K: Financial and Insurance Services

Fundies blast AMP over $3.4b fire sale

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Original article by James Frost
The Australian Financial Review – Page: 1 & 22 : 31-Oct-18

Allan Gray Australia and Merlon Capital Partners are among the institutional investors that have criticised AMP’s proposal to divest its life insurance business. They believe that the $3.4bn sale price undervalues the life business, and Merlon has flagged the possibility of seeking an extraordinary general meeting to challenge the deal. Merlon has written to AMP arguing that the deal demonstrates a "reckless disregard" for shareholders’ funds, while Simon Mawhinney of Allan Gray describes it as a "disastrous deal" for AMP’s shareholders.

CORPORATES
AMP LIMITED – ASX AMP, ALLAN GRAY AUSTRALIA PTY LTD, MERLON CAPITAL PARTNERS PTY LTD, MACQUARIE COUNTRYWIDE MANAGEMENT LIMITED, COMMONWEALTH BANK OF AUSTRALIA – ASX CBA, RESOLUTION LIFE GROUP LIMITED, AXA ASIA PACIFIC HOLDINGS LIMITED

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

Local rally defies Wall Street blues to signal correction may be over

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Original article by David Rogers
The Australian – Page: 28 : 31-Oct-18

The Australian sharemarket has posted strong gains in the last two trading sessions, reducing its loss for the month to 6.5 per cent. The local bourse has recovered from its recent 18-month low of 5,624 points, having peaked at 6,373 points in late August. Meanwhile, Tony Brennan of Citigroup notes that growth stocks were the biggest underperformers in the Australian market’s recent sell-off, although he adds that these stocks’ price-earnings multiples remain high.

CORPORATES
STANDARD AND POOR’S ASX 200 INDEX, CITIGROUP PTY LTD, SHANGHAI COMPOSITE INDEX, UNITED STATES. EXECUTIVE OFFICE OF THE PRESIDENT, NASDAQ COMPOSITE INDEX, STANDARD AND POOR’S 500 INDEX, DOW JONES INDUSTRIAL AVERAGE INDEX, MSCI WORLD INDEX, MSCI EMERGING MARKETS INDEX

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

AMP implodes as investors flee amid fund outflows

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Original article by Andrew White
The Australian – Page: 19 & 23 : 26-Oct-18

Wealth manager AMP has advised that its fund outflows totalled $1.5bn in the September quarter, compared with just $243m in the previous corresponding period. Acting CEO Mike Wilkins says lack of fund inflows is a bigger concern than the rise in outflows, adding that the problem is likely to persist until the financial services royal commission delivers its final report. AMP has also announced a $3.3bn deal to sell its life insurance business to Resolution Capital. AMP shares reached a record low on 25 October, reducing its market capitalisation by $2.3bn.

CORPORATES
AMP LIMITED – ASX AMP, AMP LIFE LIMITED, RESOLUTION CAPITAL LIMITED, AUSTRALIA. ROYAL COMMISSION INTO MISCONDUCT IN THE BANKING, SUPERANNUATION AND FINANCIAL SERVICES INDUSTRY, AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION, MACQUARIE GROUP LIMITED – ASX MQG

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

Super hit in $50bn plunge

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Original article by David Rogers, James Kirby
The Australian – Page: 1 & 2 : 26-Oct-18

The S&P/ASX 200 has shed almost seven per cent so far in 2018, including a fall of 10.8 per cent since August. The big sell-down on 25 October will impact on superannuation funds’ returns, with balanced funds having lost about 2.5 per cent so far in 2018-19. SuperRatings MD Jeff Bresnahan says most super fund members who have chosen the balanced option can expect the value of their super to fall by around four per cent in response to the sell-off.

CORPORATES
STANDARD AND POOR’S ASX 200 INDEX, SUPERRATINGS PTY LTD, DOW JONES INDUSTRIAL AVERAGE INDEX, NASDAQ COMPOSITE INDEX, NIKKEI 225 INDEX, SHANGHAI COMPOSITE INDEX, BELL POTTER SECURITIES LIMITED, AMP LIMITED – ASX AMP, NETFLIX INCORPORATED, FACEBOOK INCORPORATED, ALPHABET INCORPORATED, GOOGLE INCORPORATED, XERO LIMITED – ASX XRO, AFTERPAY TOUCH GROUP LIMITED – ASX APT, WISETECH GLOBAL LIMITED – ASX WTC, AUSTRALIA. FUTURE FUND MANAGEMENT AGENCY, CORELOGIC AUSTRALIA PTY LTD

$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