Can NAB make a go of the Goldman Sachs JB Were broking business?
Welcome back!
During the week NAB purchased 80.1% of Goldman Sachs JB Were’s brokering business for $99 million but will be purchase be another bank debacle for the big four banks.
The brokering business has approximately 22,000 customers and while consuming around 8% of the domestic broker market in Australia is far from the hey-day of JB Were’s peak. The decision for NAB to purchase a controlling interest is a bid decision in light of the broader failures experienced by all the banks will wealth management operations.
But can NAB make a success of this? NAB have arguably bought the operations in a downturn which will benefit the bank but the business is likely to experience significant leakage of major brokers and broker clients as the leading brokers start their own operations or get snapped up by other majors like Macquarie.
The old days of brokering houses being a goldmine appear to be long gone and unless NAB can find a way to create ‘rivers of gold’ again from the operation then it’s likely it will be a failure. Althoughs JB , at a cost of $99 million is is marginal in the scheme of the banks overall operations both in positive and negative terms.
What do you think of the decision to buy the Goldman Sachs JB Were brokering operations? Are you a client who will stay with them under NAB or will you leave? Share your thoughts in our comments section.
ANZ close to securing RBS Asian Assets
Reports indicate that ANZ may be close to securing the key Asian assets of the Royal Bank of Scotland (RBS). ANZ have kept no secret of the desire to secure the assets but are keeping their lips tight at the moment and not revealing any information ahead of a possible announcement next week.
Should ANZ secure the assets it will be a massive boost for the plans of ANZ Bank to develop a super-regional bank that will better help it differentiate itself from the other Australian banks.
NAB seek $2.75 billion share placement
The NAB in a quarterly update announced a $2.75 billion capital raising, $2 billion from institutional investors and $750 million through a retail share offer.
The share placement will increase tier one capital from 8.2% to 8.8% in what was a mild surprise to the market and indicated that we have not sen the end of the bank capital raisings.
The announcement makes the recent ANZ announcement even better timed as they managed to jump in first to secure capital with others likely to come back to the table for further funds.
The bank will also raise up to $750 million through an offer of new shares to retail investors.
NAB used the market update to also indicate tat they have taken a charge for bad and doubtful debts which rose to $1.06 billion for the three months to 30 June 2009. The announcement indicated that the bank was being hit hard by the market crunch and general rise in bad debts.
The equity raising will go some way to secure further liquidity for the bank at a time when the Australian economy has not hit the peak of the downturn.
Should you fix rates on your mortage?
Well do you think you should fix your mortgage now? Well with interest rates near the low point in the cycle then it could be the perfect time to fix your mortgage.
Traditionally when the economic talk is still negative and the rumours in the market are for the RBA to make further cuts it is almost perfect time to lock in rates. The markets have all kicked higher with the hope of the economy recovering through 2009 but home owners should not wait till the economy improves as the RBA will but trying to slow the rapid growth that low interest rates will generate.
While interest rates are still low by historical standards it’s hard to imagine they will be at or near similar levels in two years time as the economy is likely to be back in full gear by then.
If your happy to take your chances and ride the cycles stick with the variable rate but if you want any mortgage certainty consider locking in now. Remember it has been along time since the official cash rate was anywhere near current levels.
NZ Tax Bill to hot Australian Banks
New Zealand has been an unhappy hunting ground in recent years for Australia’s top four banks and it seems to be the case again with the big banks looking at a AUD$1.9 billion tax bill after a ruling by the New Zealand High Court.
The decision was against the National Australia Bank regarding sic structured finance transactions. While an appeal is a given the NAB are looking at needing to raise capital to cover the $550 million approx provision.
Justice John Wild said the transactions had “no commercial purpose or rationale”, other than to use the bank’s tax capacity to generate exempt income. The decision puts not only NAB but CBA, Westpac and ANZ on a collision course with regulators and a similar outcome.
It would seem ANZ and Westpac have adequate provisions already in case whereas CBA was less clear.
ANZ raise $2.2 billion in Share Purchase Plan
The ANZ Bank has pulled off an amazingly successful share purchase plan raising $2.2 billion from retail investors.
The retail share placement is the largest in Australian corporate history after a planned raising of $350 million. Investors in ANZ were allocated their full entitlement at $14.40 per share. The ANZ share price closed down over 2% today at $15.89 indicating some retail investors were already taking profits.
The share purchase plan takes the ANZ tier one capital to 9.5%, the largest of all the banks.
ANZ eye RBS Asian assets after $2.5 billion capital raising
ANZ has gone to the market and secured $2.5 billion in the space of 24 hours to support grand plans for securing the key assets from the Royal Bank of Scotland auction of it’s asian banking assets.
ANZ hopes to secure $2.85 billion in all, with a further $350 million to be secured through a share purchase plan. ANZ is competing with HSBC and Standard Chartered for the RPB assets but rumours indicate both failed to submit their bids for the assets by the cut-off date.
This would put ANZ at a strong advantage if the RBS wanted to quickly liquidate their assets. The raising of $2.5 billion was three times oversubscribed and at $14.40 per share, a discount of 7.5% to the stocks last trade of $15.57 before the announcement.
If successful in the bid the ANZ would secure a stronger position in Asia and would be well on the way to developing into the super-regional bank that CEO Mike Smith has been indicating since taking the helm.
Which Australian bank has a plan for growth?
The Australian banking sector like the global banking sector has become risk averse and in a time where banks around the world are falling over the Australian banking sector still looks strong.
But if you were thinking a few years out and wanted to invest now, where would you put your money? The Australian banks have mostly followed the same path od de-risking and focusing on Australia so if you were investing you would want to consider what growth options they are aiming to access.
It would appear growth options are limited in Australia but and that NAB, Westpac and Commonwealth Bank all seem to be aiming at Australia for the future both short and long term. ANZ is the only bank that is aiming for a different path, they see growth in Asia as the major driver in the future.
ANZ have a defined strategy under Mike Smith, much like when McFarlane was in charge in the early days at ANZ. ANZ soon took the mantle of the best managed bank under McFarlane and I expect in a few years time people will be singing the praises of Smith.
Asia is a developing region and for business it is an area that needs to be invested in to benefit from growth as opposed to investing in old growth markets of Europe and Australia.
So which do you think is the best Australian bank if you are looking at a three to five year perspective?
Westpac leads in Australian banking sector
Westpac showed why it’s the most highly regarded Australian bank with a solid $2.18 billion profit amid a rise in debt provisioning to $1.6 billion on an increase in bad loans.
The interim result to 31 March indicated the rising bad debt impact on Westpac as has recent results for all the major banks. Gail Kelly the CEO of Westpac indicated that the economy was likely to worsen but Westpac was well prepared for the tougher conditions ahead.
Westpac anounced a cut to the first half dividend from 70c to 56c to preserve capital in what is stil very tough banking conditions. Of particular concern to Westpac was the increase in provisions of $156 million in the margin lending operations. In a positive, Kelly indicated the margin loan book had been reduced from $6.6 billion to $4 billion indicating this was managed well.
After seeing all the results it would appear Westpac delivered the best result overall and appear to be well supported by the strong focus on Australia but while they are managing risk what are their growth plans?