K: Financial and Insurance Services

‘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

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

Wipe-out on way as Telstra, big banks tank

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Original article by James Kirby
The Australian – Page: 24 : 17-Oct-18

The dividend yields of Australian stocks that were once regarded as bond proxies is testing seven per cent, while the dividend yield across the broader sharemarket has risen to 4.45 per cent. However, the share prices of former bond proxies such as Telstra and the major banks have fallen sharply, and the loss of sharemarket value may offset any dividend gains. An increasingly competitive telco market is weighing on Telstra, while the banks face a number of headwinds, including the prospect of increased regulation and the impact of the financial services royal commission.

CORPORATES
TELSTRA CORPORATION LIMITED – ASX TLS, 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, BENDIGO AND ADELAIDE BANK LIMITED – ASX BEN, BANK OF QUEENSLAND LIMITED – ASX BOQ, TPG TELECOM LIMITED – ASX TPM, VODAFONE AUSTRALIA LIMITED, BHP BILLITON LIMITED – ASX BHP, RIO TINTO LIMITED – ASX RIO, JB HI-FI LIMITED – ASX JBH, FINANCIAL OMBUDSMAN SERVICE LIMITED, RAMS HOME LOANS PTY LTD, SUNCORP GROUP LIMITED – ASX SUN, BANKWEST, BANK OF MELBOURNE LIMITED, HSBC AUSTRALIA HOLDINGS PTY LTD, LATITUDE FINANCIAL PARTNERS

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

Tech, financials in sea of red as world awaits US earnings

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Original article by David Rogers
The Australian – Page: 17 & 28 : 16-Oct-18

Bearish investor sentiment again weighed on Asian sharemarkets on 15 October, which followed the Australian bourse further into negative territory. Richard Coppleson of Bell Potter expects global markets to follow the historical trend for October, whereby sharp sell-offs are usually followed by a strong recovery in the final months of the year. However, he adds that the Australian sharemarket is unlikely to rebound strongly until there is evidence that Wall Street’s latest sell-off was merely a correction.

CORPORATES
BELL POTTER SECURITIES LIMITED, STANDARD AND POOR’S ASX 200 INDEX, HANG SENG INDEX, SHANGHAI COMPOSITE INDEX, NIKKEI 225 INDEX, JANUS HENDERSON GROUP PLC – ASX JHG, UNITED STATES. EXECUTIVE OFFICE OF THE PRESIDENT, JP MORGAN AND COMPANY INCORPORATED

Investors brace for another volatile week

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Original article by Perry Williams
The Australian – Page: 19 : 15-Oct-18

Futures pricing suggests that Australian equities will fall when the local sharemarket opens on 15 October. The S&P/ASX 200 shed 4.7 per cent in the previous week, despite a modest gain on 12 October, and Shane Oliver of AMP Capital says there is a high risk of a further correction in the short-term. The Dow Jones Industrial Average also clawed back some of its losses on 12 October, after shedding 1,300 points in the previous two trading sessions.

CORPORATES
STANDARD AND POOR’S ASX 200 INDEX, AMP CAPITAL INVESTORS LIMITED, DOW JONES INDUSTRIAL AVERAGE INDEX, UNITED STATES. FEDERAL RESERVE BOARD, UNITED STATES. EXECUTIVE OFFICE OF THE PRESIDENT, RESERVE BANK OF AUSTRALIA, TD SECURITIES, FARR, MILLER AND WASHINGTON LLC

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