K62 Finance

Greedy banks inhibit stimulus

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Original article by Michael Roddan
The Australian – Page: 17 & 21 : 23-Jul-19

Jonathan Mott of UBS has questioned whether the return on equity targets of Australia’s four major banks are "justifiable or sustainable". He argues that these targets could undermine the Reserve Bank’s efforts to stimulate the economy via interest rate cuts, as they reduce banks’ incentive to cut their own interest rates due to the impact on their net interest margins. The differential between the cash rate and banks’ lending rates has widened from less than two per cent prior to the global financial crisis to almost four per cent.

CORPORATES
UBS HOLDINGS PTY LTD, RESERVE BANK OF AUSTRALIA, WESTPAC BANKING CORPORATION – ASX WBC, COMMONWEALTH BANK OF AUSTRALIA – ASX CBA, AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – ASX ANZ, NATIONAL AUSTRALIA BANK LIMITED – ASX NAB, CANSTAR PTY LTD

Job data puts rate cut expectations on hold

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Original article by David Rogers
The Australian – Page: 27 : 19-Jul-19

The chances of an interest rate cut in August have lengthened following the release of data showing that Australia’s official unemployment rate was steady at 5.2 per cent in June. Analysis by Westpac suggests that financial markets are pricing in a 15 per cent chance of a rate cut in August, although the Reserve Bank is still widely tipped to ease monetary policy by the end of the year. The jobless rate rose from 5.19 per cent to 5.24 per cent in unrounded terms in June, while the underemployment rate fell to 8.2 per cent.

CORPORATES
RESERVE BANK OF AUSTRALIA, WESTPAC BANKING CORPORATION – ASX WBC, AMP CAPITAL INVESTORS LIMITED

APRA ordered to toughen up

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Original article by Michael Roddan
The Australian – Page: 17 & 21 : 17-Jul-19

A report has concluded that an overhaul of the Australian Prudential Regulation Authority’s internal culture and regulatory approach is needed. Former Australian Competition & Consumer Commission chairman Graeme Samuel headed the capability review, which was undertaken in the wake of the Hayne royal commission. APRA and the federal government have accepted all of the review’s recommendations, which include increased oversight of banks and superannuation funds.

CORPORATES
AUSTRALIAN PRUDENTIAL REGULATION AUTHORITY, AUSTRALIAN COMPETITION AND CONSUMER COMMISSION, AUSTRALIA. ROYAL COMMISSION INTO MISCONDUCT IN THE BANKING, SUPERANNUATION AND FINANCIAL SERVICES INDUSTRY, RESERVE BANK OF NEW ZEALAND, AUSTRALIA. DEPT OF THE TREASURY, AUSTRALIA. PRODUCTIVITY COMMISSION

RBA flags another rate cut if jobs market deteriorates

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Original article by David Rogers
The Australian – Page: 2 : 17-Jul-19

The Reserve Bank of Australia indicated in the minutes of its monthly board meeting that there is likely to be spare capacity in the labour market for some time, while jobs growth is likely to ‘moderate’. Labour market data for June will be released on 18 July, and the official unemployment rate is expected to be steady at 5.2 per cent. The employment and inflation outlook is likely to influence the timing of further interest rate cuts; some economists say the RBA may wait to gauge the impact of the cuts in June and July before further easing monetary policy.

CORPORATES
RESERVE BANK OF AUSTRALIA, WESTPAC BANKING CORPORATION – ASX WBC, UBS HOLDINGS PTY LTD

ANZ the first bank to loosen lending criteria

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Original article by Eric Johnston
The Australian – Page: 19 : 15-Jul-19

The ANZ Bank has advised that its ‘floor rate’ for home loan customers will be reduced from 7.25 per cent to 5.5 per cent in response to the Australian Prudential Regulation Authority’s recent reforms. ANZ will also increase its sensitivity margin to 2.5 per cent. Rival banks are expected to quickly follow ANZ in reducing their floor rates, which are used to assess a borrower’s ability to repay a loan.

CORPORATES
AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – ASX ANZ, AUSTRALIAN PRUDENTIAL REGULATION AUTHORITY, MORGAN STANLEY AUSTRALIA LIMITED

RBA could weigh cheap cash to banks if rates fall: analysts

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Original article by Jonathan Shapiro
The Australian Financial Review – Page: 17 : 15-Jul-19

Observers expect the Reserve Bank of Australia to cut the cash rate again by the end of 2019. However, analysts estimate that bank earnings would be reduced by seven per cent if they were to pass on the next interest rate cut in full, meaning only a partial cut in mortgage rates is likely. Credit Suisse has suggested that the RBA might offer cheap funding to banks that offer to pass on the next rate cut in full under a scheme similar to that adopted by the Bank of England after it cut interest rates following the Brexit vote in 2016.

CORPORATES
RESERVE BANK OF AUSTRALIA, CREDIT SUISSE (AUSTRALIA) LIMITED, BANK OF ENGLAND, NATIONAL AUSTRALIA BANK LIMITED – ASX NAB

Housing loan growth at decade low as squeeze hits

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Original article by Nick Lenaghan
The Australian Financial Review – Page: 7 : 12-Jul-19

Data from the Australian Bureau of Statistics shows that housing finance approvals declined by 2.4 per cent in May 2019 and 20.9 per cent in the year to May. Lending to owner occupiers was down 2.7 per cent in May and 18 per cent over the year, while lending to investors fell by 1.7 per cent and 27.8 per cent respectively. However, the monthly figures also show that there was 0.8 per cent growth in housing finance for owner-occupiers who were buying their first home.

CORPORATES
AUSTRALIAN BUREAU OF STATISTICS, DOMAIN HOLDINGS AUSTRALIA LIMITED – ASX DHA, AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – ASX ANZ, UBS HOLDINGS PTY LTD, AUSTRALIAN LABOR PARTY, WESTPAC BANKING CORPORATION – ASX WBC, COUNCIL OF FINANCIAL REGULATORS

Fed chair prepares ground for July rate cut

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Original article by Nick Timiraos
The Australian – Page: 27 : 12-Jul-19

Wall Street and the yield on 10-year US government bonds rose on 11 July after Federal Reserve chairman Jerome Powell indicated that the cash rate is likely to be reduced at the end of the month. Powell has told the US Congress that trade tensions and concerns about the global economy continue to weigh on the US economic outlook, while the inflation rate may remain weak for some time. Financial markets have priced in a rate of at least 25 basis points when the central bank meets on 30-31 July.

CORPORATES
UNITED STATES. FEDERAL RESERVE BOARD

Culture to cost big three banks $500m

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Original article by James Fernyhough, James Thomson
The Australian Financial Review – Page: 1 & 21 : 12-Jul-19

The Australian Prudential Regulation Authority has imposed additional capital requirements on Westpac, the ANZ Bank and National Australia Bank following its review of their culture, governance and accountability self-assessments. They will have to set aside an extra $500m of capital until their customer remediation programs are completed and they have addressed all of the issues that emerged in their self-assessments. The increased capital requirements will have a slight impact on the three banks’ common equity tier 1 capital ratios.

CORPORATES
WESTPAC BANKING CORPORATION – ASX WBC, AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – ASX ANZ, NATIONAL AUSTRALIA BANK LIMITED – ASX NAB, AUSTRALIAN PRUDENTIAL REGULATION AUTHORITY

Fels laments lack of bank competition

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Original article by Adam Creighton
The Australian – Page: 2 : 11-Jul-19

Former Australian Competition & Consumer Commission chairman Allan Fels has expressed concern about the four major banks’ domination of the nation’s home loans market. He says competition in Australia’s banking sector has declined substantially since the global financial crisis. He also notes that there is now very little difference between the "big four" banks and that it is relatively easy for them to co-ordinate their actions without breaching cartel laws.

CORPORATES
AUSTRALIAN COMPETITION AND CONSUMER COMMISSION, RESERVE BANK OF AUSTRALIA, ST GEORGE BANK LIMITED, BANKWEST, AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION, AUSTRALIAN PRUDENTIAL REGULATION AUTHORITY, AUSTRALIA. ROYAL COMMISSION INTO MISCONDUCT IN THE BANKING, SUPERANNUATION AND FINANCIAL SERVICES INDUSTRY