K62 Finance

Bond guru sees US Treasury yields rising to 4pc

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Original article by David Rogers
The Australian – Page: 24 : 17-Oct-18

Data from Bloomberg shows that most market watchers expect the yield on US 10-year bonds to remain below 3.5 per cent until 2020, despite its recent spike to 3.26 per cent. However, Steve Miller of Grant Samuel Funds Management forecasts that the 10-year bond yield could potentially top four per cent in 2019. He cites factors such as the strength of the US economy, the prospect of further monetary policy tightening by the Federal Reserve and the fact that it is slated to wind back its bond holdings in coming years.

CORPORATES
GRANT SAMUEL FUNDS MANAGEMENT PTY LTD, BLOOMBERG LP, UNITED STATES. FEDERAL RESERVE BOARD, RESERVE BANK OF AUSTRALIA, BLACKROCK INCORPORATED

Big four in fees probe

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Original article by Ben Butler
The Australian – Page: 17 & 20 : 17-Oct-18

The four major banks will be a key focus of the Australian Securities & Investments Commission’s investigation into breaches of financial planning fee disclosure requirements under the Future of Financial Advice reforms. It is uncertain as to whether wealth manager AMP will also come under scrutiny by ASIC, which recently advised that it had received a "substantial" number of breach notices from various industry players.

CORPORATES
AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION, COMMONWEALTH BANK OF AUSTRALIA – ASX CBA, WESTPAC BANKING CORPORATION – ASX WBC, NATIONAL AUSTRALIA BANK LIMITED – ASX NAB, AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – ASX ANZ, AMP LIMITED – ASX AMP, COMMONWEALTH FINANCIAL PLANNING LIMITED, FINANCIAL WISDOM LIMITED, COUNT FINANCIAL LIMITED, COMMINSURE, RI ADVICE GROUP PTY LTD, MILLENNIUM 3 PTY LTD, IOOF HOLDINGS LIMITED – ASX IFL, ANZ FINANCIAL PLANNING

CBA on mission to discover if households are satisfied

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Original article by William McInnes
The Australian Financial Review – Page: 33 : 16-Oct-18

The Commonwealth Bank of Australia has developed a Household Satisfaction Index containing 11 components, including work-life balance, civic engagement and education. CBA chief economist Michael Blythe says the Index is something that the bank has been thinking about for a while. He says that while other "satisfaction" surveys are based on what people feel, the CBA’s is based on hard data. Its measurement began in September 2015 and Blythe says it showed an increase in household satisfaction until around mid-2016, and that it has since tracked sideways.

CORPORATES
COMMONWEALTH BANK OF AUSTRALIA – ASX CBA

AUD subdued on Friday after tumultuous week. AFEX Monday update – October 15, 2018

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It was a mixed week for the Australian dollar with turmoil in equity markets weighing heavily mid-week, but a recovery ensued enabling the AUD to settle back above 0.7100 at the close on Friday.

All appeared ok in the markets early in the week, but on Wednesday in the US investors quickly shifted into overdrive and ditched their equity holdings.  The appeal of risk-free bond yields at 7-year highs appeared the key catalyst.  With equities down over 3% in the session, currency traders flocked to the safe havens of the Japanese yen, Swiss franc and US dollar – leaving the risk-currencies like the AUD completely out of favour as traders rushed to the exits.

The Australian dollar fell from 0.7130 at 4.30pm on Wednesday to 0.7043 at 7.30am on Thursday, a 1.2% swing.  But as quickly as the sell-off happened, by 11.30pm Thursday night it had fully recovered and spent the remainder of the week grinding sideways to close at 0.7110.

The AUD also lost ground against the EUR.  For a while there on Thursday AUD/EUR touched its lowest level since August 2015 at 0.6112, a far cry from the 0.7300 level where it traded in February 2017.  It managed to bounce higher off the lows to close the week out at 0.6151.

It was a similar story for the AUD/GBP, where on Thursday it traded at the lowest level since June 2016 at 0.5335.  However it also managed a recovery, closing the week at 0.5404.

The week ahead is quite busy on the economic front.  In the US, retail sales lead the way on Monday night, followed by the Fed meeting minutes on Thursday night.  Throughout the week there are also a host of speeches by Fed members.  Locally we have the RBA publishing their meeting minutes on Tuesday, followed by employment data on Thursday.  In the UK, highlights include employment data on Tuesday, CPI on Wednesday and retail sales on Thursday.  In addition, the Brexit negotiations will be a key factor in how the sterling trades this week and US treasuries and the US/China trade tiff will be key determinants on how the USD trades.

Given the plethora of economic data and political events this week, no doubt we are in for another volatile week ahead in the currency markets.  Expected weekly trade ranges:

  • AUD/USD:  0.7040 – 0.7215.  Neutral bias
  • AUD/EUR:  0.6110 – 0.6180.  Neutral bias
  • AUD/GBP:  0.5330 – 0.5520.  Bullish bias

I’m expecting the sterling to be the key trade this week.  Given Brexit negotiations appear to have missed the deadline for the EU’s October meeting, there could be some negativity towards the GBP as a result.  This could help AUD/GBP recover in the short-term.

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

CBA abusing the law fighting customers: Labor

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Original article by James Eyers
The Australian Financial Review – Page: 19 : 12-Oct-18

Commonwealth Bank of Australia CEO Matt Comyn appeared before the House of Representatives economics committee on 11 October. He admitted that the misconduct exposed by the financial services royal commission had hurt some customers, and said CBA is changing its organisational culture in the wake of the scandals that have rocked the bank. Labor MP Clare O’Neil criticised CBA’s approach to dealing with customers’ complaints, including the use of aggressive litigation tactics.

CORPORATES
COMMONWEALTH BANK OF AUSTRALIA – ASX CBA, AUSTRALIA. HOUSE OF REPRESENTATIVES STANDING COMMITTEE ON ECONOMICS, AUSTRALIAN LABOR PARTY, AUSTRALIA. ROYAL COMMISSION INTO MISCONDUCT IN THE BANKING, SUPERANNUATION AND FINANCIAL SERVICES INDUSTRY, LIBERAL PARTY OF AUSTRALIA

CBA faces first suit over low returns

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Original article by Michael Roddan
The Australian – Page: 21 : 11-Oct-18

The Commonwealth Bank of Australia has indicated that it will "vigorously" defend a class action launched by Slater & Gordon. The law firm contents that wealth manager Colonial First State had invested its superannuation clients’ money in CBA-owned funds that had very low returns, when it could have invested the money in higher-returning funds controlled by CBA or other banks. Other banks and financial institutions have also been targeted by class action lawyers in the wake of the financial services royal commission.

CORPORATES
COMMONWEALTH BANK OF AUSTRALIA – ASX CBA, COLONIAL FIRST STATE GROUP LIMITED, SLATER AND GORDON LIMITED – ASX SGH, AUSTRALIA. ROYAL COMMISSION INTO MISCONDUCT IN THE BANKING, SUPERANNUATION AND FINANCIAL SERVICES INDUSTRY, AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION, AUSTRALIAN PRUDENTIAL REGULATION AUTHORITY, COMMONWEALTH FINANCIAL PLANNING LIMITED, BW FINANCIAL ADVICE, NATIONAL AUSTRALIA BANK LIMITED – ASX NAB, MLC LIMITED, AMP LIMITED – ASX AMP, MAURICE BLACKBURN PTY LTD

Bank CEOs to face off with fired-up MPs

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Original article by James Frost
The Australian Financial Review – Page: 17 : 11-Oct-18

Liberal MP Tim Wilson, who chairs federal parliament’s standing committee on economics, says bank CEOs can expect to face a grilling when they front the committee in coming days. He says that amongst other things, the committee will be demanding information on how the major banks intend to address governance concerns and compensate customers for misconduct. Commonwealth Bank CEO Matt Comyn and Westpac CEO Brian Hartzer will appear before the committee on 11 October.

CORPORATES
AUSTRALIA. HOUSE OF REPRESENTATIVES STANDING COMMITTEE ON ECONOMICS, LIBERAL PARTY OF AUSTRALIA, COMMONWEALTH BANK OF AUSTRALIA – ASX CBA, WESTPAC BANKING CORPORATION – ASX WBC, AUSTRALIA. ROYAL COMMISSION INTO MISCONDUCT IN THE BANKING, SUPERANNUATION AND FINANCIAL SERVICES INDUSTRY, AMP LIMITED – ASX AMP, NATIONAL AUSTRALIA BANK LIMITED – ASX NAB, AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION, AUSTRALIAN LABOR PARTY, AUSTRALIAN BANKING ASSOCIATION, AUSTRALIAN COMPETITION AND CONSUMER COMMISSION, AUSTRALIAN GREENS, AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – ASX ANZ

Banks to end charging dead, conflicted fees

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Original article by James Frost
The Australian Financial Review – Page: 13 & 17 : 10-Oct-18

The Australian Banking Association has proposed a number of changes to the banking code of practice in response to the misconduct exposed by the financial services royal commission. Amongst other things, banks have agreed to take action to ensure that they do not continue to charge fees after a customer has died, while the banks will ensure that they do not charge fees for services that are not provided or are not needed by a customer. The ABA and its members will also lobby for the complete abolition of trailing commissions for financial advice.

CORPORATES
AUSTRALIAN BANKING ASSOCIATION, AUSTRALIA. ROYAL COMMISSION INTO MISCONDUCT IN THE BANKING, SUPERANNUATION AND FINANCIAL SERVICES INDUSTRY, AMP LIMITED – ASX AMP, AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – ASX ANZ, COMMONWEALTH BANK OF AUSTRALIA – ASX CBA, NATIONAL AUSTRALIA BANK LIMITED – ASX NAB, WESTPAC BANKING CORPORATION – ASX WBC, MACQUARIE PRIVATE WEALTH MANAGEMENT PTY LTD, CLSA AUSTRALIA PTY LTD, COMMONWEALTH FINANCIAL PLANNING LIMITED, COUNT FINANCIAL LIMITED, FINANCIAL WISDOM LIMITED, COLONIAL FIRST STATE GLOBAL ASSET MANAGEMENT

Banks tumble over advice compo fears

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Original article by Michael Roddan
The Australian – Page: 17 & 20 : 9-Oct-18

The ANZ Bank has advised that its full-year accounts for 2017-18 will include charges totalling $739m in the second half. Amongst other things, ANZ has advised of $374m in charges to compensate customers who paid fees for services they had not received, while its costs associated with the financial services royal commission are expected to total $55m. The major banks will shortly come under scrutiny by the House of Representatives economics committee for the first time since the inquiry began.

CORPORATES
AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – ASX ANZ, AUSTRALIA. ROYAL COMMISSION INTO MISCONDUCT IN THE BANKING, SUPERANNUATION AND FINANCIAL SERVICES INDUSTRY, AUSTRALIA. HOUSE OF REPRESENTATIVES STANDING COMMITTEE ON ECONOMICS, WESTPAC BANKING CORPORATION – ASX WBC, AMP LIMITED – ASX AMP, AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION, COMMONWEALTH BANK OF AUSTRALIA – ASX CBA, NATIONAL AUSTRALIA BANK LIMITED – ASX NAB, UBS HOLDINGS PTY LTD, LIBERAL PARTY OF AUSTRALIA, STANDARD AND POOR’S FINANCIAL SERVICES LLC, MLC LIMITED, MAURICE BLACKBURN PTY LTD, SLATER AND GORDON LIMITED – ASX SGH

Banks urged to slash branches to offset rising costs

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Original article by Richard Gluyas
The Australian – Page: 19 : 8-Oct-18

Morgan Stanley argues that Australia’s major banks could generate significant savings by closing bank branches and placing greater emphasis on mobile banking. This is one of four scenarios outlined in a new report; however, Morgan Stanley notes that banks are unlikely to significantly reduce the cost of their networks in the next year, given that the sector is under scrutiny at present. Morgan Stanley adds that the major banks could potentially generate large savings by reviewing their multibrand strategies.

CORPORATES
MORGAN STANLEY AUSTRALIA LIMITED, WESTPAC BANKING CORPORATION – ASX WBC, COMMONWEALTH BANK OF AUSTRALIA – ASX CBA, AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – ASX ANZ