K: Financial and Insurance Services

Credit raters circle wagons around banks

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Original article by James Eyers, James Frost
The Australian Financial Review – Page: 11 & 14 : 10-Oct-19

Australia’s banks are under growing scrutiny over their failure to reduce their mortgage interest rates by 0.25 per cent in line with the latest official interest rate cut. However, S&P Global Ratings says banks’ profits and capital buffers may be adversely affected if they yield to political pressure and match the Reserve Bank’s rate cut. S&P adds that this could in turn prompt a review of the banking sector’s credit rating. Moody’s Investors Service and Fitch Ratings are also supportive of the banks’ decision to withhold part of the official interest rate cut.

CORPORATES
S&P GLOBAL RATINGS, MOODY’S INVESTORS SERVICE INCORPORATED, FITCH RATINGS LIMITED, RESERVE BANK OF AUSTRALIA, IBISWORLD PTY LTD, COPLEY FUND RESEARCH, AUSTRALIA. DEPT OF THE PRIME MINISTER AND CABINET

ANZ boss calls for QE summit

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Original article by Tony Boyd, Vesna Poljak
The Australian Financial Review – Page: 1 & 22 : 10-Oct-19

The growing prospect of negative interest rates and unconventional policy measures such as quantitative easing has prompted ANZ Bank CEO Shayne Elliott to propose holding a summit on the issue. He says it should include representatives from the major banks, regional banks, industry regulators, the Treasury and the Reserve Bank. Elliott says that amongst other things, the summit could discuss issues such as the broader economic implications of QE and the role of banks in the economy.

CORPORATES
AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – ASX ANZ, AUSTRALIA. DEPT OF THE TREASURY, RESERVE BANK OF AUSTRALIA, WESTPAC BANKING CORPORATION – ASX WBC, UNIVERSITY OF MELBOURNE. INSTITUTE OF APPLIED ECONOMIC AND SOCIAL RESEARCH, UNITED STATES. FEDERAL RESERVE BOARD, EUROPEAN CENTRAL BANK, BANK FOR INTERNATIONAL SETTLEMENTS

Evans warns of negative impact of rate cuts

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Original article by David Rogers
The Australian – Page: 27 : 10-Oct-19

Financial markets expect the cash rate to fall to 0.5 per cent by February, and market pricing suggests that there is more than a 50 per cent chance of further rate cuts by mid-2020. Westpac’s chief economist Bill Evans says the Reserve Bank should take note of declining consumer confidence when considering further rate cuts, and the "possible unintended consequences" of any move toward negative interest rates. The general consensus of economists is that fiscal policy would be more effective than unconventional monetary policy measures such as quantitative easing.

CORPORATES
WESTPAC BANKING CORPORATION – ASX WBC, RESERVE BANK OF AUSTRALIA, UNIVERSITY OF MELBOURNE. INSTITUTE OF APPLIED ECONOMIC AND SOCIAL RESEARCH, AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – ASX ANZ, ROY MORGAN LIMITED, NATIONAL AUSTRALIA BANK LIMITED – ASX NAB, GOLDMAN SACHS AUSTRALIA PTY LTD, COMMONWEALTH BANK OF AUSTRALIA – ASX CBA, AMP CAPITAL INVESTORS LIMITED

Super fee gap shrinking as retail funds catch up

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Original article by Joanna Mather
The Australian Financial Review – Page: 3 : 9-Oct-19

Data from Rainmaker shows that the superannuation industry’s fees fell by about four per cent in 2018-19, to $31.8bn. It was the first decline in fees since 2014, with retail super funds recording the biggest fall. Rainmaker notes that as a result, the traditional fee gap between retail and industry super funds has narrowed to almost zero. This is particularly so in the case of MySuper funds; the average fee for non-profit MySuper products is now 1.15 per cent, compared with an average of 1.17 per cent for retail MySuper products.

CORPORATES
RAINMAKER INFORMATION SERVICES PTY LTD

Strong economies need profitable banks, says Wilson

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Original article by James Frost, Vesna Poljak, Aleks Vickovich, Peter Ker
The Australian Financial Review – Page: 1 & 16 : 9-Oct-19

Wilson Asset Management chairman Geoff Wilson has rejected criticism of Australia’s major banks for failing to pass on the latest official interest rate cut in full. He contends that strong and profitable banks are essential for a strong economy, and he estimates that the sector’s earnings would be $4.5bn-$6bn lower if banks had reduced their mortgage interest rates by 0.75 per cent since June, in line with the Reserve Bank. Bendigo & Adelaide Bank chairman Robert Johanson has also dismissed claims by Prime Minister Scott Morrison that the banks are profiteering by withholding interest rate cuts.

CORPORATES
WILSON ASSET MANAGEMENT, BENDIGO AND ADELAIDE BANK LIMITED – ASX BEN, AUSTRALIA. DEPT OF THE PRIME MINISTER AND CABINET, AUSTRALIAN FOUNDATION INVESTMENT COMPANY LIMITED – ASX AFI, COMMONWEALTH BANK OF AUSTRALIA – ASX CBA, AUSTRALIAN PRUDENTIAL REGULATION AUTHORITY, AUSTRALIAN LABOR PARTY

ANZ compo bill jumps to $1.2bn

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Original article by Joyce Moullakis
The Australian – Page: 21 : 9-Oct-19

The ANZ Bank has advised that its cash profit for the second half of 2018-19 will be marred by an after-tax charge of $559m due to increased provisions for customer-related remediation. ANZ has now announced a total of $1.22bn in after-tax compensation charges since 2017. Australia’s major banks have set aside a combined $7.6bn pre-tax to compensate customers, and Jarrod Martin of Credit Suisse expects this to increase. ANZ will release its financial results for the year to 30 September in late October.

CORPORATES
AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – ASX ANZ, CREDIT SUISSE (AUSTRALIA) LIMITED, NATIONAL AUSTRALIA BANK LIMITED – ASX NAB, WESTPAC BANKING CORPORATION – ASX WBC, MORGANS FINANCIAL LIMITED, CITIGROUP PTY LTD

QE would kill finance and capitalism, McKibbin warns

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Original article by John Kehoe
The Australian Financial Review – Page: 6 : 9-Oct-19

Former Reserve Bank board member Warwick McKibbin has cautioned against any move to reduce implement quantitative easing in Australia. He argues that unconventional monetary policy in Europe is merely propping up financially unsustainable businesses while restricting access to capital for new businesses. He adds that reducing interest rates below a certain level merely distorts capital without providing any economic stimulus. Some economists expect the cash rate to fall to 0.5 per cent in coming months.

CORPORATES
RESERVE BANK OF AUSTRALIA, BANK FOR INTERNATIONAL SETTLEMENTS, AUSTRALIAN NATIONAL UNIVERSITY

More work to do for CBA boss

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Original article by Joyce Moullakis
The Australian – Page: 17 & 21 : 8-Oct-19

Commonwealth Bank of Australia CEO Matt Comyn is seeking feedback from customers about what it is doing right and areas in which it can improve. He has sent a letter to customers in which he concedes that CBA still has a lot of work to do to restore its reputation in the wake of a series of scandals. Comyn has also written to employees, stating that amongst other things, the bank must keep listening to customers, complete a remediation program and implement the recommendations of the Hayne royal commission. CBA will provide a live stream of its upcoming customer forum in Brisbane.

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

Banks face heat over loyalty tax

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Original article by Patrick Durkin, James Frost, Jonathan Shapiro
The Australian Financial Review – Page: 1 & 2 : 7-Oct-19

Australian Competition & Consumer Commission chairman Rod Sims has suggested that the nation’s banks are trying to "dud" their loyal customers. Sims, who is hoping Treasurer Josh Frydenberg will grant the ACCC’s request to conduct an inquiry into the competitive strength of the big banks, was commenting on the gap between mortgage interest rates offered to new borrowers and those offered to existing customers; the gap is generally half a percentage point. The banks have argued in private that it is not possible to offer the same competitive rates to all borrowers.

CORPORATES
AUSTRALIAN COMPETITION AND CONSUMER COMMISSION, AUSTRALIA. DEPT OF THE TREASURY, AUSTRALIAN LABOR PARTY, AUSTRALIAN BANKING ASSOCIATION, RESERVE BANK OF AUSTRALIA, EVANS AND PARTNERS PTY LTD, MACQUARIE GROUP LIMITED – ASX MQG, DELOITTE TOUCHE TOHMATSU LIMITED

Savers do it tough as banks hold off cuts

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Original article by Jonathan Shapiro, Aleks Vickovich, Jemima Whyte
The Australian Financial Review – Page: 4 : 4-Oct-19

People who rely on interest income from their savings have been hard hit by the Reserve Bank of Australia’s aggressive monetary policy easing. Canstar notes that banks’ 12-month deposit rates have traditionally been about one per cent higher than the cash rate, but this has narrowed to 0.64 per cent. Term deposit rates and online savings account rates have both fallen sharply since the first of three official interest rate cuts in June, and Canstar’s Steve Mickenbecker says there is little scope for further reductions.

CORPORATES
RESERVE BANK OF AUSTRALIA, CANSTAR PTY LTD, UNIVERSITY OF TECHNOLOGY, SYDNEY, AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – ASX ANZ, BANK OF QUEENSLAND LIMITED – ASX BOQ, SUNCORP BANK, MACQUARIE GROUP LIMITED – ASX MQG