Australian Banks to cull jobs
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Australian banks are about to hit the panic button with a new host of job cuts across the sector.
The biggest cuts have been flagged with 2000 job cuts coming from the Westpac & St George merger that was approved by shareholders today.
The National Australia Bank yesterday cut 179 technology jobs, while ABN Amro will cut 150 jobs as part of a review by the Royal Bank of Scotland.
A host of other financial institutions such as Commonwealth Bank, Suncorp, Merrill Lynch and Macquarie Bank have either frozen recruitment or indicated job cuts are likely.
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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%.
NAB seek $3 billion capital raising
The National Australia Bank has cashed in on the market to seek up to $3 billion in capital to shore up it’s capital requirements and balance sheet.
The capital raising is at a share price of $20, which is a discount to the current share price.
It has been reported that demand from institutions has been strong and that the capital will take away the need to underwrite their dividend reinvestment plan for 2008.
The NAB will offer shares to retail clients at the institutional price up to a package of $10,000.
The additional capital raised will increase the NAB Tier 1 ratio to 8% which would be very well received by the market.
NAB cut rates by 0.62% to 7.74%
The National Australia Bank (NAB) became the third bank to announce a cut to their variable standard bank rate to 7.74%, a reduction of 0.62% from their current rate of 8.36%
The NAB reduction takes effect on 10 November 2008.
The ANZ Bank and St George are yet to announce a cut following the RBA announcement of a 0.75% rate reduction yesterday.
NAB Profit Announcement - down 0.9%
The National Australia Bank has announced their full year profits this morning with a 0.9% fall due to provisioning relating to their US mortgage exposure.
NAB announced a net profit for the year ended 30 September 2008 of $4.54 billion down from $4.58 billion the prior year.
A more accurate profit figure the cash earnings fell 10.7 per cent to $3.92 billion, this was in line with NAB’s previous guidance.
The result included a $1.01 billion provision for possible losses on a $1.2 billion portfolio of collateralised debt obligations (CDOs), which were backed by US mortgages.
The National Australia Bank also took a $100 million hit after it took out additional hedging.
To reflect the tightening economic conditions their bad and doubtful debt charges were up 55 per cent.
NAB mentioned in the analyst briefing that their net interest rate margin of 2.42% for fiscal 2008 would be difficult to achieve in 2009 due to the skyrocketing cost of deposits.
The result generally indicates the strength of the Australian economy which has kept the core of NAB solid, the result is sensational when compared with overseas banks who have been smashed by defaulting loans and the broader credit crisis.
The NAB announced a rise in the final dividend by 2c to 97c fully franked, or 194c for the year.
NAB cut variable rates by 0.20%
The National Australia Bank announced they are following ANZ and Aussie Home Loans in cutting interest rates with a 0.20% reduction to their standard variable rate and some fixed mortgage rates by 0.30%.
Ahmed Fahour echoed the comments from the ANZ; that funding costs have reduced for Australian banks mostly on the back of the initiatives of the Australian Government which has reduced the rate of wholesale funds to local banks.
Of the major Australian banks the Commonwealth Bank and Westpac have yet to make a decision on any further reductions to their standard variable rate.
The National Australia Bank rate change takes effect on 27 October 2008.
Click on NAB to read the Media Release.