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WBC's response. WESTPAC REAFFIRMS PERFORMANCE OF MORTGAGE PORTFOLIO

 

I find these comments somewhat "sad"

 

Westpac has taken the findings of the PWC Report seriously and has used this to guide its

ongoing continuous improvement work on its policies and application processes for mortgage

origination.

 

 

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Summary of todays events - UBS downgrade, WBC response

Westpac shares crumble after poor lending practices conceded in internal documents

By business reporter Stephen Letts

Updated about 2 hours ago

Westpac's share price has nosedived after the release of explosive documents detailing widespread failings in not only the quality and riskiness of its home loans, but the way they are processed.

 

complete article - http://www.abc.net.au/news/2018-04-26/west...ection=business

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If you look at the details of the ÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’â€Â¦ÃƒƒÂ¢Ãƒ¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…âہ“widespread failingsÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’â€Å¡Ãƒƒâہ¡ÃƒÆ’‚ÂÂ, over 20% of loans had been repaid/refinanced, 1% was over 30 days due and 0.25% greater than 90 days past due. Hardly justifies the reaction.
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PWC's review examined a "sample of 420 mortgage files" made between June 2015 and August 2016 to which WBC responded - what about the rest of their $400 billion mortgage book - that's one question UBS raised. They are also concerned about a potential crackdown on lending standards resulting from the royal commission and the risk of a credit crunch.

 

There are two big questions raised by Mott's analysis.

 

Firstly, how likely is his doomsday credit crunch scenario? And secondly, is Westpac as exposed as Mott suggests?

 

Mott argues that even a moderate downturn could hurt Westpac, as its recent changes around lending standards take time to work through the system. He will be looking hard at auction clearance rates and housing finance approval numbers to see how the changes in underwriting standards across the industry are flowing through.

 

What we are seeing here is a very live example of how the royal commission is already changing the banking sector, as the key players try to rectify the issues already exposed by regulators, and get ahead of what the commission may recommend.

 

Mott will be written off by some as Chicken Little, and it's true the banking sector's core stability has not been changed by what we've seen so far at the Hayne inquisition.

 

But his belief that the royal commission is a "game changer for Australian financial services" doesn't seem far fetched.

 

"In particular its focus on ensuring the banks 'obey' the responsible lending laws and with boards and management likely to be much more risk adverse, further tightening of underwriting standards are highly likely across the industry.

 

"This could potentially lead to a sharp reduction in credit availability. Combined with a weaker asset quality and questions over the enforcability of security in the event of irresponsible lending, we have a cautious view on Westpac and the broader Australian banking industry."

 

Read more: http://www.afr.com/brand/chanticleer/ubs-w...w#ixzz5DputR9Oc

 

Mind you, this is nothing new. I posted this article back in July 2016 from Hedgeye

 

Seems Hedgeye in the US are suggesting AU Banks are overvalued and recommend shorting.

 

07/13/16 12:32 PM EDT

Banks on the Barbie: Four Short Ideas In AustraliaÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¾Ãƒâہ¡ÃƒÆ’‚¢s Housing Bubble

 

Last week, Hedgeye Financials Sector Head Josh Steiner held an institutional call discussing AustraliaÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¾Ãƒâہ¡ÃƒÆ’‚¢s housing bubble, and why now is the time to short Australian Banks.

 

The countryÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¾Ãƒâہ¡ÃƒÆ’‚¢s big four banks: CommBank (CBA), National Bank (NAB), Westpac (WBC) and Australia & New Zealand Banking Group (ANZ) are holding the bag on this developing mess. With over 60% of their loan books in residential mortgages, thereÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¾Ãƒâہ¡ÃƒÆ’‚¢s basically nowhere to hide.

 

Here are some noteworthy highlights from SteinerÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¾Ãƒâہ¡ÃƒÆ’‚¢s call:

 

Contrary to popular belief, the primary driver accounting for approximately 30% of the Australian GDP is building, selling, and financing property, not mining which only accounts for around 8% of GDP. 60-70% of the market being bought with interest-only mortgages; this model only works when property prices continue to go up, as Americans may painfully remember.

 

An important tenet of SteinerÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¾Ãƒâہ¡ÃƒÆ’‚¢s demand slowing call rests on the assumption that Chinese demand for foreign property investment will slow in 2016 vs 2015, and then slow further in 2017. Part of this has to do with the coming credit storm and pace of FX reserve drawdown.

 

https://app.hedgeye.com/insights/52288-bank...le?type=insight

 

Shortman's graph on the big 4 http://www.shortman.com.au/market

THE BIG FOUR BANKS (ANZ, CBA, NAB, WBC)

This graph shows the total dollar amount of all shorted shares on the big four banks, which together dominate the banking market share in Australia.

post-330173-1524796858.jpg

 

 

 

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All this doom and gloom,i must be silly for buying a heap more this morning,

 

Nothing silly about that Mr Bear. Who was it that said -

 

-> "Buy when there's blood in the streets, even if the blood is your own." :biggrin: and,

 

-> "You pay a very high price in the stock market for a cheery consensus." :biggrin:

 

Both gentlemen did OK. May the force be with you, Mr Bear :)

 

Going Against the Crowd

Contrarians, as the name implies, try to do the opposite of the crowd. They get excited when an otherwise good company has a sharp, but undeserved drop in share price. They swim against the current, and assume the market is usually wrong at both its extreme lows and highs. The more prices swing, the more misguided they believe the rest of the market to be.

 

A contrarian investor believes the people who say the market is going up do so only when they are fully invested and have no further purchasing power. At this point, the market is at a peak; when people predict a downturn, they have already sold out, at which point the market can only go up.

 

Bad Times Make for Good Buys

Contrarian investors have historically made their best investments during times of market turmoil. During the crash of 1987 (also known as "Black Monday"), the Dow dropped 22% in one day in the U.S. In the 1973-74 bear market, the market lost 45% in about 22 months. The September 11, 2001, attacks also resulted in a sizable market drop. The list goes on and on, but those are times when contrarians found their best investments.

 

Read more: Contrarian Investing: Buy When There's Blood in the Streets https://www.investopedia.com/articles/finan...p#ixzz5E2Ibw3XC

 

 

 

 

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