K62 Finance

NAB chief warns: culture fix may be a decade away

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Original article by Joyce Moullakis
The Australian – Page: 2 : 27-Nov-18

National Australia Bank’s chairman Ken Henry has conceded that it could take up to 10 years to address issues with the bank’s culture that have been exposed by the financial services royal commission. He has told the inquiry that NAB has had the lowest compliance risk rating for all but one month in the seven years that he has been its board. Henry also said that it is more appropriate for the Australian Prudential Regulation Authority to have oversight of the banking sector’s culture than the Australian Securities & Investments Commission.

CORPORATES
NATIONAL AUSTRALIA BANK LIMITED – ASX NAB, AUSTRALIA. ROYAL COMMISSION INTO MISCONDUCT IN THE BANKING, SUPERANNUATION AND FINANCIAL SERVICES INDUSTRY, AUSTRALIAN PRUDENTIAL REGULATION AUTHORITY, AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION, COMMONWEALTH BANK OF AUSTRALIA – ASX CBA

No credit crunch: RBA blames investors for property slowdown

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Original article by Andrew White
The Australian – Page: 17 & 21 : 27-Nov-18

A regulatory crackdown on investor and interest-only property loans has seen growth in housing credit fall below five per cent in 2018, compared with around seven per cent in 2015. However, the Reserve Bank of Australia’s assistant governor Christopher Kent says high-quality borrowers can still gain access to credit at competitive rates. He notes that there appears to have been a larger fall in the average interest rate for investors than owner-occupiers in the last year.

CORPORATES
RESERVE BANK OF AUSTRALIA, AUSTRALIAN PRUDENTIAL REGULATION AUTHORITY, AUSTRALIA. DEPT OF THE TREASURY

Hayne to quiz NAB bosses on legal breaches

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Original article by James Frost
The Australian Financial Review – Page: 15 & 19 : 26-Nov-18

The final week of public hearings of the financial services royal commission will commence in Melbourne on 26 November. National Australia Bank CEO Andrew Thorburn and chairman Ken Henry are scheduled to appear, as are acting AMP CEO Mike Wilkins, ANZ CEO Shayne Elliott and Bendigo & Adelaide Bank chairman Robert Johanson. The appearance of Thorburn and Henry comes on the back of growing evidence that NAB has breached laws that could see it hit with criminal and civil penalties.

CORPORATES
NATIONAL AUSTRALIA BANK LIMITED – ASX NAB, AMP LIMITED – ASX AMP, AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – ASX ANZ, BENDIGO AND ADELAIDE BANK LIMITED – ASX BEN, COMMONWEALTH BANK OF AUSTRALIA – ASX CBA, AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION, AUSTRALIA. ROYAL COMMISSION INTO MISCONDUCT IN THE BANKING, SUPERANNUATION AND FINANCIAL SERVICES INDUSTRY

Satisfaction with banks declines further in October

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Original article by Roy Morgan
Market Research Update – Page: Online : 26-Nov-18

New results from Roy Morgan shows that customer satisfaction with Australia’s banks fell to 78.0% in the six months to October 2018, compared with 78.5% in the six months to September. Satisfaction with banks was 81.2% in the six months to January 2018, prior to the Finance Royal Commission. The decline of 3.2% since January has resulted in the lowest satisfaction with banks in seven years, although it remains above the long-term average and is much higher than the 58.7% recorded in 2001. Satisfaction with the four major banks has fallen to 75.0%, down from 79.2% in the six months to January. However, satisfaction among customers of other banks has declined by only 1% over the same period, leaving them with an overall customer satisfaction rating of 83.9%. Roy Morgan’s "Customer Satisfaction-Consumer Banking in Australia October Report" is based on in-depth interviews conducted face-to-face with over 50,000 consumers per annum in their homes.

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ROY MORGAN LIMITED

Moore claims Macquarie pay model is better than the majors

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Original article by Joyce Moullakis
The Australian – Page: 24 : 23-Nov-18

Macquarie Group CEO Nicholas Moore has told the banking royal commission that its remuneration model is superior to those used by Australia’s major banks. Moore said its model provides more accountability, and that profit share is more powerful than bonuses. Commenting on the issue of the commissions paid to mortgage brokers, Moore said he would be reluctant to see them abolish and replaced with a flat fee, as consumers might be reluctant to pay the latter.

CORPORATES
MACQUARIE GROUP LIMITED – ASX MQG, KPMG AUSTRALIA PTY LTD, AUSTRALIA. ROYAL COMMISSION INTO MISCONDUCT IN THE BANKING, SUPERANNUATION AND FINANCIAL SERVICES INDUSTRY

ASIC antithesis of tough attitude

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Original article by James Eyers, James Frost
The Australian Financial Review – Page: 14 : 23-Nov-18

Australian Securities & Investments Commission chairman James Shipton appeared before the royal commission on 22 November. He conceded that ASIC should have taken steps against National Australia Bank’s home loan "introducer" program some years ago. He was also queried about a July email in which it was suggested that NAB should only be required to make a "community benefit payment" as penalty for the program; Shipton stated that the views expressed in the email were not his.

CORPORATES
AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION, NATIONAL AUSTRALIA BANK LIMITED – ASX NAB, COMMONWEALTH BANK OF AUSTRALIA – ASX CBA, BT FINANCIAL GROUP PTY LTD, AUSTRALIA. ROYAL COMMISSION INTO MISCONDUCT IN THE BANKING, SUPERANNUATION AND FINANCIAL SERVICES INDUSTRY

We should have cut bonuses: CBA chair

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Original article by Joyce Moullakis
The Australian – Page: 2 : 22-Nov-18

The Commonwealth Bank of Australia’s executive remuneration came under scrutiny by the financial services royal commission on 21 November. CBA chair Catherine Livingstone has conceded that the bank failed to reduce or withhold bonuses in 2016, despite a series of compliance breaches. She also acknowledged that it might have been appropriate for CBA to note in its latest annual report that former chairman David Turner had declined the board’s request to repay 40 per cent of his directors’ fees as a result of the compliance breaches.

CORPORATES
COMMONWEALTH BANK OF AUSTRALIA – ASX CBA, AUSTRALIA. ROYAL COMMISSION INTO MISCONDUCT IN THE BANKING, SUPERANNUATION AND FINANCIAL SERVICES INDUSTRY

Challenge emerges to inflation target regime

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Original article by Vesna Poljak
The Australian Financial Review – Page: 27 : 22-Nov-18

The Bank of Canada has signalled that it will undertake a review of alternatives to its inflation target of two per cent. Options that the central bank will consider include increasing the inflation target, targeting aggregate prices or nominal income, and adding a full employment objective. The move may increase pressure on the Reserve Bank of Australia to reappraise its own inflation target of 2-3 per cent. Some economists have argued that the RBA’s inflation target is too high, although many advocate the status quo.

CORPORATES
BANK OF CANADA, RESERVE BANK OF AUSTRALIA, BETASHARES CAPITAL LIMITED, UNIVERSITY OF TECHNOLOGY, SYDNEY

CBA bosses share shame blame

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Original article by Joyce Moullakis
The Australian – Page: 19 & 23 : 21-Nov-18

Commonwealth Bank of Australia CEO Matt Comyn and chair Catherine Livingstone appeared before the financial services royal commission on 20 November. Comyn conceded that the bank should have been aware of its legal obligations regarding antimoney-laundering laws, while Livingstone said the CBA board had failed to act on audit reports which had raised concerns well below Austrac took legal action. Comyn also told the inquiry that predecessor Ian Narev had dismissed his concerns about the sale of so-called "junk" consumer insurance products.

CORPORATES
COMMONWEALTH BANK OF AUSTRALIA – ASX CBA, AUSTRALIA. ROYAL COMMISSION INTO MISCONDUCT IN THE BANKING, SUPERANNUATION AND FINANCIAL SERVICES INDUSTRY, AUSTRALIA. ATTORNEY-GENERAL’S DEPT. AUSTRALIAN TRANSACTION REPORTS AND ANALYSIS CENTRE, AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION, MORGAN STANLEY AUSTRALIA LIMITED

AUD surges to near 3-month high on trade war optimism – November 19, 2018

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The Australian dollar has reversed early session weakness to leap through technical resistance and trade above 0.7300 to the highest level since late-August.  The moves came after US President Donald Trump said he is optimistic about resolving the trade war with China ahead of his meeting with Chinese President Xi Jinping at the G20 meeting this month.  Whilst Trump was positive with his remarks, he also was quoted as saying “hopefully, we will make a deal, and if we don’t, we are doing very well just the way it is right now,” which suggests the onus is on China to meet Trump’s demands, or else the current tariffs will remain in place.

For now though the comments were enough to send the AUD surging higher, where it leapt from a session low of 0.7250 to touch 0.7337, before closing the week at 0.7330.  It was a good week for the Aussie, building off momentum generated from the US mid-terms and local employment data released by the ABS which showed continued growth in jobs added and the unemployment rate held steady at 5.00%.

This week the economic calendar is quite thin, with the RBA monetary policy meeting minutes and US core durable goods orders the highlights.  This could be the catalyst for a week of consolidation for the Aussie dollar in the absence of any major announcements.  Looking at the charts, there appears to be resistance at 0.7360 and 0.7380, representing trading highs in August.  If there is a break back below 0.7300, 0.7250 is the next key level of support.

The Australian dollar has also garnered support against the British pound, where on Friday it reached a 3-month high.  Political woes surrounding the UK’s exit from the European Union are weighing heavily on the pound, with PM Teresa May under extreme pressure from within her own party, with many of her colleagues criticising the handling of the divorce negotiations and there are rumours that a leadership challenge could be launched at any moment.

Economically speaking the sterling probably should be trading higher than it currently is, however all of this political uncertainty is preventing any sustained move higher.  Expect Brexit to dominate the headlines this week too whilst Teresa May tries to keep her party aligned and progress Brexit proceedings.

AUD/GBP closed the week at 0.5708, now up 6.5% from the October 11 low.  There appears to be resistance at 0.5750 followed by 0.5775, representing trading highs in June and August respectively.  Support starts at 0.5650 but given the wide trading range seen in recent time, it wouldn’t surprise if we see further moves beyond 0.5650 if the UK parliament can approve the Brexit divorce bill.

James King
Head of FX Dealing, AFEX
www.afex.com