio from 42 per cent at present to less than 40 per cent

CORPORATES
WESTPAC BANKING CORPORATION – ASX WBC, PRICEWATERHOUSECOOPERS AUSTRALIA (INTERNATIONAL) PTY LTD, CITIGROUP PTY LTD, AUSTRALIAN PRUDENTIAL REGULATION AUTHORITY, BANK FOR INTERNATIONAL SETTLEMENTS. BASEL COMMITTEE ON BANKING SUPERVISION, KPMG AUSTRALIA PTY LTD, AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – ASX ANZ

ANZ shrinks to reduce rising risks

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Original article by James Eyers
The Australian Financial Review – Page: 1 : 4-Nov-16

The ANZ Bank has announced a fall of 18 per cent in cash profit to $A5.9 billion for 2015-16. Return on equity fell to 12.2 per cent, from 13.8 per cent a year ago. The cost to income ratio for the year declined to 44.8 per cent. ANZ CEO Shayne Elliott said the bank reduced its workforce by 3,600 jobs over the year to 30 September 2016. The stock rose 0.6 per cent to $A27.35 on 3 November 2016.

CORPORATES
AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – ASX ANZ

RBA likely to cut again but not in a hurry

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Original article by Jessica Sier
The Australian Financial Review – Page: 35 : 3-Nov-16

Financial markets now consider that there is an eight per cent chance that the Reserve Bank of Australia will reduce official interest rates in December 2016. However, there is now seen to be a 36 per cent change that rates will be cut by May 2017. Michael Blythe of the Commonwealth Bank anticipates another rate cut during the June quarter, while Paul Dales of Capital Economics says there is potential for the next change in monetary policy to be an increase in the cash rate.

CORPORATES
RESERVE BANK OF AUSTRALIA, COMMONWEALTH BANK OF AUSTRALIA – ASX CBA, CAPITAL ECONOMICS LIMITED