BANKS AND BANKING

Lack of confidence to force RBA rate cut

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Original article by Michael Roddan
The Australian – Page: 2 : 25-Jul-19

Westpac’s chief economist Bill Evans now expects official interest rates to fall to a record low of 0.5 per cent by February. Evans had previously forecast that the cash rate would reach a low of 0.75 per cent in the current monetary policy easing cycle. His revised forecast was prompted by factors such as a decline in consumer confidence in the wake of the rate cuts in June and July.

CORPORATES
WESTPAC BANKING CORPORATION – ASX WBC, RESERVE BANK OF AUSTRALIA, AUSTRALIAN BUREAU OF STATISTICS, UBS HOLDINGS PTY LTD, COMMONWEALTH SECURITIES LIMITED, SEEK LIMITED – ASX SEK, AUSTRALIA. DEPT OF JOBS AND SMALL BUSINESS

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

Job data puts rate cut expectations on hold

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Original article by David Rogers
The Australian – Page: 27 : 19-Jul-19

The chances of an interest rate cut in August have lengthened following the release of data showing that Australia’s official unemployment rate was steady at 5.2 per cent in June. Analysis by Westpac suggests that financial markets are pricing in a 15 per cent chance of a rate cut in August, although the Reserve Bank is still widely tipped to ease monetary policy by the end of the year. The jobless rate rose from 5.19 per cent to 5.24 per cent in unrounded terms in June, while the underemployment rate fell to 8.2 per cent.

CORPORATES
RESERVE BANK OF AUSTRALIA, WESTPAC BANKING CORPORATION – ASX WBC, AMP CAPITAL INVESTORS LIMITED

RBA flags another rate cut if jobs market deteriorates

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Original article by David Rogers
The Australian – Page: 2 : 17-Jul-19

The Reserve Bank of Australia indicated in the minutes of its monthly board meeting that there is likely to be spare capacity in the labour market for some time, while jobs growth is likely to ‘moderate’. Labour market data for June will be released on 18 July, and the official unemployment rate is expected to be steady at 5.2 per cent. The employment and inflation outlook is likely to influence the timing of further interest rate cuts; some economists say the RBA may wait to gauge the impact of the cuts in June and July before further easing monetary policy.

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

Labor decries Coalition complacency on economy

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Original article by Joe Kelly
The Australian – Page: 4 : 16-Jul-19

Deloitte Access Economics partner Chris Richardson contends that a slowdown in the economy is not the main reason why the Reserve Bank of Australia has cut interest rates in two consecutive months. Rather, he suggests that it is because the RBA has changed its view on how many new jobs need to be created in order to stimulate wage growth. Labor’s treasury spokesman Jim Chalmers says the opinion expressed in the latest Deloitte Business Outlook report is "just one opinion in a range of opinions". Chalmers claims that the Australian economy has gotten worse since the federal election, but that the Coalition still has its feet up.

CORPORATES
DELOITTE ACCESS ECONOMICS PTY LTD, RESERVE BANK OF AUSTRALIA, AUSTRALIAN LABOR PARTY

AMP rattled as $3.3bn sale breaks down

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Original article by Cliona O’Dowd, Joyce Moullakis
The Australian – Page: 17 & 20 : 16-Jul-19

Shares in AMP closed 15.81 per cent lower at $1.81 on 15 July after the Reserve Bank of New Zealand thwarted the proposed sale of its life insurance division. The central bank said it would not support the sale of AMP Life NZ to the UK-based Resolution Life unless the assets underpinning New Zealanders’ policies are ‘ring-fenced’. AMP still hopes to secure a deal, but analysts say any sale now is likely to be at a much lower price than the $3.3bn that Resolution Life had agreed to pay. AMP has also advised that investors will not receive an interim dividend, citing uncertainty regarding the sale of AMP Life.

CORPORATES
AMP LIMITED – ASX AMP, AMP LIFE LIMITED, RESOLUTION LIFE GROUP LIMITED, RESERVE BANK OF NEW ZEALAND, ALLAN GRAY AUSTRALIA PTY LTD, MORNINGSTAR PTY LTD, REGAL FUNDS MANAGEMENT PTY LTD, SHAW AND PARTNERS LIMITED, MACQUARIE GROUP LIMITED – ASX MQG

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

RBA chief backs Frydenberg plan

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Original article by Richard Ferguson, Rachel Baxendale
The Australian – Page: 1 & 2 : 12-Jul-19

Reserve Bank of Australia governor Philip Lowe says he is in full agreement with Treasurer Josh Frydenberg’s view that the Australian economy remains sound. Lowe and Frydenberg met for two hours in Melbourne on 11 July. Lowe said after the meeting that it was a "remarkable achievement" that more Australians have a job now than at any previous time in the country’s history, while shadow treasurer Jim Chalmers claimed that Frydenberg is letting the RBA do nearly all of the heavy lifting.

CORPORATES
RESERVE BANK OF AUSTRALIA, AUSTRALIA. DEPT OF THE TREASURY, AUSTRALIAN LABOR PARTY, COMMONWEALTH BANK OF AUSTRALIA – ASX CBA, NATIONAL AUSTRALIA BANK LIMITED – ASX NAB, AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – ASX ANZ, WESTPAC BANKING CORPORATION – ASX WBC

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

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