BANKS AND BANKING – AUSTRALIA

Banks rule OK on loan repayments as Westpac beats ASIC

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Original article by Andrew White
The Australian – Page: Online : 14-Aug-19

The Federal Court has dismissed claims by the Australian Securities & Investments Commission that Westpac had breached the responsible lending rules. ASIC’s case against Westpac had been closely observed by lenders, with the responsible lending rules being used by banks to determine a borrower’s ability to repay a loan. In rejecting ASIC’s case against Westpac, Justice Federal Court judge Nye Perram stated Westpac should not be automatically compelled to consider a borrower’s declared living expenses, and should be free to make use of spending benchmarks.

CORPORATES
FEDERAL COURT OF AUSTRALIA, AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION, WESTPAC BANKING CORPORATION – ASX WBC

Cheap money squeezes CBA

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Original article by James Eyers, Jonathan Shapiro
The Australian Financial Review – Page: 1 & 18 : 8-Aug-19

The Commonwealth Bank of Australia has posted a 2018-19 cash profit of $8.49bn, which is 4.7 per cent lower than previously; revenue was two per cent lower at $24.4bn. CEO Matt Comyn has warned that the bank’s net interest margin will fall by four basis points in 2019-20 due to the consecutive official interest rate cuts in June and July. He adds that there will be limited scope to pass on further rate cuts to customers, as many of its deposit rates are already close to zero. CBA’s cost-to-income ratio is currently 46.2 per cent, and Comyn says the aim is to reduce it to below 40 per cent over time.

CORPORATES
COMMONWEALTH BANK OF AUSTRALIA – ASX CBA, RESERVE BANK OF AUSTRALIA, JP MORGAN AUSTRALIA LIMITED, CITIGROUP PTY LTD, PM CAPITAL LIMITED, RESERVE BANK OF NEW ZEALAND

Big four lending at record low as competition bites

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Original article by Duncan Hughes
The Australian Financial Review – Page: 3 : 6-Aug-19

Analysis by Morgan Stanley suggests that smaller Australian banks and non-authorised deposit-taking institutions are enjoying stronger growth in mortgage lending than the nation’s four largest banks. The ‘big four’ are attempting to counter this by offering incentives and aggressively reducing their interest rates, but some of the smaller lenders are matching these offers. Meanwhile, data from Australian Finance Group shows that the market share of non-bank lenders rose to a record 42 per cent in the June quarter.

CORPORATES
MORGAN STANLEY AUSTRALIA LIMITED, AUSTRALIAN FINANCE GROUP LIMITED – ASX AFG, AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – ASX ANZ, NATIONAL AUSTRALIA BANK LIMITED – ASX NAB, COMMONWEALTH BANK OF AUSTRALIA – ASX CBA, WESTPAC BANKING CORPORATION – ASX WBC, ME BANK, BENDIGO BANK, CANSTAR PTY LTD, THINKTANK, THE BLACKSTONE GROUP LP, LA TROBE FINANCIAL PTY LTD

CBA sets banking tone with profit pressure

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Original article by Cliona O’Dowd
The Australian – Page: 17 & 20 : 5-Aug-19

The consensus of analysts polled by Bloomberg is that the Commonwealth Bank of Australia will post a 2018-19 cash profit of $8.76bn, which would be seven per cent lower than previously. Jonathan Mott of UBS estimates that CBA has about $5bn in excess capital after completing the sale of Colonial First State Global Asset Management. He says that rather than announcing a special dividend, the bank should retain some capital until the outcome of the New Zealand Capital Review is known. Mott recently downgraded his recommendation on CBA’s stock to ‘sell’. AMP and Suncorp are among the other companies that will issue earnings reports in coming days.

CORPORATES
COMMOTION SYSTEMS, BLOOMBERG LP, UBS HOLDINGS PTY LTD, COLONIAL FIRST STATE GLOBAL ASSET MANAGEMENT, AMP LIMITED – ASX AMP, SUNCORP GROUP LIMITED – ASX SUN, INSURANCE AUSTRALIA GROUP LIMITED – ASX IAG, AGL ENERGY LIMITED – ASX AGL, TRANSURBAN GROUP LIMITED – ASX TCL, RECKON LIMITED – ASX RKN, MIRVAC GROUP – ASX MGR, MITSUBISHI UFJ FINANCIAL GROUP INCORPORATED, JP MORGAN AUSTRALIA LIMITED, ORD MINNETT GROUP LIMITED, AUSTRALIAN PRUDENTIAL REGULATION AUTHORITY

Data laws a win for bank customers

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Original article by Supratim Adhikari, Joyce Moullakis
The Australian – Page: 20 : 2-Aug-19

Australian Banking Association CEO Anna Bligh says open banking will boost competition and will be good for bank customers. Open banking becomes possible following the passage of the federal government’s Consumer Data Right legislation, which will make it easier for customers to change financial institutions. MoneyPlace CEO Stuart Stoyan says open banking will lead to the elimination of poor products and services, and that the big banks will actually be one of its biggest beneficiaries, despite their misgivings about the open banking reforms.

CORPORATES
AUSTRALIAN BANKING ASSOCIATION, MONEYPLACE PTY LTD

Greedy banks inhibit stimulus

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Original article by Michael Roddan
The Australian – Page: 17 & 21 : 23-Jul-19

Jonathan Mott of UBS has questioned whether the return on equity targets of Australia’s four major banks are "justifiable or sustainable". He argues that these targets could undermine the Reserve Bank’s efforts to stimulate the economy via interest rate cuts, as they reduce banks’ incentive to cut their own interest rates due to the impact on their net interest margins. The differential between the cash rate and banks’ lending rates has widened from less than two per cent prior to the global financial crisis to almost four per cent.

CORPORATES
UBS HOLDINGS PTY LTD, RESERVE BANK OF AUSTRALIA, WESTPAC BANKING CORPORATION – ASX WBC, COMMONWEALTH BANK OF AUSTRALIA – ASX CBA, AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – ASX ANZ, NATIONAL AUSTRALIA BANK LIMITED – ASX NAB, CANSTAR PTY LTD

ANZ the first bank to loosen lending criteria

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Original article by Eric Johnston
The Australian – Page: 19 : 15-Jul-19

The ANZ Bank has advised that its ‘floor rate’ for home loan customers will be reduced from 7.25 per cent to 5.5 per cent in response to the Australian Prudential Regulation Authority’s recent reforms. ANZ will also increase its sensitivity margin to 2.5 per cent. Rival banks are expected to quickly follow ANZ in reducing their floor rates, which are used to assess a borrower’s ability to repay a loan.

CORPORATES
AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – ASX ANZ, AUSTRALIAN PRUDENTIAL REGULATION AUTHORITY, MORGAN STANLEY AUSTRALIA LIMITED

RBA could weigh cheap cash to banks if rates fall: analysts

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Original article by Jonathan Shapiro
The Australian Financial Review – Page: 17 : 15-Jul-19

Observers expect the Reserve Bank of Australia to cut the cash rate again by the end of 2019. However, analysts estimate that bank earnings would be reduced by seven per cent if they were to pass on the next interest rate cut in full, meaning only a partial cut in mortgage rates is likely. Credit Suisse has suggested that the RBA might offer cheap funding to banks that offer to pass on the next rate cut in full under a scheme similar to that adopted by the Bank of England after it cut interest rates following the Brexit vote in 2016.

CORPORATES
RESERVE BANK OF AUSTRALIA, CREDIT SUISSE (AUSTRALIA) LIMITED, BANK OF ENGLAND, NATIONAL AUSTRALIA BANK LIMITED – ASX NAB

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