Banks struggle despite RBNZ retreat: analysts

Original article by Cliona O’Dowd
The Australian – Page: 20 : 9-Dec-19

Jonathan Mott of UBS says the outlook for Australia’s banks remains "very challenging", despite the fact that they will be treated more favourably than expected under the Reserve Bank of New Zealand’s new capital requirements. The central bank will phase in the new capital rules over a longer time-frame, while the banks will able to hold a wider range of securities as tier-one capital. Several analysts expect the new capital rules to result in the banks receiving lower dividend payouts from their New Zealand subsidiaries.

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

Banks boosted as Kiwis cave in

Original article by Richard Gluyas
The Australian – Page: 17 & 21 : 6-Dec-19

The Reserve Bank of New Zealand will require the local subsidiaries of Australia’s four major banks to hold tier one capital that is equivalent to at least 16 per cent of their risk-weighted assets. They will also be required to hold total capital of 18 per cent, of which 13.5 per cent will have to be common equity tier one capital. However, the new rules will be implemented over a seven-year period, rather than the five-year time-frame that was initially proposed.

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

Banks braced for RBNZ’s capital D-Day

Original article by James Eyers
The Australian Financial Review – Page: 13 & 16 : 5-Dec-19

The Reserve Bank of New Zealand will announce its new tier-1 capital requirements for Australian banks’ NZ subsidiaries on 5 December. Cameron Bagrie from Bagrie Economics expects the central bank to push ahead with its previously flagged plan to increase minimum capital ratios to 16 per cent, despite warnings from banks that this is excessive. It is estimated that Australian banks would need to hold about $18bn worth of additional capital in New Zealand, which may reduce both their profits and dividends in Australia.

CORPORATES
RESERVE BANK OF NEW ZEALAND, BAGRIE ECONOMICS, EVANS AND PARTNERS PTY LTD, AUSTRALIAN PRUDENTIAL REGULATION AUTHORITY, NEW ZEALAND BANKERS’ ASSOCIATION

Economists push out QE timing after Lowe speech

Original article by Matthew Cranston
The Australian Financial Review – Page: 8 : 28-Nov-19

Westpac’s chief economist Bill Evans now expects the Reserve Bank of Australia to pursue quantitative easing in June 2020, having previously forecast that it would commence a bond-buying program in February. Other economists have also revised their timetables for QE after RBA governor Philip Lowe signalled that this option is unlikely to be pursued unless the cash rate falls to 0.25 per cent. Citigroup’s Josh Williamson has ruled out any move to QE in 2020.

CORPORATES
RESERVE BANK OF AUSTRALIA, WESTPAC BANKING CORPORATION – ASX WBC, CITIGROUP PTY LTD, HSBC AUSTRALIA HOLDINGS PTY LTD

Two cuts left in RBA arsenal

Original article by Patrick Commins
The Australian – Page: 1 & 6 : 27-Nov-19

Reserve Bank of Australia governor Philip Lowe has used a speech in Sydney to state that conventional monetary policy remains effective and the central bank is unlikely to consider quantitative easing unless the cash rate falls to 0.25 per cent. He indicated that the RBA would buy government bonds if it opted for QE. Lowe also described negative interest rates as the only monetary policy tool that is "truly unconventional", and emphasised that negatives rates are unlikely in Australia.

CORPORATES
RESERVE BANK OF AUSTRALIA, AUSTRALIAN LABOR PARTY

‘QE will do nothing’: fundies back infrastructure spending

Original article by Robert Guy
The Australian Financial Review – Page: 28 : 27-Nov-19

Quay Global Investors portfolio manager Chris Bedingfield contends that the Reserve Bank of Australia should not implement quantitative easing. He argues that the federal government should instead prioritise increased spending on infrastructure, noting that this will create jobs in the short-term and boost productivity in the long-term. Sarah Shaw of 4D Infrastructure also advocates investing in infrastructure to stimulate the economy.

CORPORATES
QUAY GLOBAL INVESTORS PTY LTD, 4D INFRASTRUCTURE PTY LTD, RESERVE BANK OF AUSTRALIA, BENNELONG FUNDS MANAGEMENT PTY LTD

Minutes show Reserve Bank was close to November cut

Original article by Matthew Cranston
The Australian Financial Review – Page: 8 : 20-Nov-19

The minutes of the Reserve Bank of Australia’s board meeting on 5 November show that the central bank gave serious consideration to reducing the cash rate to 0.5 per cent. However, board members took into account factors such as the likely effect of further monetary policy easing on savers and consumer confidence. The board ultimately concluded that the best course of action would be to wait until the impact of previous interest rate cuts became clear.

CORPORATES
RESERVE BANK OF AUSTRALIA, COMMONWEALTH BANK OF AUSTRALIA – ASX CBA, CITIGROUP PTY LTD

Sweden dumps Oz bonds over climate inertia

Original article by Paul Garvey
The Australian – Page: 4 : 15-Nov-19

Shane Oliver of AMP Capital says the Swedish central bank’s decision to divest bonds issued by the Western Australian and Queensland government is unlikely to have much impact on Australian bond prices. Sveriges Riksbank deputy governor­ Martin Floden has cited Australia’s lack of sufficient action on climate change for the move. The central bank has sold its holdings of bonds issued by the Canadian province of Alberta for the same reason.

CORPORATES
SVERIGES RIKSBANK, AMP CAPITAL INVESTORS LIMITED, INVESTOR GROUP ON CLIMATE CHANGE, S&P GLOBAL RATINGS, WESTERN AUSTRALIA. DEPT OF TREASURY AND FINANCE

QE coming next year: JPMorgan

Original article by David Rogers
The Australian – Page: 17 & 28 : 12-Nov-19

JPMorgan Australia’s chief economist Sally Auld expects the Reserve Bank to implement unconventional monetary policy measures in the December 2020 quarter. Auld still anticipates another official interest rate cut in February, but warns that this will be insufficient to stimulate the economy, prompting the central bank to reduce the cash rate to 0.25 per cent and commence a quantitative easing program in late 2020. However, Auld says quantitative easing is unlikely to be necessary if the federal government’s May 2020 Budget includes ‘meaningful’ fiscal stimulus.

CORPORATES
RESERVE BANK OF AUSTRALIA, JP MORGAN AUSTRALIA LIMITED, MORGAN STANLEY AUSTRALIA LIMITED, WESTPAC BANKING CORPORATION – ASX WBC

Optimistic Reserve Bank holds rates steady for now

Original article by David Rogers, Patrick Commins
The Australian – Page: 19 & 27 : 6-Nov-19

Reserve Bank of Australia governor Philip Lowe has reiterated that the cash rate is likely to remain low for some time, after it was left unchanged at 0.75 per cent on 5 November. However, he also stressed that the central bank is open to further rate cuts if necessary to achieve its inflation and full employment targets. Su-Lin Ong of RBC Capital Markets now expects another rate cut in February, rather than December. Bill Evans of Westpac also expects a rate cut in February, which he says will be the last one in the current easing cycle.

CORPORATES
RESERVE BANK OF AUSTRALIA, RBC CAPITAL MARKETS, WESTPAC BANKING CORPORATION – ASX WBC, COMMONWEALTH BANK OF AUSTRALIA – ASX CBA, AUSTRALIA. DEPT OF THE TREASURY