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The Banks
Does It Get Any Better For The Big Four?
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blacksheep
post Posted: Dec 5 2019, 06:04 PM
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Banks rallied on the RBNZ review - Final decisions in RBNZ capital review still require $20b increase for banks but composition of capital is softened and banks get 7 years instead of 5 to adapt
- https://www.interest.co.nz/banking/102858/f...nks-composition
extract
'Á modest 'win' for the banks'

QUOTE
In a note on the Reserve Bank's capital decisions, Australian-based UBS banking analysts note the key elements from last year's proposals remain intact, including increasing New Zealand bank capital ratios materially, towards the strongest in the world.

"However, there is some moderation to what we considered more excessive proposals. This provides a modest 'win' for the banks in a very challenging environment," UBS says.

"While the RBNZ retained its 16% Tier 1 requirement, we believe there are three main changes: (1) The transition period was extended from five to seven years. The first phase (increase RWA scalar) will begin in July 2020, rather than January 2020; (2) Increase in the proportion of Additional Tier 1 (AT1) that may contribute to Total Tier 1 capital to 2.5% of RWA, from 1.5% in the 2018 proposal; (3) Further, the definition of AT1 has been widened to include Redeemable, Perpetual Preference-Shares (RPPS), rather than just Non-Redeemable Preference Shares in the 2018 proposal."

"Importantly, this increases the attractiveness of ATI as marketable securities, with the RBNZ stating that the original AT1 proposals 'would not appeal to either equity or debt investors and… would not be issued by banks'. In effect, this implies that the amount of CET1 the banks will need to hold falls to >13.5% compared to >16% in the 2018 proposal," UBS says.

"Calculating the exact capital shortfall for both the New Zealand business and the Australian (Level 1) operations is complex, and some inputs are not publicly available. We expect each of the major banks to make announcements today regarding their initial estimates of their capital shortfalls and the potential for issuing AT1 securities. However, we expect the NZ CET1 requirements to be substantially lower than their original estimates (ANZ NZ$6-8bn; CBA NZ$3bn; NAB NZ$4-5bn; WBC NZ$3.5-4.0bn)."

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The herd instinct among forecasters makes sheep look like independent thinkers. Edgar Fiedler

If the freedom of speech is taken away then dumb and silent we may be led, like sheep to the slaughter. George Washington
 
blacksheep
post Posted: Nov 12 2019, 10:17 AM
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Interesting read from Michael West on the Banks/Franking Credits/Farm Debt Relief Policy
extract
QUOTE
the paradox of franking credits has been put in stark relief by the big banks. Last week’s falling dividends and franking credits payouts have actually benefitted the Government. Shareholders’ losses have been government’s gain.

The less the banks pay out, the more the Government gets to keep. And the numbers are large.

Each of the three major banks to report in recent days has reduced the amount of franking credits “released” this November (compared to last November):

ANZ: 30% fewer
WBC: 15% fewer
NAB: 16% fewer

We will get to the detail in due course, but it is worth noting how intertwined are the Government and the banks are; and, in a sense, how government is privatising economic decision-making.

One, it is the directors of the large banks which set both the dividend payout ratio and and size of dividend which, in turn, determine how much tax government gets from the banks. Bank directors therefore determine how much tax the Government gets to keep.

Two, the latest farm-debt relief policy will likely ensure that farmers simply pay out their high-interest bank loans with the zero-interest money they get from the Government.

Given the drought, it is unlikely much of the funding will go to planting new seed or developing new herds. Yet, the banks are sure-fire winners from the program because it will allow them to “derisk” their portfolios, lower their exposure to farm debt. Will they lend any more? Probably not.

Three, quantitative easing (QE). Although the recent spike in wholesale interest rates (bond yields) lowers the likelihood the Government will print money to revive the economy (QE is effectively printing money), if QE were to proceed though, it would also be a boon for the banks, allowing them to decide who got the loans, rather than the Government.

QE is akin to outsourcing economic management to the banks.

How bank results are a win for government

ANZ went first in reporting season. It was the first of the Big Four banks not to pay 100% franked dividends, winding down the tap to 70% franking. Westpac was next, keeping the franking at 100pc but reducing its dividend from 94c to 80c (-15%). That’s a 14c per share reduction which leads to a 6c per share reduction in franking credits – a reduction in total benefits from 134c per share to 114c.

NAB then emerged with its news on Thursday. It’s shares fell 2.8% as it dropped the dividend from 99c to 83c (-16%) while maintaining 100% franking.

That’s a reduction of 16c per share in the dividend leading to a reduction of 7cps reduction in franking credits.

Overall, the reduction in benefits went from from 141cps to 119cps.

Rather than succumbing to Liberal Party scare campaigns, Labor should stick to its guns on franking credits, cap the pay-outs to protect poorer retirees, and educate the media about what franking credits really are, cash payouts rather than refunds.

There are not many Dick Smiths about, those prepared to publicise the freakish policy of middle class welfare subsidised by ordinary taxpayers. People naturally tend to keep this sort of lurk to themselves.

As the payouts rise in future years however and more come to understand what they are – a great big subsidy rather than a “great big retiree tax”, they will eventually have to be abandoned. Beating a retreat from a retreat is not an enticing prospect for the Opposition.


read more - https://www.michaelwest.com.au/franking-cre...nds-dick-smith/



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The herd instinct among forecasters makes sheep look like independent thinkers. Edgar Fiedler

If the freedom of speech is taken away then dumb and silent we may be led, like sheep to the slaughter. George Washington
 
nipper
post Posted: Nov 1 2019, 06:59 PM
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QUOTE
The ANZ result showed the impact of slower credit growth and compression of the net interest margin (NIM), a major earnings driver, as a result of falling interest rates. ANZ also announced that its dividend will be held flat and franked at 70.0%, which may have disappointed shareholders.

The increased costs may prove to be a trend in the banking sector and we will watch closely as the other banks report their results. Specifically, Westpac (ASX: WBC) and National Australia Bank's (ASX: NAB) results will provide an indication of whether the impacts were limited to ANZ or have spread to the rest of the sector. The combination of higher costs, lacklustre credit growth and regulatory capital risks might see boards reduce dividends for banks with tighter capital ratios.
- common fundie view



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"Every long-term security is nothing more than a claim on some expected future stream of cash that will be delivered into the hands of investors over time. For a given stream of expected future cash payments, the higher the price investors pay today for that stream of cash, the lower the long-term return they will achieve on their investment over time." - Dr John Hussman

"If I had even the slightest grasp upon my own faculties, I would not make essays, I would make decisions." ― Michel de Montaigne

Said 'Thanks' for this post: early birds  Pendragon  
 
nipper
post Posted: Oct 25 2019, 07:56 AM
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QUOTE
Three of the big four banks will report annual results in the coming fortnight and each is expected to unveil a measure to top up its capital position.

ANZ Banking Group, National Australia Bank and Westpac Banking Corp have four options; dividend cuts, underwritten dividend reinvestment plans, equity raisings and/or asset sales.

CBA is the best set of the big-4, with ANZ still above the 10.75% CET1 capital level but, on the assumption a dividend cut is unpalatable, the other two might go to the market. And three of the four options require the help of an investment bank.



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"Every long-term security is nothing more than a claim on some expected future stream of cash that will be delivered into the hands of investors over time. For a given stream of expected future cash payments, the higher the price investors pay today for that stream of cash, the lower the long-term return they will achieve on their investment over time." - Dr John Hussman

"If I had even the slightest grasp upon my own faculties, I would not make essays, I would make decisions." ― Michel de Montaigne

Said 'Thanks' for this post: early birds  
 
early birds
post Posted: Oct 2 2019, 05:30 PM
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In Reply To: early birds's post @ Sep 30 2019, 10:01 AM

https://www.afr.com/policy/economy/frydenbe...y_Sent=02102019


All the banks have now passed on rates. NAB said it would cut rates for owner-occupiers and investors paying principal and interest by 15 basis points, while the CBA said it would cut as little as 13 basis points. ANZ said it could cut by 14 basis points while Westpac will pass on 15 basis points.

============================

all passed on partially !!! lmaosmiley.gif



 
early birds
post Posted: Sep 30 2019, 10:01 AM
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https://www.afr.com/street-talk/cba-bank-of...y_Sent=30092019

It is understood ICG’s bid was backed by about a $200 million debt package, including a $160 million-odd term loan and separate working capital and capital expenditure facilities. CBA and Bank of China were the two biggest lenders in the syndicate. ICG was advised by Lazard.

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infrastructure is the next aussie economy focus going forward.......
my ramping----i bought some bank of china from hong kong market with my CFDs account, as the stock is more than 30 % below it's mainland price and yield around 5---6%/. it's really under valued...thanks to current HK political unrest that got people sell things undiscriminately .



 

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nipper
post Posted: Sep 24 2019, 08:20 AM
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QUOTE
UBS analyst John Mott says any [interest rate] cuts from here simply decimate bank earnings because they can’t cut deposit rates any lower.

CBA, by way of example, has one quarter of all deposits on 25 basis points or less and its most popular product, NetBank Saver, is at 15 basis points.

Deposits fund about 60 per cent of home loans, so if the bank is earning zero or less on deposits it isn’t making much on its home loans.

In a recent note, UBS’s Mott noted the banks are also losing control of the home loan market, with just 37 per cent of all home loans generated directly by banks’ own sales channels. This is down from 48 per cent in 2013.

While the big four banks control 79 per cent of mortgages, they are increasingly acting as the underwriters for home loans generated by the brokers.

- if RBA cuts next week, it is possible we'll see some mortgage offerings starting with a 2



--------------------
"Every long-term security is nothing more than a claim on some expected future stream of cash that will be delivered into the hands of investors over time. For a given stream of expected future cash payments, the higher the price investors pay today for that stream of cash, the lower the long-term return they will achieve on their investment over time." - Dr John Hussman

"If I had even the slightest grasp upon my own faculties, I would not make essays, I would make decisions." ― Michel de Montaigne

Said 'Thanks' for this post: early birds  
 
nipper
post Posted: Sep 11 2019, 08:19 PM
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QUOTE
Banks are back, with the sector up almost 13 per cent this year, but further gains are likely to depend on an ongoing housing market market recovery as interest rates go lower.

Large Australian lenders rallied this year after the federal election result in May, which was quickly followed by rule changes from the prudential regulator, and the Reserve Bank of Australia's two interest rate cuts.

Commonweath Bank is up 11.3 per cent to $80.60, National Australia Bank is up 19.6 per cent to $28.79, Westpac is higher by 18.3 per cent to $29.61 and ANZ shares have rallied 12.7 per cent to $27.46.

The sector's advance dates back to early in the year, when the royal commission into the financial services sector wrapped up without demanding onerous penalties of lenders.

- reports of their demise are somewhat exaggerated



--------------------
"Every long-term security is nothing more than a claim on some expected future stream of cash that will be delivered into the hands of investors over time. For a given stream of expected future cash payments, the higher the price investors pay today for that stream of cash, the lower the long-term return they will achieve on their investment over time." - Dr John Hussman

"If I had even the slightest grasp upon my own faculties, I would not make essays, I would make decisions." ― Michel de Montaigne
 
blacksheep
post Posted: Jul 3 2019, 08:13 PM
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Interesting read - HERE’S SOMETHING FOR BANK INVESTORS TO CONSIDER
extract
QUOTE
The big four have capitalised significant amounts of spend for many years, which they classify as software investment. Every 3 or 4 years, they generally take a large write-down of this asset, and the cycle starts all over again. These periodic impairment charges also act to boost reported earnings by reducing the amortisation charge in future periods. While the companies generally claim these are non-cash charges, this is a misleading statement as they reflect a write-off of cash investment/spend in prior periods. So, while they do not necessarily relate to cash payments in the current period, it is still a charge against real capital that was invested by the company.

Because the write-downs are generally treated as a one off by the market, this spend is quite often never really fully factored into analyst valuations.

read more - https://rogermontgomery.com/heres-something...rs-to-consider/



--------------------
The herd instinct among forecasters makes sheep look like independent thinkers. Edgar Fiedler

If the freedom of speech is taken away then dumb and silent we may be led, like sheep to the slaughter. George Washington
 
nipper
post Posted: Jul 2 2019, 04:54 PM
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In Reply To: nipper's post @ Jun 28 2019, 11:08 AM

QUOTE
so, how long can this ... rally last?

Not long.... the "fractional banking" system doesn't lend itself well to declining interest rates.
QUOTE
Investors fled the major banks over fears their margins would be squeezed after the Reserve Bank of Australia cut the cash rate to a record low 1 per cent.

... The local sharemarket had been trading firmly higher through the day and initially jumped after the RBA cut rates to a fresh record low of 1 per cent. However, sharemarket's gains were crimped after investors in the major banks headed for the hills.

"The closer interest rates get to zero the larger the impact of each rate reduction on banks net interest margin," said Lazard Asset Management portfolio manager Aaron Binsted.

"In this low credit growth environment, a further rate reduction, even with less than 100 per cent pass through to borrowers, is enough to dent earnings growth across the big four."

The major banks wiped a collective 21.8 points from the benchmark index. Commonwealth Bank shares fell 1.5 per cent to $81.05, Westpac slid 1.6 per cent to $27.93, ANZ closed 1.5 per cent lower at $27.87 and NAB dropped to $1.2, down 26.49 per cent.

The smaller lenders were also weaker.
market was up, otherwise.



--------------------
"Every long-term security is nothing more than a claim on some expected future stream of cash that will be delivered into the hands of investors over time. For a given stream of expected future cash payments, the higher the price investors pay today for that stream of cash, the lower the long-term return they will achieve on their investment over time." - Dr John Hussman

"If I had even the slightest grasp upon my own faculties, I would not make essays, I would make decisions." ― Michel de Montaigne
 
 


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