NZ Tax Bill to hot Australian Banks
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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.
Australia’s Big 4 AA Rated
Australia’s Four Pillars in the banking sector has stood up amazingly well in the face of the global recession with the Commonwealth Bank, ANZ, Westpac and National Australia Bank all maintaining AA rated despite the global slump.
The big four remain as only eight international banks rated AA in the world.
CBA announce $2.57 billion first half profit
The Commonwealth Bank announced a profit of $2.57 billion, a rise of 9% in the toughest banking conditions in two decades for the economy.
The first half profit was a surprising result considering the low expectations for the domestic banking sector which is outperforming the major banks of the world.
CBA have maintained a dividend of $1.23 but flagged that future cuts may be considered based on a deteriorating domestic economy in the second half. With a tier 1 capital of 8.75% the bank is in a healthy position which will enable it to maintain a solid balance sheet but that alone will not stop higher impairment costs going forward.
The result of the remaining banks will be interesting to see if the same message is passed on that dividends are under threat, perhaps Westpac may be in a position to give a succint and accurate assessment of it’s future prospects when it reports.
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.
Commonwealth Bank hit 3.5 year lows
The Commonwealth Bank today hit a three and a half year share price low over broker downgrades and concerns about debt provisioning after being caught up in a number of corporate collapses.
Several major brokers have downgraded the Commonwealth Bank in recents days as concern has grown that that they are not as safe as previously expected.
Previously the ANZ and National Australia Bank were considered high risk while Westpac and the Commonwealth Bank were considered lower risk. But in recent days the National Australia Bank has undertaken a $3 billion capital raising and funds have started to flow from the Commonwealth Bank into NAB.
The Commonwealth Bank is also burdened by having to raise in the vicinity of $14 billion to replace BankWest funding. The Commonwealth will be able to secure the funding but in the current climate this could be at a considerable premium.
In another negative the Commonwealth Bank is also trailing it’s rivals with a tier 1 capital ratio of 7.6% compared to the recently increased National Australia Bank at 8%.