K: Financial and Insurance Services

Fed chair prepares ground for July rate cut

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Original article by Nick Timiraos
The Australian – Page: 27 : 12-Jul-19

Wall Street and the yield on 10-year US government bonds rose on 11 July after Federal Reserve chairman Jerome Powell indicated that the cash rate is likely to be reduced at the end of the month. Powell has told the US Congress that trade tensions and concerns about the global economy continue to weigh on the US economic outlook, while the inflation rate may remain weak for some time. Financial markets have priced in a rate of at least 25 basis points when the central bank meets on 30-31 July.

CORPORATES
UNITED STATES. FEDERAL RESERVE BOARD

Culture to cost big three banks $500m

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Original article by James Fernyhough, James Thomson
The Australian Financial Review – Page: 1 & 21 : 12-Jul-19

The Australian Prudential Regulation Authority has imposed additional capital requirements on Westpac, the ANZ Bank and National Australia Bank following its review of their culture, governance and accountability self-assessments. They will have to set aside an extra $500m of capital until their customer remediation programs are completed and they have addressed all of the issues that emerged in their self-assessments. The increased capital requirements will have a slight impact on the three banks’ common equity tier 1 capital ratios.

CORPORATES
WESTPAC BANKING CORPORATION – ASX WBC, AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – ASX ANZ, NATIONAL AUSTRALIA BANK LIMITED – ASX NAB, AUSTRALIAN PRUDENTIAL REGULATION AUTHORITY

Australian workers not saving enough to handle a job loss

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Original article by Killian Plastow
The New Daily – Page: Online : 11-Jul-19

Research by Finder shows that 5.9 million Australian workers have insufficient savings to support themselves for more than a month if they lost their job. The survey also found that 2.1 million Australians would be unable to financially support themselves for more than a week. Separate research by Roy Morgan shows that Australians have an average of six months’ worth of savings, although the median is about 0.8 months, or 24 days. CEO Michele Levine says people on low incomes would be hardest hit by a sudden job loss, as they are less likely to have savings.

CORPORATES
FINDER.COM.AU, ROY MORGAN LIMITED, AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION

Fels laments lack of bank competition

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Original article by Adam Creighton
The Australian – Page: 2 : 11-Jul-19

Former Australian Competition & Consumer Commission chairman Allan Fels has expressed concern about the four major banks’ domination of the nation’s home loans market. He says competition in Australia’s banking sector has declined substantially since the global financial crisis. He also notes that there is now very little difference between the "big four" banks and that it is relatively easy for them to co-ordinate their actions without breaching cartel laws.

CORPORATES
AUSTRALIAN COMPETITION AND CONSUMER COMMISSION, RESERVE BANK OF AUSTRALIA, ST GEORGE BANK LIMITED, BANKWEST, AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION, AUSTRALIAN PRUDENTIAL REGULATION AUTHORITY, AUSTRALIA. ROYAL COMMISSION INTO MISCONDUCT IN THE BANKING, SUPERANNUATION AND FINANCIAL SERVICES INDUSTRY

S&P upgrades outlook for big four banks

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Original article by Tim Boyd
The Australian Financial Review – Page: 19 : 11-Jul-19

The Australian Prudential Regulation Authority’s move to scale back its capital requirements for the banking sector has prompted S&P Global Ratings to upgrade its outlook for the nation’s four major banks from ‘negative’ to ‘stable’. The credit ratings agency has also upgraded Macquarie Bank’s outlook from ‘developing’ to ‘positive’. Meanwhile, S&P has indicated that a sharp correction in residential property prices is the biggest risk factor for Australian banks.

CORPORATES
S&P GLOBAL RATINGS, AUSTRALIAN PRUDENTIAL REGULATION AUTHORITY, MACQUARIE BANK LIMITED – ASX MBL, BELL POTTER SECURITIES LIMITED

APRA lowers capital targets for banks

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Original article by Jonathan Shapiro, James Fernyhough
The Australian Financial Review – Page: 19 : 10-Jul-19

The Australian Prudential Regulation Authority has scaled its near-term target for the amount of capital the nation’s banks will be required to hold. APRA had initially proposed that banks would have to increase their total capital by 4-5 percentage points by January 2024, but it has reduced this to three percentage points in response to industry feedback. However, it will require banks to meet the higher target in the longer-term.

CORPORATES
AUSTRALIAN PRUDENTIAL REGULATION AUTHORITY, COMMONWEALTH BANK OF AUSTRALIA – ASX CBA, WESTPAC BANKING CORPORATION – ASX WBC, MOODY’S INVESTORS SERVICE INCORPORATED

Big four in great rate cuts rip-off

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Original article by Adam Creighton, David Tanner
The Australian – Page: 1 & 6 : 10-Jul-19

The gap between the cash rate and the average variable mortgage interest rate of Australia’s major banks was consistently around 1.8 percentage points between 1997 and 2007. However, this gap has widened significantly since then, and the two consecutive official interest rate cuts has increased it to a 25-year high of 3.94 percentage points. The banks contend that factors such as rising funding costs, capital requirements and increased regulation mean it has become more difficult to move in tandem with the Reserve Bank.

CORPORATES
RESERVE BANK OF AUSTRALIA, WESTPAC BANKING CORPORATION – ASX WBC, AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – ASX ANZ, COMMONWEALTH BANK OF AUSTRALIA – ASX CBA, NATIONAL AUSTRALIA BANK LIMITED – ASX NAB, AUSTRALIA. PRODUCTIVITY COMMISSION, AUSTRALIAN PRUDENTIAL REGULATION AUTHORITY, AUSTRALIAN COMPETITION AND CONSUMER COMMISSION

Rate cuts push investors into risky territory

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Original article by David Rogers
The Australian – Page: 25 : 10-Jul-19

Australia’s benchmark S&P/ASX 200 recorded its third-biggest loss for 2019 on 8 July, after gaining two per cent in the previous week and about 25 per cent in the last six months. The rally in global sharemarkets during 2019 has been driven by central banks’ shift towards a monetary policy easing bias. The downturn in official interest rates is prompting more investors to embrace higher-risk asset classes, which in turn can increase market risk.

CORPORATES
STANDARD AND POOR’S ASX 200 INDEX, JP MORGAN AND COMPANY INCORPORATED, RESERVE BANK OF AUSTRALIA, UNITED STATES. FEDERAL RESERVE BOARD

Morgan Stanley puts cat among the pigeons

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Original article by David Rogers
The Australian – Page: 28 : 9-Jul-19

The S&P/ASX 200 recorded its third-biggest daily loss for 2019 on 8 July, after gaining two per cent in the previous week. Morgan Stanley’s move to downgrade its equity market recommendation from ‘equalweight’ to ‘underweight’ contributed to the pullback, and Andrew Sheets of Morgan Stanley says the investment bank’s global equity weight is now at its lowest since coverage began in 2014. Meanwhile, with the US earnings season set to begin shortly, Tobias Levkovich of Citigroup says consensus estimates for earnings in the June quarter could be too low.

CORPORATES
STANDARD AND POOR’S ASX 200 INDEX, MORGAN STANLEY AND COMPANY INCORPORATED, CITIGROUP INCORPORATED, STANDARD AND POOR’S 500 INDEX, RESERVE BANK OF AUSTRALIA, UNITED STATES. FEDERAL RESERVE BOARD, EUROPEAN CENTRAL BANK

Local staff to be hit hard in Deutsche cull

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Original article by Joyce Moullakis, Bridget Carter
The Australian – Page: 17 & 22 : 9-Jul-19

Deutsche Bank’s decision to close its global equity division will result in the loss of at least 50 jobs in Australia. The move will affect staff working in equities trading, sales, ­research and ­equity capital markets, while sources have indicated that jobs in its advisory operations will also be cut. Deutsche’s exit from equities trading is part of a broader restructuring which will result in the loss of 18,000 jobs worldwide. Restructuring costs are forecast to result in Deutsche posting a loss of EUR2.8bn for the second quarter.

CORPORATES
DEUTSCHE BANK AG, NOMURA AUSTRALIA LIMITED, CIMB SECURITIES INTERNATIONAL (AUSTRALIA) PTY LTD, COMMONWEALTH BANK OF AUSTRALIA – ASX CBA, CLSA AUSTRALIA PTY LTD, JEFFERIES AND COMPANY, WILSONS ADVISORY AND STOCKBROKING LIMITED, CRAIGS INVESTMENT PARTNERS LIMITED