BANKS AND BANKING – AUSTRALIA

Westpac returns hit by need to build capital

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Original article by James Eyers
The Australian Financial Review – Page: 11 & 15 : 8-Nov-16

Westpac has posted a 2015-16 cash profit of $A7.8bn. Its return on equity fell by 1.85 per cent to 14 per cent in the year to 30 September 2016, and its ROE target has been scaled back from 15 per cent to 13-14 per cent due to factors such as new capital requirements for the banking sector. PwC estimates that the combined ROE of the four major banks fell by 127 basis points to 13.75 per cent in 2015-16. Meanwhile, Westpac will seek to reduce its cost-to-income ratio from 42 per cent at present to less than 40 per cent

CORPORATES
WESTPAC BANKING CORPORATION – ASX WBC, PRICEWATERHOUSECOOPERS AUSTRALIA (INTERNATIONAL) PTY LTD, CITIGROUP PTY LTD, AUSTRALIAN PRUDENTIAL REGULATION AUTHORITY, BANK FOR INTERNATIONAL SETTLEMENTS. BASEL COMMITTEE ON BANKING SUPERVISION, KPMG AUSTRALIA PTY LTD, AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – ASX ANZ

ANZ shrinks to reduce rising risks

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Original article by James Eyers
The Australian Financial Review – Page: 1 : 4-Nov-16

The ANZ Bank has announced a fall of 18 per cent in cash profit to $A5.9 billion for 2015-16. Return on equity fell to 12.2 per cent, from 13.8 per cent a year ago. The cost to income ratio for the year declined to 44.8 per cent. ANZ CEO Shayne Elliott said the bank reduced its workforce by 3,600 jobs over the year to 30 September 2016. The stock rose 0.6 per cent to $A27.35 on 3 November 2016.

CORPORATES
AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – ASX ANZ

ANZ’s Whelan will divest Asian bank stakes next

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Original article by Lisa Murray
The Australian Financial Review – Page: 13 & 17 : 2-Nov-16

The ANZ Bank will further scale back its presence in Asia after securing a deal to offload some of its retail banking and wealth management assets in the region. Mark Whelan, the head of institutional banking, says ANZ is making progress on selling some of its minority stakes in four Asian banks. He says these stakes are deemed to be non-core assets, but he stresses that ANZ is "reshaping" its Asian operations rather than withdrawing from the region. ANZ CEO Shayne Elliott has signalled that institutional banking will be the focus of its Asian operations.

CORPORATES
AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – ASX ANZ, SHANGHAI RURAL COMMERCIAL BANK, BANK OF TIANJIN COMPANY LIMITED, PT BANK PAN INDONESIA TBK, AMMB HOLDINGS BHD, DBS BANK LIMITED

Banks on S&P negative watch over hot property

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Original article by Jonathan Shapiro
The Australian Financial Review – Page: 11 & 15 : 1-Nov-16

Factors such as rising household debt and residential property prices have prompted Standard & Poor’s to downgrade Australia’s economic risk trends. The firm has also downgraded the credit rating outlook of 25 local lenders to "negative". S&P downgraded the major banks’ rating outlooks to "negative" in mid-2016, but it has not yet made any further changes. However, their "AA-" credit ratings could be reviewed, particularly if Australia implements new global regulations regarding bank bailouts.

CORPORATES
STANDARD AND POOR’S CORPORATION, MACQUARIE BANK LIMITED – ASX MBL, BENDIGO AND ADELAIDE BANK LIMITED – ASX BEN, BANK OF QUEENSLAND LIMITED – ASX BOQ, RESERVE BANK OF AUSTRALIA

ANZ cuts back Asian footprint

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Original article by Michael Bennet
The Australian – Page: 21 & 24 : 1-Nov-16

CEO Shayne Elliot says the ANZ Bank will eventually offload more of its retail banking operations in Asia, after striking a deal to sell its retail and wealth assets in Hong Kong, Singapore, China, Taiwan and Indonesia. ANZ has not revealed the price of the transaction, although it says Singapore-based DBS Bank will pay $A110m more than the book value of the assets. ANZ will incur a $A265m net loss on the transaction, while it will also slightly affect its earnings per share and return on equity. ANZ expanded its presence in Asia under previous CEO Mike Smith.

CORPORATES
AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – ASX ANZ, DBS BANK LIMITED, ROYAL BANK OF SCOTLAND GROUP PLC, MORGAN STANLEY AUSTRALIA LIMITED, MACQUARIE GROUP LIMITED – ASX MQG

Banks charged customers $180m for no financial advice

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Original article by Misa Han
The Australian Financial Review – Page: 6 : 28-Oct-16

The Australian Securities & Investments Commission has released a report on the dubious practices of financial advisers aligned with the "big four" banks and AMP. ASIC found that many customers had been charged for financial advice between August 2013 and December 2015, but they did not receive any such advice. ASIC noted that most of these cases occurred prior to the implementation of the Future of Financial Advice reforms. It is estimated that about 200,000 customers will be entitled to total compensation of some $A178m.

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, MACQUARIE GROUP LIMITED – ASX MQG, AUSTRALIAN BANKERS’ ASSOCIATION

Dividend cuts loom despite $23bn profits

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Original article by Michael Bennet
The Australian – Page: 17 & 21 : 24-Oct-16

National Australia Bank is tipped to post a 2015-16 cash profit of $A6.55bn on 27 October 2016. The ANZ Bank and Westpac are expected to post full-year profits of $A6.18bn and $A7.8bn respectively in coming weeks, while the Commonwealth Bank has booked a cash profit of $A9.45bn for the year to 30 June. Bank dividends are likely to come under pressure, while Jonathan Mott of UBS expects the banks to post negative growth in earnings per share for the first time since the global financial crisis.

CORPORATES
NATIONAL AUSTRALIA BANK LIMITED – ASX NAB, WESTPAC BANKING CORPORATION – ASX WBC, AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – ASX ANZ, COMMONWEALTH BANK OF AUSTRALIA – ASX CBA, UBS HOLDINGS PTY LTD, CITIGROUP PTY LTD, CLSA AUSTRALIA PTY LTD, GOLDMAN SACHS AND PARTNERS AUSTRALIA PTY LTD, MACQUARIE GROUP LIMITED – ASX MQG, RESERVE BANK OF AUSTRALIA, CLYDESDALE BANK PLC, STANDARD AND POOR’S ASX 200 BANKS INDEX, DEUTSCHE BANK AG

How banks and resources could move in sync

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Original article by David Rogers
The Australian – Page: 31 : 21-Oct-16

The S&P/ASX 200 Materials Index has significantly outperformed the S&P/ASX 200 Banks Index in 2016, with a gain of 29 per cent compared with the latter’s eight per cent fall. Deutsche Bank notes that with the exception of the last four years, the two sectors have both regularly outperformed the broader sharemarket over the last 25 years. In addition, they have often outperformed in tandem. Tim Baker of Deutsche argues that the divergence of the two indices over the last few years suggests that they could be set for a new period of joint outperformance.

CORPORATES
STANDARD AND POOR’S ASX 200 MATERIALS INDEX, STANDARD AND POOR’S ASX 200 BANKS INDEX, DEUTSCHE BANK AG

Mortgage price war ‘will hurt dividend’

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Original article by Michael Bennet
The Australian – Page: 23 : 20-Oct-16

Scott Manning of JP Morgan says stricter capital requirements and a rise in the customer churn rate contributed to a decline in the four major banks’ return on equity from mortgages between 2010 and 2015. He adds that the return from banks’ non-mortgage products fell to the same level as their cost of capital during this period. Manning warns that banks’ dividends will be vulnerable if the return on equity from mortgages falls any further, and he argues that banks should be offering tailored mortgage interest rates that reflect each borrower’s risk profile.

CORPORATES
JP MORGAN AUSTRALIA LIMITED, 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, DIGITAL FINANCE ANALYTICS, BANK OF QUEENSLAND LIMITED – ASX BOQ

Livingstone named CBA chair as Turner departs

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Original article by Richard Gluyas
The Australian – Page: 21 : 13-Oct-16

The Commonwealth Bank has advised that Catherine Livingstone will succeed David Turner as the bank’s chair in early 2017. Livingstone has praised Turner’s contribution as chairman, which he has held since 2010. Brian Johnson of CLSA notes that the bank has outperformed during Turner’s time in the role, but adds that it has underperformed in 2016. He also says Livingstone’s biggest challenge is likely to be finding an eventual successor to CEO Ian Narev.

CORPORATES
COMMONWEALTH BANK OF AUSTRALIA – ASX CBA, CLSA AUSTRALIA PTY LTD, TELSTRA CORPORATION LIMITED – ASX TLS, MACQUARIE GROUP LIMITED – ASX MQG, COCHLEAR LIMITED – ASX COH, WESTPAC BANKING CORPORATION – ASX WBC, NATIONAL AUSTRALIA BANK LIMITED – ASX NAB