Opes Prime continues to haunt ANZ
Welcome back!
US law firm Vianale & Vianale has filed a lawsuit against the ANZ in the US as the nightmare that was Opes Prime continues to linger for the ANZ.
The lawsuit filed on 29 December 2008 on behalf of purchasers of ANZ Bank’s ADR’s during the period of 2 March 2007 to 27 July 2008 continues the debacle that was Opes Prime.
Vianale & Vianale allege ANZ’s top executives violated the US securities laws by failing to adequately disclose the range of risks that arose from loans to Opes Prime.
ANZ have announced that will defend the lawsuit.
ANZ signs up Suburu Australia for car financing
ANZ’s Esanda has signed up Suburu Australia to the financing plan of the Federal Government’s $2 billion proposal to save the local car industry.
Subaru Australia’s current finance partner, General Motors Acceptance Corporation Australia (GMAC) will conclude their existing arrangement on 16 April 2009. The new 3 year arrangement with Esanda will take place after the current arrangement with GMAC concludes.
Australian Bank Watch Changes
I have made some minor changes to the Australian Bank Watch site. You will note on the left hand sidebar I have expanded the selection of variable home loan rates to include a number of leading Australian banks outside of the top 4.
I have also added the cash rates for the US Federal Reserve, European Central Bank, Bank of England, Bank of Japan and Reserve Bank of New Zealand. These complement the existing Reserve Bank of Australia cash rate that is also displayed. This will help visitors more quickly make a comparison between global central bank interest rates.
I have importantly added a date for when the interest rates were last revised. This should only be used as a guide and the interest rates should always be checked on the bank website which I have links attached for ease of navigation.
It is difficult to keep up to date with all the interest rate changes and they are quite liquid at the moment so I thought it wise to revisit the date I last updated. I will revise these on average once a month but also will update upon any Reserve Bank rate decision.
I have also expanded the links to a number of additional banks that were not previously listed and links to the major central banks.
I hope you find the changes of use and please direct any feedback or things you thing Australian Bank Watch should include to wes@ausbankwatch.com
Happy New Year!
2008 Bank Consolidation 2009 Non-Bank Oblivion
2008 was an amazing year in hindsight. We saw massive consolidation across the global economy particularly in the once dominant banking sector and perhaps we have or are experiencing the worst financial crisis since the great depression.
Only time will tell on that last one but for Australian banks it was clearly a year of consolidation and a period that has once again tipped the weight in favour of the big four banks Commonwealth Bank, ANZ Bank, National Australia Bank and Westpac.
In fact Westpac was the big winner of the year, now Australia’s highest capitalised bank after their successful takeover of former No 5 St George Bank.
Commonwealth Bank also picked up a few through the year with the latest deal the Wizard Home Loans purchase, they also bought 33% of Aussie Home Loans and swallowed Bankwest.
ANZ Bank consolidated it’s position with new CEO Mike Smith re-focusing the bank on tigher fiscal discipline after early financial setbacks through poor lending practices. ANZ also pressed on with it’s focus on Asia as the future development pathway of the bank.
The National Australia Bank did not sit on it’s hands as it consolidated it’s reputation and focused once again on core business in the light of the continuing deterioration in credit markets.
So what’s ahead for 2009, clearly with the crippled financial markets for smaller non-bank lenders further consolidation with occur. It is also fair to say that the regional banks Suncorp, Bendigo Bank and Bank of Queensland are likely to merge or will be swallowed by the big banks.
2009 will also likely see the death of the non-bank lender. These have been virtually damaged beyond repair in 2008 but will disappear or be bought for a pittance.
One last statistic to leave you with, in 2007 the big four banks had 45% of the mortgage market, at the end of November 2008 it was almost 90%. Don’t expect bank margins to reduce anytime soon.
Commonwealth Bank snatch Wizard from NAB
The Commonwealth Bank have masterfully pulled off an amazing last minute deal to purchase Wizard from under the nose of NAB.
The National Australia Bank had all but sealed the deal when the Commonwealth Bank becked Aussie Home Loans sealed the deal. The Commonwealth will pay $26 for Wizard, a far cry from the near $500 million paid by exiting owner GE Money only 4 years ago.
The deal secures Commonwealth Bank the $2 billion worth of prime residential mortgage’s and offers the potential for another $2 billion worth should they exercise the option.
Aussie Home Loans will buy Wizard’s brand and existing retail distribution network.
GE Money have announced plans to exit the Australian and New Zealand lending market to focus on their core business.
Australian Bank Watch Update
The Australian Bank Watch site will be a bit quiet over the next two weeks leading up to Christmas. Due to other commitments I am unlikely to be able to post much news until after Christmas.
I will endeavour to update the site where possible in days leading up to Christmas.
All the best and Season’s Greetings.
Wes
Australian Banks interest rate margins expand
With RBA interest rates now at 4.25%, the same rate that was in place in 2002 it is easier to make an assessment of the margins being charged by the Australian banks.
In 2002 the average standard variable interest rate offered by the big four banks was 6.07%. The current average standard variable rate is 6.82%, an increase of 0.75% from the levels of 2002.
The banks will put this down to the global financial crisis and while funding costs have indeed increased it also reflects an amount of margin creep.
It is estimated that about 90% of all lending is currently being done through the big banks while has heavily impacted the smaller lenders and the lack of funding options has rendered the smaller lenders to be unable to compete in the current environment.
Hence these small lenders have had to increase rates as they are unable to source funds as cheaply as the big banks. This has impaired the local lending market and once again given the banks the upper hand once again against the consumer.
Commonwealth shareholders have a week to forget
The Commonwealth Bank sank further during the week as the bank faltered behind it’s rivals and sank further down the pecking order through delayed activity.
The Commonwealth Bank fell by 14.2% to $28.15 over the week as it’s rivals got the jump on the bank seeking funding through bond and retail share offerings to boost their tier 1 capital ratio.
The Commonwealth Bank placed a $750 million placement to Merrill Lynch to redeem their PERL 2 securities in March 2009. The plan will increase the tier 1 capital to 7.8% from 7.5%.
The bank also announced a $500 million retail share purchase plan for shareholders that will be revealed in February.
The actions of the Commonwealth Bank have all been too brief and late for the market as it has lost valuable credibility in the market to the other leading Australian banks. The share purchase plan is still not likely to boost the tier one capital ratio to the levels of the other banks.
Westpac reveal rising bad debts at AGM
The Westpac AGM through the week revealed the current progress of Australia’s largest bank in the face of the current global financial crisis.
Chairman Bill Evans revealed that Westpac will have a challenging year ahead where bad debts are set to rise from current levels. Westpac has provisioned $1 billion for bad debts but it was revealed this was certain to rise.
Westpac is arguably the least exposed of the Australian banks and is best placed to deal with any ongoing bad debts but is far from immune. The bank revealed it would cut back lending to already leveraged customers and would carefully consider all lending practices.
Gail Kennedy the CEO of Westpac revealed impairment charges to average loans had risen by 12 basis points to 31 basis points for fiscal 2008.
Westpac recently increased it’s tier one capital to above 8% with a $2.5 billion raising.
It was also revealed that once the intergration of the St George merger occurs the cost to income ratio will drop to below 40%. This is a traditional ratio for an Australian top tier bank.
Bank of America to slash workforce by 35,000
To further underline the ongoing financial turmoil caused by the global financial crisis the Bank of America announced plans to slash it’s workforce by up to 35,000 over the next three years.
The cuts come amid the takeover of Merrill Lynch and the ongoing issues in the US banking system. The cuts are forecast around 10% of the total workforce.