WEEKLY BANKING NEWS
29 October 2008 - Deposit guarantee clarified but questions remain
Source: The Australian Financial Review
The deposit guarantee threshold under which there is no fee is one million dollars per depositor, per bank the government said last night. The clarification came amid advice from planners and analysts to companies, councils and individuals with more than one million to spread their money around to avoid the fee. Only the balance above one million dollars will attract the fee said the Commonwealth Treasury. For a deposit of $1.5 million in a big four AA rated bank, $500,000 would be charged a fee of 0.7 per cent. In an A rated bank such as Macquarie the fee would be 1.0 per cent. Lower and unrated institutions would be charged 1.5 per cent. Foreign bank branches have belatedly been included in the guarantee. The government is under pressure to clarify how it will stop foreign depositors moving money into Australian branches of foreign banks and benefiting from the guarantee.
29 October 2008 - Record profit posted by St George
Source: The Age
St George announced a cash profit of $1.32 billion, up 14 per cent on last year. Bad and doubtful debt expenses rose by 63.5 per cent to $291 million. Total income was up 9.4 per cent to $3.58 billion in 2007-2008 with customer satisfaction ratings also up to 75 per cent, compared to the other major banks who scored an average of 70 per cent. St George's Tier 1 capital adequacy ratio was 6.6 per cent, above the required minimum of 6.25 per cent. The St George board yesterday reiterated its recommendation to shareholders to accept the Westpac takeover offer.
29 October 2008 - Suncorp for sale again
Source: The Age
Suncorp said it will cut dividends to shareholders from last year's $1.07 dividend and confirmed it was willing to sell its banking division which analysts say is worth $6 billion. Last month Suncorp is believed to have talked to all four big banks about a possible sale with ANZ the only bank to make a formal bid at $3 billion for the banking assets of Suncorp.
29 October 2008 - Westpac/BT have learnt the liquidity lesson
Source: The Australian
Westpac's wealth management subsidiary BT Investment management has sustained a $6.6 billion, or 16 per cent, fall in funds under management to $35.3 billion in the year to September, due to the meltdown in equity and debt markets. BT chief executive Dirk Morris said the firm had not experienced a mass exodus of funds but inflows had slowed. Mr Morris said he was concerned about the contagion effects caused by funds freezing their assets. BT said its balance sheet was strong enough to withstand and even respond to market volatility. Mr Morris said BT and Westpac had learnt lessons from liquidity issues that damaged their brand in the 1990's. BT reported a net profit after tax of $40 million on revenues of $147 million.
28 October 2008 - Bendigo boasts strong deposit growth
Source: Herald Sun
Bendigo and Adelaide Bank increased retail deposits by $2 billion last financial year to $23.6 billion. Managing Director Rob Hunt said the bank's retail deposits were the strongest of any Australian bank, despite the merger with Adelaide Bank reducing the group's reliance on retail deposits as a funding source. Bendigo posted a 40 per cent increase in net profit to $170.5 million with dividends to shareholders up 12 per cent to 65 cents. Branch numbers are expected to grow 20 per cent from 223 community branches currently. Retail deposits now comprise 73 per cent of the group's income, down from 92 per cent before the merger with Adelaide bank. Bendigo plans to increase deposits to 80 per cent of income to allow it participate in wholesale money markets.
28 October 2008 - CBA shocks investors by freezing CFS trust
Source: Business Spectator
Commonwealth Bank has shocked financial advisors, markets and investors by stepping back from the undertakings of its Colonial First State mortgage trust subsidiary and allowing it to suspend redemptions. As a consequence of the CBA decision, all bank owned operations that are not directly part of the bank, including their finance companies, may be called into question. It was open to the bank to purchase Colonial First State Mortgage Trust's mortgages and the decision not to do so is now being interpreted as a political one to place pressure on the government.
28 October 2008 - Government rejects extending deposit guarantee
Source: The Australian
Confusion reigns in markets over the government's guarantee on deposits in authorised deposit taking institutions particularly in relation to short-term cash management trusts and similar asset classes, says UBS Wealth Management. The Government is expected to resist further calls to extend the guarantee and has already rejected calls to extend the guarantee to investment products such as mortgage funds. Major banks are expected to shun the government guarantee for some capital products including their bank bills because the cost will lower returns to investors.
28 October 2008 - St George will rejuvenate Westpac
Source: The Australian Financial Review
Westpac will be rejuvenated by the St George takeover says Southern Cross Equities analyst TS Lim. "If you look at Westpac, the retail banking hasn't been very good," said Mr Lim, "This is a very good deal for Westpac." The combined group will be Australia's second biggest bank, after Commonwealth, although it will retain separate brands. St George is expected to announce profit growth of around 10 per cent tomorrow in its last result before being taken over by Westpac. St George shareholders will receive 1.31 Westpac shares for each St George share they own, a deal that equals $26.19 per St George share, lower than yesterday's closing price of $26.39.
28 October 2008 - Westpac on NSW sales blitz
Source: The Sheet
Westpac has embarked on a 'NSW sales blitz' campaign on home loans. Westpac is offering 7.66 per cent home loan interest rates for first home buyers, no establishment fees and a $600 rebate for refinancers. The campaign will end on the 7th of November.
27 October 2008 - Aussie Home Loans cuts rates again
Source: Aussie Home Loans
Aussie Home Loans has cut its basic variable home loan rate by 0.50 per cent to 7.59 per cent. The standard variable rate is 8.09 per cent. Aussie is also offering no application fee and free building insurance for the first 12 months. Aussie's one year fixed rate is down 1.7 per cent to 6.79 per cent.
27 October 2008 - Govt guarantee creates surge in bank deposits
Source: Sydney Morning Herald
Bank deposits increased last week by 6 to 9 per cent as money rushes into the financial institutions protected by the federal government's deposit guarantee scheme. Much of the growth in bank deposits is said to be coming from the unprotected mortgage funds. The Finance Minister, Lindsay Tanner, said the Government was looking at what could be done for the mortgage funds but would not say whether it would extend the guarantee. "We believe these measures will work," he said. The funds want banks to rein in their advertising featuring "safe haven" claims.
27 October 2008 - GE Money cuts and runs
Source: The Australian Financial Review
GE Money is closing its home lending, motor finance and small business lending divisions in Australia and New Zealand, costing 335 staff their jobs. GE owned Wizard Home Loans is not affected by the decision. GE will continue with its in store credit business, retail finance and insurance products. GE sources all its funding from wholesale credit markets. Three weeks ago parent company General Electric announced it was tightening lending standards in order to maintain a AAA credit rating.
23 October 2008 - ANZ profit down 21 per cent
Source: The Sheet
ANZ yesterday reported a net profit of $3.3 billion for the year to September, 21 per cent down on the 2007 results. The provision for credit impairment rose from $522 million in 2007 to $1.9 billion. Non-performing loans rose $1.06 billion to $1.17 billion. Most of the bank's performance measures deteriorated. Return on equity fell from 19.6 to 13.2 per cent (and to only 11.2 per cent in the second half). Return on assets fell from 1.15 to 0.76 per cent. The expense to income ratio was up from 43.7 to 46.8 per cent. The net interest margin fell 18 basis points from 2.19 to 2.01 per cent. Operating expenses of $5.7 billion were up 15 per cent on the previous year.
23 October 2008 - Banks go to Canberra for crisis talks on guarantee
Source: The Australian
The chief executives of the Commonwealth Bank, Westpac, National Australia Bank and ANZ met with prime minister Kevin Rudd and commonwealth treasurer Wayne Swan on the crisis in financial markets last night. Money rushing out of unguaranteed cash management trusts and other funds into guaranteed bank deposits had turned into a "flood" on Wednesday said senior bankers. Australian Financial Markets Association said foreign banks with local branches not included in the Federal Government's guarantee, had bled "hundreds of millions of dollars" in the past two weeks. APRA executive general manager Wayne Byers said the authority was monitoring the shift of funds. The RBA is thought to favour a threshold for free guaranteed deposits of $500,000 to limit the widespread dislocation that is occurring in the financial system, however that is unlikely as the government has already committed to free guaranteed deposits of one million dollars.
23 October 2008 - CBA tree dispute could be costly for Bendigo
Source: Herald Sun
Adelaide Bank, now owned by Bendigo Bank, is fighting Commonwealth Bank over claims to the assets of failed investment scheme provider Environinvest. Bendigo's total exposure to schemes managed by Environinvest equal about 20 per cent of the regional bank's total profit. CBA has registered charges over land that was used to grow plantation trees. Bendigo is asserting its rights to the trees planted on the land. Creditors will meet in Melbourne this morning. The scheme owes $70 million to 300 investors.
23 October 2008 - Swan approves Westpac plus St George
Source: The Sheet
Westpac yesterday received the formal approval of Wayne Swan, Australia's Treasurer, for its planned takeover of St George Bank. The approval comes with, including maintaining branch and ATM numbers, retaining the brands of St George and Bank of South Australia, "dedicated management teams" for St George and Westpac retail banking distribution and a "corporate presence" at the former head office of St George in Kogarah. Westpac appears to still be three or four weeks away from letting the management teams of the two banks know which job they will hold, if any, in the merged organisation. Shareholders of St George will vote on the scheme of arrangement for the takeover in three weeks.
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