BANKS AND BANKING – AUSTRALIA

Are Australia’s big four banks equipped for recession?

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Original article by Ian Verrender
abc.net.au – Page: Online : 4-May-20

The general expectation is that Australia’s major banks will ride out the coronavirus-induced economic downturn relatively unscathed. However, contrary to popular opinion, the nation’s financial system did not cope well with the global financial crisis; indeed, the federal government had to underwrite bank loans and guarantee deposits. Meanwhile, Australia’s banks now have significant exposure to the residential and commercial property sectors. With unemployment likely to reach double digits, there will be growing pressure on already heavily indebted households; demand for office space will also fall as more people become jobless or work from home permanently, which will in turn reduce commercial property values.

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Good news and bad debt

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Original article by Terry McCrann
Sunday Herald Sun – Page: 63 : 3-May-20

The advice from Australian Banking Association CEO Anna Bligh that "so far" more than 320,000 home loan borrowers and 170,000 businesses have had loan repayments deferred is a mix of ‘good’ news and ‘bad’ news. Clearly the numbers who need repayments deferred "will increase". Some "good news" for the government is Roy Morgan’s April estimate of Australia’s unemployed and under-employed, down 439,000 on the last 2 weeks in March – however, it only dropped because of the government’s JobKeeper scheme. If JobKeeper numbers were added to those who are unemployed and under-employed then "real joblessness" is probably around a third of the workforce, with not one person from the public sector ‘out-of-work’. Even with Australian banks proactively playing their part the post-virus reality is not going to be "a walk in the park" – assuming it is allowed!

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AUSTRALIAN BANKING ASSOCIATION, ROY MORGAN LIMITED

Prepare for drawn-out downturn

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Original article by Richard Gluyas
The Australian – Page: 13 & 17 : 1-May-20

The ANZ Bank has posted an interim cash profit of $1.41bn, which is 60 per cent lower than previously. The result was marred by impairment charges totalling $1.7bn, while a decision on its half-year dividend will be deferred until August due to uncertainty regarding the economic impact of the coronavirus pandemic. ANZ’s common equity tier one ratio has fallen to 10.8 per cent, compared with 11.5 per cent a year ago. Meanwhile, CEO Shayne Elliott says the Australian economy is unlikely to experience a V-shaped recovery.

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AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – ASX ANZ

Westpac braces for virus shock

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Original article by Joyce Moullakis
The Australian – Page: 17 & 21 : 29-Apr-20

Westpac has advised that its half-year accounts will include a pre-tax impairment charge of $2.24bn. This includes a $1.6bn provision for coronavirus-related loan losses. However, CEO Peter King says the bank is well-positioned to absorb an increase in loan losses, while Westpac does not expect the impairment charges to have much effect on its common equity tier-one capital ratio. Westpac is not expected to undertake a capital raising, having raised some $2.77bn from investors in November. Westpac will release its interim results on 4 May.

CORPORATES
WESTPAC BANKING CORPORATION – ASX WBC

Virus-plagued NAB seeks $3.5bn

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Original article by Richard Gluyas
The Australian – Page: 13 & 17 : 28-Apr-20

National Australia Bank has posted a 2019-20 interim net profit of $1.3bn, compared with $2.7bn previously. Loan impairments rose to $1.2bn due to a sharp increase in provisions due to the coronavirus, while NAB has reduced its interim dividend from $0.83 per share to just $0.30. NAB shares were suspended from trading on 27 April pending a $3.5bn capital raising, which comprises a $3bn institutional placement and a $500m share purchase plan. Meanwhile, NAB is bearish about the outlook for the economy and unemployment in the near-term.

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NATIONAL AUSTRALIA BANK LIMITED – ASX NAB

Greedy banks protect profits: ACCC

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Original article by Cliona O’Dowd, David Ross
The Australian – Page: 15 : 28-Apr-20

The Australian Competition & Consumer Commission has released the interim report of its Home Loan Price Inquiry. It has concluded that the nation’s four major banks failed to pass on the full 75 basis point reduction in the cash rate during 2019 in order to protect their profits. The ACCC also found that existing home loan customers tend to pay higher interest rates than new borrowers. Steve Mickenbecker of Canstar says it is a ‘lethargy tax’ rather than a ‘loyalty tax’, and the onus should be on existing customers to actively request a lower interest rate.

CORPORATES
AUSTRALIAN COMPETITION AND CONSUMER COMMISSION, CANSTAR PTY LTD

PM roasts banks over Covid fail

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Original article by Simon Benson, Rosie Lewis
The Australian – Page: 1 & 6 : 24-Apr-20

Australia’s four major banks will fast-track applications for bridging finance by companies that are struggling to pay their wages bills after Prime Minister Scott Morrison intervened. He has criticised the banks for taking too long to process such applications, with employers’ groups warning that some businesses have been forced to lay off employees while they wait to receive JobKeeper payments. tax commissioner Chris Jordan raised the issue with bank executives following a telephone conference with Morrison and Treasurer Josh Frydenberg.

CORPORATES
AUSTRALIA. DEPT OF THE PRIME MINISTER AND CABINET, AUSTRALIA. DEPT OF THE TREASURY, AUSTRALIAN TAXATION OFFICE, AUSTRALIAN RETAILERS ASSOCIATION, COUNCIL OF SMALL BUSINESS ORGANISATIONS OF AUSTRALIA LIMITED, RESTAURANT AND CATERING INDUSTRY ASSOCIATION OF AUSTRALIA INCORPORATED, COMMONWEALTH AGRICULTURAL BUREAU INTERNATIONAL, WESTPAC BANKING CORPORATION – ASX WBC, AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – ASX ANZ, NATIONAL AUSTRALIA BANK LIMITED – ASX NAB

CBA delays all SME repayments

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Original article by Max Maddison
The Australian – Page: 17 : 24-Apr-20

The Council of Small Business Organisations’ deputy chairman David Gandolfo has welcomed the Commonwealth Bank’s decision to defer loan repayments for many small business customers until the end of June. The loan deferral will automatically apply to small business accounts that have lending limits of less than $5m, although these customers can opt to continue making repayments. Business customers with loans of between $5m and $10m will be able to defer repayments for six months due to the impact of the pandemic.

CORPORATES
COMMONWEALTH BANK OF AUSTRALIA – ASX CBA, COUNCIL OF SMALL BUSINESS ORGANISATIONS OF AUSTRALIA LIMITED

NAB reveals $1.4bn writedowns

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Original article by Joyce Moullakis
The Australian – Page: 16 : 21-Apr-20

National Australia Bank has advised that its cash profit for the six months to 31 March will be marred by writedowns totalling $1.14bn. This includes a $188m provision for customer remediation and an impairment charge of $742m associated with its software capitalisation policy. Westpac recently warned that its half-year results will include some $1.43bn worth of write-downs. Meanwhile, analysts expect the major banks’ loan losses and dividend payouts to be a key focus for investors when their interim results are released.

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

Westpac flags $1.4b first-half hit, expects more to come

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Original article by James Frost
The Australian Financial Review – Page: 15 & 18 : 15-Apr-20

Westpac has advised that its financial accounts for the first half of fiscal 2020 will include provisions of $1,030m associated with Austrac’s money-laundering probe. Westpac will also increase its provisions for customer remediation and legal costs by $260m. The financial hit will reduce Westpac’s common equity tier 1 capital ratio by about 30 basis points, to 10.5 per cent. Dermot Ryan of AMP Capital expects Australian banks that report their half-year results in May to slash their dividend payouts.

CORPORATES
WESTPAC BANKING CORPORATION – ASX WBC, AMP CAPITAL INVESTORS LIMITED