K62 Finance

RBA signals majors near unquestionably strong threshold

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Original article by Adam Creighton
The Australian – Page: 19 & 28 : 31-Oct-18

The Reserve Bank’s assistant governor Michele Bullock has praised the success of measures aimed at increasing the capital ratios of Australian banks. She notes that the four major banks are close to achieving the Australian Prudential Regulation Authority’s "unquestionably strong" capital benchmark. The banks’ capital ratios have increased from eight per cent to 12 per cent since 2013, when measured on a risk-weighted basis. However, Bullock has warned that APRA’s measures may be undermined if the non-bank financial sector’s market share increases.

CORPORATES
RESERVE BANK OF AUSTRALIA, AUSTRALIAN PRUDENTIAL REGULATION AUTHORITY, BANK FOR INTERNATIONAL SETTLEMENTS. BASEL COMMITTEE ON BANKING SUPERVISION, LEHMAN BROTHERS INCORPORATED, BANK OF ENGLAND

Chairmen in hot seat at commission

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Original article by Richard Gluyas
The Australian – Page: 19 & 22 : 31-Oct-18

Remuneration in the banking sector will come under scrutiny during the financial services royal commission’s final round of public hearings, which commences on 19 November. There is also speculation that the chairs of some, if not all, of Australia’s four major banks will be asked to appear before the inquiry. The banks’ self-­assessments of their governance and culture are also expected to be on the royal commission’s agenda.

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

The big banks facing a full-year profit hit

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Original article by James Frost
The Australian Financial Review – Page: 17 : 29-Oct-18

The consensus of analysts is that the ANZ Bank will post a cash profit of $6.2bn for the year to 30 September, down from $6.9bn previously. National Australia Bank’s full-year cash profit is tipped to fall from $6.64bn to $5.47bn, but Westpac’s cash profit is forecast to rise from $8.06bn previously to $8.13bn. Factors such as customer remediation costs and falling net interest margins are expected to weigh on the earnings of the three big banks. The Commonwealth Bank’s cash profit for the year to 30 June fell by 4.7 per cent to $9.4bn.

CORPORATES
AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – ASX ANZ, NATIONAL AUSTRALIA BANK LIMITED – ASX NAB, WESTPAC BANKING CORPORATION – ASX WBC, COMMONWEALTH BANK OF AUSTRALIA – ASX CBA, UBS HOLDINGS PTY LTD, MORGAN STANLEY AUSTRALIA LIMITED, AUSTRALIA. ATTORNEY-GENERAL’S DEPT. AUSTRALIAN TRANSACTION REPORTS AND ANALYSIS CENTRE

Aussie trades at fresh 32-month lows before recovering post US GDP – AFEX Monday Update – October 29, 2018

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The AUD/USD chart resembled a roller coaster on Friday.  Initially the bears were in control, pushing new lows, however the bulls later gained the ascendancy in the US session helping the Aussie dollar recover from its initial losses and close the week relatively unchanged.

Earlier in the day the AUD hit fresh multi-year lows as risk-aversion swamped the markets.  Equities reversed early morning gains and currencies were swept up in the carnage.

The moves caught many off-guard due to the lack of volatility throughout the week.  Up until 2pm AEST on Friday the weekly range was a mere 72-points and tracking a similar weekly trade range to the week prior, which was the lowest weekly range since 2002.

However the weight of equity market turbulence took its toll, alongside a weakening Chinese yuan that touched it’s lowest level since January 2017.  This saw the AUD sell-off quite suddenly, pushing through the weekly lows at 0.7052 and quickly surpassing the monthly lows at 0.7040, taking out traders stop loss positions which exemplified the moves and test towards psychological support at 0.7000.

But after the release of US 3rd quarter GDP on Friday night the US dollar sold off across the board, enabling the Aussie to bounce off the low of 0.7021 and push all the way back above 0.7100 before closing the session at 0.7087.

Whilst the headline release of 3.5% growth versus 3.3% expected was quite strong, delving into the data traders saw that a considerable portion of growth came from increased inventories whilst exports declined, and thus took the position that the number was overstated and at risk of declining at the next read, and sold their USD holdings accordingly.

Looking ahead and the economic calendar is quite a lot busier than last week.  On Monday the US releases core PCE, the Fed’s preferred measure of inflation, followed by consumer confidence data on Tuesday.  This leads into Australian inflation data on Wednesday which is quickly followed by Chinese manufacturing and services data.  Later that night the US will publish quarterly wage price data, followed by Australian retail sales figures on Friday ahead of US employment numbers.

Given how close traders came to testing 0.7000 on Friday, any negativity in domestic data or strength in US data would likely see that figure tested again.  If it does break through 0.7000 the next key level of technical support coincides with the August 2015 low at 0.6907.  Thereafter and the January 2016 low of 0.6827 is the next key figure to watch.  Whilst the trajectory is for a lower AUD, a break back above 0.7160 could help the Aussie recover in the short-term, although I imagine any rallies will be met by sellers who appear in control at this time.  A sustained move towards 0.7300 could change this view, but the likelihood of this happening looks quite remote given current price action and most market participants still favour a lower AUD from here.

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

APRA examines enforcement failures after Hayne mauling

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Original article by John Kehoe
The Australian Financial Review – Page: 4 : 26-Oct-18

The Australian Prudential Regulation Authority has launched an internal review of its enforcement policies, following criticism from the banking royal commission. One issue that the review will look at is the use of court-imposed sanctions; the royal commission was very critical of APRA’s unwillingness to use this strategy as a tactic against financial institutions. APRA is also working with the Australian Securities & Investments Commission on the delineation of responsibilities between the two bodies, as well as increasing its scrutiny of the remuneration and incentive policies of financial institutions.

CORPORATES
AUSTRALIAN PRUDENTIAL REGULATION AUTHORITY, AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION, AUSTRALIA. ROYAL COMMISSION INTO MISCONDUCT IN THE BANKING, SUPERANNUATION AND FINANCIAL SERVICES INDUSTRY

$19b in property loans breach new rules

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Original article by Duncan Hughes
The Australian Financial Review – Page: 21 : 25-Oct-18

Analysis by the Australian Prudential Regulation Authority shows that mortgage lenders approved $19bn worth of loans in the year to September that do not meet their revised lending criteria. This is $9b higher than the previous year, with major lenders recording the biggest growth in such loans. Martin North of Digital Finance Analytics says it is a concern that banks are not complying with their own rules regarding the ability of customers to service their loans. APRA notes that the new rules allow lenders to take into account exceptional circumstances when assessing a home loan application.

CORPORATES
AUSTRALIAN PRUDENTIAL REGULATION AUTHORITY, DIGITAL FINANCE ANALYTICS, SUNCORP BANK, SUNCORP GROUP LIMITED – ASX SUN, AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION, AUSTRALIA. PRODUCTIVITY COMMISSION, AUSTRALIA. ROYAL COMMISSION INTO MISCONDUCT IN THE BANKING, SUPERANNUATION AND FINANCIAL SERVICES INDUSTRY

Whistleblower at Westpac calls out risks

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Original article by James Eyers, John Kehoe
The Australian Financial Review – Page: 8 : 22-Oct-18

An unnamed risk manager at Westpac has claimed that he was bullied and ignored after he voiced concerns about deficiencies in regard to a technology project. He has reported the matter to WorkSafe New South Wales and the Australian Prudential Regulation Authority. The risk manager says his performance reviews appeared to have suffered as a result of his raising concerns about the technology project, and that his treatment was evidence of a poor risk culture at Westpac.

CORPORATES
WESTPAC BANKING CORPORATION – ASX WBC, WORKSAFE NEW SOUTH WALES, AUSTRALIAN PRUDENTIAL REGULATION AUTHORITY, COMMONWEALTH BANK OF AUSTRALIA – ASX CBA, AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – ASX ANZ, NATIONAL AUSTRALIA BANK LIMITED – ASX NAB

‘Fluff and fail’: shameful report card for banks

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Original article by James Frost
The Australian Financial Review – Page: 19 : 19-Oct-18

Research by UK-based Lafferty Global has concluded that Australia’s major banks are underperforming their international peers when assessed using a range of qualitative and quantitative measures. The Commonwealth Bank had a rating of three stars out of five, while its three main rivals all had a two-star rating. Bendigo Bank and the Bank of Queensland also had three-star ratings. Lafferty Global founder Michael Lafferty says all of the "big four" banks had a zero rating for culture and digital dependability.

CORPORATES
COMMONWEALTH BANK OF AUSTRALIA – ASX CBA, WESTPAC BANKING CORPORATION – ASX WBC, AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – ASX ANZ, NATIONAL AUSTRALIA BANK LIMITED – ASX NAB, LAFFERTY GROUP LIMITED, BENDIGO BANK, BANK OF QUEENSLAND LIMITED – ASX BOQ

Satisfaction with banks declines during Finance Royal Commission – Big four hit hardest

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Original article by Roy Morgan
Market Research Update – Page: Online : 19-Oct-18

New results from Roy Morgan shows that bank customer satisfaction has declined from 81.2% in the six months to January 2018, prior to the Finance Royal Commission, to 78.5% in the six months to September 2018. This decline of 2.7% points was mainly due to a drop in satisfaction of 3.6% points (to 75.6%) for the big four banks, compared to an overall decline of only 0.7% points for all other banks (to 84.2%). Among the 10 largest consumer banks, Bendigo Bank has the highest satisfaction with 88.8%, followed by ING (88.0%) and Bank of Queensland (87.2%). The best of the big four is the CBA on 77.1%, followed by NAB (75.3%). The most positive movers in satisfaction ratings since the Royal Commission are ING (up 2.8%) and Bank of Queensland (up 1.4%). All of the big four banks have shown declines in satisfaction over the period, with Westpac showing the greatest decline, down by 5.0% to 72.9%. Roy Morgan’s "Customer Satisfaction-Consumer Banking in Australia September Report" is based on in-depth interviews conducted face-to-face with over 50,000 consumers per annum in their homes, including over 4,000 bank customers per month.

CORPORATES
ROY MORGAN LIMITED, BENDIGO BANK, ING BANK (AUSTRALIA) LIMITED, BANK OF QUEENSLAND LIMITED – ASX BOQ, COMMONWEALTH BANK OF AUSTRALIA – ASX CBA, NATIONAL AUSTRALIA BANK LIMITED – ASX NAB, WESTPAC BANKING CORPORATION – ASX WBC, AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – ASX ANZ

Payday lenders to face probe

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Original article by Michael Roddan
The Australian – Page: 21 : 18-Oct-18

The Senate will undertake an inquiry into payday lenders and short-term credit providers after the proposed probe was backed by the Greens and Centre Alliance. Payday lenders and so-called "buy now, pay later" credit providers were excluded from the financial services royal commission’s terms of reference. Shares in Afterpay Touch Group, Zip Co and Cash Converters fell sharply in response to news of the inquiry.

CORPORATES
AFTERPAY TOUCH GROUP LIMITED – ASX APT, ZIP CO LIMITED – ASX Z1P, CASH CONVERTERS INTERNATIONAL – ASX CCV, CREDIT CORP GROUP LIMITED – ASX CCP, AUSTRALIA. SENATE STANDING COMMITTEE ON ECONOMICS, AUSTRALIAN GREENS, CENTRE ALLIANCE, AUSTRALIA. ROYAL COMMISSION INTO MISCONDUCT IN THE BANKING, SUPERANNUATION AND FINANCIAL SERVICES INDUSTRY, THORN GROUP LIMITED – ASX TGA, RADIO RENTALS, NIMBLE PTY LTD, AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION, AUSTRALIAN LABOR PARTY