Industry News & Views

Transcription

1 Industry News & Views 30 September 2008 Banks face crackdown from regulator Banks face a crackdown from the banking system regulator APRA over their loans to investment groups such as Babcock and Brown and Macquarie group. APRA suspects that banks may have been underestimating their total exposure to the big investment groups by treating different subsidiary funds as completely different entities, rather than grouping them together. No bank is allowed to overexpose itself to a single entity. Source: The Australian Financial Review 30 September 2008 Merger benefits unclear for St George and Westpac Directors of St George and Westpac were unable to estimate the financial benefits of the deal in documents tendered to the federal court yesterday. Recent turmoil in the global banking system and the worsening New Zealand economy have been blamed by the directors for preventing them from accurately predicting the impact of the proposed merger. Shareholders will now have to rely on earlier estimates of cost savings in deciding on the benefits of the proposal. Documents tendered to the court yesterday said "The Westpac directors and St George directors have carefully considered whether they have a reasonable basis to produce reliable and meaningful forecast information for the merged group and have concluded that they do not have a reasonable basis that is sufficiently meaningful and reliable for St George security holders." Source: The Daily Telegraph 30 September 2008 NAB funds youth business Small business owners under 30 years old with no business track record are being offered micro enterprise loans by National Australia Bank. The non profit group Enterprise Network for Young Australians has partnered with NAB to assess loan applications and business plans from young Australians looking to start their own business. Applicants for the loans of up to $20,000 must be under 30, have never been bankrupt and must work with a business mentor for 12 months. NAB said they had funded 110 businesses so far under the program with average loan size being about $15,000. The default rate so far was about 4 per cent on an interest rate of 9.95 per cent. NAB said they were losing money on the program but continuing with it as part of their social responsibility program.

2 Source: The Australian Financial Review 30 September 2008 New credit card features double reward points Supermodel Megan Jones launches the David Jones American Express card today in Sydney. The card is available for people with a household income of more than $40,000 and a good credit rating. The annual fee is $99, the interest rate payable is per cent after an interest free period of 56 days. As an introductory promotion, all cardholders will get a $50 gift card and additional reward points on the credit card. For the first six months the card will attract three reward points for every dollar spent outside of David Jones and four points for every dollar you spent at David Jones. After six months the rate reverts to 1.5 points for every dollar you spend outside of David Jones and 2 points for every dollar you spend shopping at David Jones. Cardholders can redeem $100 worth of Qantas travel for 15,000 points. Source: David Jones 29 September 2008 Home buyers accounts complex and costly The First Home Buyer Savings accounts that will be offered by banks, some credit unions and building societies after the first of October are too complex and expensive to administer to make money says banking analysts. The market for people saving for their first home is too small to make the accounts viable for many Superannuation funds and smaller institutions say experts. Savers can receive government cocontributions for saving money that will be spent only on a deposit for a first home. Commonwealth Bank will offer their first home buyers account through all branches from the 1st of October. ANZ's first home buyer account will be available online. AMP will pay a bonus one per cent interest on its first home buyers account between October 1 and December 31. Source: Herald Sun 29 September 2008 More banks fail in US and Europe Another US bank failed on the weekend while a UK bank looks set to be nationalised by the British government. A Belgian bank also appears to be in real trouble. JP Morgan Chase took over the deposits and some other assets of Washington Mutual (once a top 10 US bank) from the Federal Deposit Insurance Corp on Thursday night, US time. Bradford & Bingley, now looks certain to be nationalised by Britain's government in the next 24 hours. The government and Financial Services Authority are orchestrating the sale of B&B's deposit book and branch network to another bank.

3 The loan book appears likely to remain in government hands, according to the Financial Times. Fortis, which appears likely to enjoy an explicit guarantee from the Belgian government on deposits is seeking to raise 5 billion to maintain capital ratios. Reuters and other media are reporting that BNP Paribas and ING are among likely buyers for this tottering national champion. 26 September 2008 Big rate cuts coming in October The Reserve Bank of Australia is now more likely to cut rates by 0.5 per cent in the first week of October than by 0.25 per cent says Macquarie Bank. The Australian and global outlook for economic growth continues to "darken" said Macquarie, giving the RBA good reasons to make big cuts to interest rates. ANZ chief executive Mike Smith said Australian banks were looking very strong but warned of a global depression if the US financial system rescue package proposed by President George Bush is not implemented. Source: Herald Sun 26 September 2008 Heritage looks to agribusiness Toowoomba based Heritage Building Society yesterday reported a five per cent increase in net profit to $20.5 million for financial year 2008, though a $6.5 million gain from the Visa initial public offering was required to produce the rise in headline profit. Tighter margins impacted profit with the interest expense up 29 per cent for the period to $415 million. Interest revenue increased 22 per cent to $501 million. Growth in deposits was strong at 14 per cent or $324 million, to $2.7 billion. Chief executive officer John Minz said the deposit book has grown by another $170 million since July, with two thirds term deposits. Residential lending increased ten per cent for the period to $5.9 billion, with the majority of new lending sourced through Heritage's own network of 59 branches. "I would have said at the start of the financial year (2008) residential lending was 60 / 40 in the favour of brokers, but by the end of the year that reversed." Arrears of 30 days plus was 0.37 per cent at the end of the financial year, although Minz said the figure has subsequently fallen in the first quarter of the 2009 financial year. Total lending outstanding is $6.1 billion, with Heritage beginning to focus on agribusiness in the last year. 26 September 2008 Macquarie exits lending markets

4 Macquarie Bank is selling out of the investment lending market following its decision in March to wind back its mortgage lending business. "The investment lending business is an Australian market leader and has been a profitable business, it contributes less than one per cent of Macquarie Group profits,'' said Macquarie Bank in a statement issued yesterday. ''The sale of the business will not be financially material to Macquarie Group and will enable the group to further focus on continuing to grow Macquarie's most profitable businesses,'' it added. Analysts are blaming higer funding costs and difficult financial market conditions for the Macquarie Bank move to wind back its lending operations. Source: The Age 25 September 2008 Banks run riot with no competition A lack of competition has allowed banks to "run riot" and push profits back up to levels not seen since the 1990's say banking industry experts. Debate continued yesterday in the industry over APRA figures showing that banks had enjoyed record profit margins while increasing interest rates above official RBA rate rises. Banks argued that the rises were needed because funding costs were rising. University of Western Sydney economics professor Steve Keen said the big banks had been misleading. "Whilst it is true that banks were facing substantially higher costs for their mortgage funds, what they didn't say is that they had an unprecedented rush of new customers from the collapsing non bank sector, and this boosted their customer base and their profits by more than the higher costs were eating away at them" he said. Prescott Securities senior analyst Darryll Gobbett said "I think they are getting back the profit margin they had in years gone by before the competition came from the likes of Wizard and Aussie". The Australian Bankers Association, said the figures were open to misinterpretation, and that reports of record profits are down to a "statistical anomaly". Source: The Daily Telegraph 25 September 2008 Commonwealth tipped to buy Suncorp bank Commonwealth Bank is believed to be considering paying $4 billion for Suncorp's banking operations. Insurance group QBE as well as NAB and ANZ are also believed to be considering a bid for Suncorp which has suffered a big fall in share price, hitting an eight year low last week of $8.35. Suncorp is suffering funding issues as a result of a single A credit rating. Suncorp's head office must remain in Brisbane, a deterrent to many possible buyers says analysts. Source: The Australian

5 25 September 2008 NAB may offload bad debt to US government National Australia Bank may be able to sell up to $1 billion of bad US debt to the US government under the US$700 billion financial system rescue package now being debated by the US congress. Australian treasury and Reserve Bank of Australia officials are currently discussing the details of the package with government regulators in the US. The Prime Minister Kevin Rudd yesterday urged the US congress to pass the rescue package announced last week by President George Bush. Source: The Australian 25 September 2008 Visa and MasterCard taking over debit Visa and MasterCard branded debit cards now account for around one fifth of the value of debit card payments according to the Payments System Board. Scheme debit cards have been available in Australia for more than 25 years, originally through building societies and credit unions (under the Visa brand). In recent years most major banks have also begun to issue the cards, in part because of the favourable interchange fees (since reduced by RBA regulation) and in part to cater to demand for internet purchasing (which is not directly available on the bank owned Eftpos payment cards). 24 September 2008 Aussie banks profit from credit crunch The average profit margin for the major banks was 54.8 per cent in the March quarter, more than double the long term average return of 26.9 per cent, according to official figures from the Australian Prudential Regulatory Authority. That equals more than $1 profit for every $2 in interest and fee income charged. Banks raised interest rates independently of movements in official cash rates because they said their margins were being squeezed by higher funding costs. Those claims were supported by the Treasurer Wayne Swan. The Commonwealth, the National Australia Bank, the ANZ and Westpac all lifted their mortgage rates by more than the Reserve Bank. Banks interest income increased in the March by $7.2 billion to a record $31.9 billion. Interest costs grew $6.3 billion with net interest income up 13 per cent to $8.3 billion. Earnings from fees and commissions climbed 36.9 per cent to $4 billion. Source: The Australian

6 24 September 2008 BankWest quits cashflow finance Bank of Western Australia will refer customers seeking finance under an invoice discounting facility to Allianz Australia. They describe their relationship as a "strategic referral". BankWest won't transfer existing cashflow finance facilities to Allianz. The bank began its search for an alternative funder for this line of business only a month or so ago. Cashflow finance of a generic kind is a relatively new line of business for Allianz, though the firm is the largest financier of insurance premiums through Hunter Premium Funding. Allianz finances in excess of $1 billion in premiums annually through Hunter. It isn't clear how significant debtor finance is to BankWest. The bank has invested heavily in the expansion of its business and commercial banking capacity, especially in eastern Australia, as part of its effort to grow market share quickly. The Institute of Factors and Discounters estimates that lenders funded around $60 billion in business invoices under discounting or factoring arrangements in the year to March Growth in this segment was 20 per cent a year over the last two years. 24 September 2008 Commonwealth joins velocity awards The Commonwealth Bank has enhanced its credit card Awards program by adding the Virgin Blue Velocity Rewards loyalty program. Commonwealth Awards members can now transfer their points to Velocity Rewards and redeem for flights on Virgin Blue and Velocity's Partner Airlines. There are also car hire, accommodation, and entertainment awards that points can be swapped for. Commonwealth Awards customers wishing to transfer their Commonwealth Awards points to Velocity Rewards should be a current Velocity Member, and can join for free online. If customers transfer their Commonwealth Awards points to Velocity before midnight 30 November 2008, they will receive an additional 25 per cent bonus Velocity Points. Source: Commonwealth Bank 24 September 2008 Sydney Credit Union becomes SCU Sydney Credit Union will relaunch as SCU this week with a more streamlined product range and user friendly website, aimed at younger consumers. To celebrate the launch, SCU will be sending street teams across Sydney this week conducting "Random Acts Of Generosity" including free coffees, free hugs and free massages. Over the last ten years, SCU has merged with Parkes District Credit Union, Pinnacle Credit Union, Prospect Credit Union and Blue Mountains Credit Union and now has 20 branches in greater Sydney plus a few in regional NSW. The credit union has grown from approximately $100 million to $430 million in on balance sheet assets with a further $100 million in managed funds off balance sheet.

7 Source: Sydney Credit Union