NAB, Commonwealth & St George join in cutting rates
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The National Australia Bank (NAB), Commonwealth Bank and St George joined Westpac and ANZ today by announcing rate cuts to their standard variable rates.
All major banks have now passed on the full 100 basis point cut to consumers.
NAB and Commonwealth have slashed their rates to 5.74% while St George have lowered their rate to 5.89%, the rate changes are effective from 13 February.
NAB and Commonwealth were at pains to point out that future interest rate cuts by the RBA may not be passed on in full to consumers as the demands and pressures on bank margins continue.
Commonwealth Bank in profit upgrade
The Commonwealth Bank surprised the market with a profit upgrade of 20% above market expectations and announced a likely profit of around $2 billion for the half.
The announcement comes on the back of strong credit growth and strong deposit growth. The profit announcement due on 11 February is still likely to be about 16% less than the previous profit of $2.38 million for the December 2007 half but indicate the negativity towards the banks in the market.
The Commonwealth Bank share price surged today on the positive news.
RBA cut rates by 100 basis points
The Reserve Bank of Australia cut rates by 100 basis points today to take the official cash rate to 3.25%. The cut comes on the same day as Prime Minister Rudd announced a $42 billion fiscal stimulus aimed at short and long term benefit to stimulate the Australian economy and protect jobs.
The RBA have now cut the cash rate by 300 basis points since September 2008 to the lowest point since 1964.
Next month is not likely to see as greater cut as those of recent months as the RBA look towards the Government’s fiscal stimulus to kickstart the domestic economy from the global turmoil inflicting markets.
ANZ push further into China & Indonesia
ANZ continues to drive it’s growth strategy in China with two big announcements for the week. ANZ announced Christine Ip as the new head of banking operations in China and increased it’s stake in the Indonesian bank PT Panin Bank.
The ANZ has been a long term investor in the PT Panin Bank and took the opportunity to buy another 8.4% of the bank from institutional investors for US$114 million. The increased holding takes ANZ to 38.3% ownership of the seventh largest bank in Indonesia.
Meanwhile, ANZ announced Christine Ip as the head of operations for the China banking operations in what ANZ is aiming to become one of the top four foreign banks in China.
Christine Ip joins ANZ from Standard Chartered Bank and has strong credentials and contacts to drive ANZ in China.
Will investors snap up Westpac at $16?
With the Westpac share purchase plan due to close on 30 January 2009, questions are beginning to mount on whether investors will fully subscribe to the $500 million retail offer.
Investors have started leaving the market again this week after a promising start to 2009 but the global crisis has started to bite hard and the signs for a very tough 2009 for Australia is looking likely.
Households have reduced spending and are tightening budgets as the fear of job losses in the economy increases. Some financial analysts are forecasting unemployment at 9%, against the current 4.5%. If this does not strike more feat into the economy then I don’t know what will.
The question for investors is why invest today at $16 when Westpac may be $13 by mid-year. Westpac closed on Friday at $16.11.
Westpac Retail Share Offer
The Westpac retail share offer opened on 5 January 2009 and closes for existing eligible shareholders on 30 January 2009. The Westpac offer will raise approximately $500 million from retail investors and will boost the banks capital levels.
The retail offer supplements the recent $2.5 billion institutional share placement that boosted Westpac’s tier one capital levels to in excess of 8%.
Westpac are offering retail investors shares at $16 with the option to obtain them lower should the share price fall below $16. Westpac will determine the share price of the offer based on the daily volume weighted average of the share price of the 5 trading days up to and including the 30 January 2009. Thus shareholders will pay $16 at the most.
Shareholders have been offered to take up parcels of $1000, $2500, $5000, $7500 or $10,000. Shares will be alloted on 11 February.
Westpac have attached one proviso to the offer that if in excess od $500 million is subscribed for in the offer they reserve the right to scale back applications.
The offer will dilute the earnings per share for 2009 by several percent but will not have any impact on the Westpac dividend unless Westpac change the payout ratio. This would be very unlikely and would result in a heavy sharemarket sell-off should such an action occur.
Opes Prime continues to haunt ANZ
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.
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.