2008 Bank Consolidation 2009 Non-Bank Oblivion
Welcome back!
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.
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.
Best Australian Deposit Rates
Here at Australian Bank Watch we have spent some time looking for some of the best Australian deposit rates available whether they be at call savings accounts, cash managements account or online savings accounts.
It would be of little surprise that none of the major Australian banks failed to feature in the top handful but expect the major banks to show an increased effort to attract savers.
The major banks have so far concentrated on term deposits but the Commonwealth Bank have recently been advertising their Cash Management account where they offer 5.75%, remember this is above the RBA rate of 5.25%.
However, a number of other well known institutions are offering better deals.
AMP is the best with an eASYCash Management account that is offering 7.35%, the Bank of Queensland also offer an excellent rate with their WebSavings account that has an introductory rate of 7.20%.
The ANZ backed One Direct offer a high interest saver account that offers a solid 7% return while the superannuation backed Members Equity have a Online Savings account offering 6.50%.
They are followed by other major institutions such as St George’s Direct Saver with 6.50%, Adelaide Banks Cash Management Trust with 6.35%, Bankwest with a Telenet Saver account offering 6.25% on a promotional rate and Macquarie Bank with their Cash Trust offering 6.25%.
At a time when the world sharemarkets are in major upheaval perhaps now could be a good time to re-allocate what available cash you have into one of these high interest accounts.
St George CEO quits
The St George Bank CEO Paul Fegan resigned today in advance of the Westpac takeover that will commence on 1 December 2008.
Fegan officially departs St George on 8 December and will leave with a termination payment of $2 million after 12 months in the top job with the bank.
The Federal Court today also approved the Westpac share scheme to takeover St George Bank, all the hurdles have now been cleared.
Australian Banks dumped on sharemarket
Growing fears of a major recession in Australia hit banks heavily today as all bar the National Australia Bank were heavily sold off as thr market tumbled today by 5.4%.
Westpac which was previously seen as the most stable domestic bank was sold off heavily falling over 11% to $16.97 as fear gripped the market. St George who announced today that shareholders approved the Westpac merger fell by over 9%.
ANZ Bank fell just under 9% to $14.05 and the Commonwealth Bank fell nearly 6 per cent to $33.00 after warning that recent company collapses will impact upon their first half results.
The National Australia Bank faired best falling 2.66% to $19.40.
The sell-off follows market fears of further negative announcements from banks regarding their debt blowouts and likely capital raisings similar to that of the National Australia Bank earlier this week.
St George shareholders approve merger with Westpac
St George shareholders today have approved the merger with Westpac at an extraordinary general meeting in Sydney.
In excess of 94% of shareholders approved the merger with Westpac where they will receive 1.31 shares for each Westpac share held and a special dividend.
Banks confirm Allco Finance Group exposure
Since Allco Finance Group went into voluntary administration yesterday and today saw a number of Australian banks revealing their exposure to the failed company.
Westpac have announced an exposure of $200 million while the Commonwealth Bank have announced a $170 million exposure.
St George Bank also revealed an exposure to the group that imploded during the credit crisis.
Is this the start of the rot that will force banks to deliver increasing announcements about bad debts? Share your comments.
St George Bank cut rates by 0.62% to 7.74%
St George became the final of the major Australian banks to announce an interest rate reduction after announcing a 0.62% cut.
The rate cut by St George Bank brings it into line with the other major banks including ANZ, NAB and the Commonwealth Bank with a rate of 7.74%. Westpac have the best standard variable rate on offer at 7.71%.
The St George Bank change takes effect from 14 November, the same as the ANZ Bank.
Treasurer approves Westpac takeover of St George
The Australian Treasurer, Wayne Swan has approved the proposed takeover of St George by Westpac. The Treasurer has imposed some strict covenants upon the takeover that Westpac must insure all St George branches and ATM’s along with their own remain open.
The takeover still requires St George shareholder approval but has achieved all other hurdles. Should the takeover proceed Westpac will become the second largest bank in Australia.
St George reduce variable by 0.21%
St.George Bank has joined Westpac today in announcing it was lowering its standard variable home loan interest rates by 0.21% pa to 8.36% pa.
The change to the standard variable rate will take effect on 31 October 2008.