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ANZ Chief Calls For An End To The Politics Of Banking
Mike Smith, chief executive of Australian banking major ANZ says the Australian economy is not being helped by politics and called for an end to criticism of the banking industry and a focus instead on helping the economy achieve long term growth.
Mr. Smith made his comments following months of intense criticism for politicians regarding rising mortgage interest rates in response to higher costs of funding.
Mr. Smith also expressed dissatisfaction with proposed new banking regulations that will be implemented worldwide, arguing that such stringent requirements come at the worst time for the global economy.
“I have to be blunt here and say politics isn’t helping, we need to bring more focus to the long-term opportunities and challenges facing Australia, rather than short-term point scoring,” M, Smith said.
ANZ reported a 5.7 per cent increase in cash profit for the December quarter, which stood at $1.48 billion.
Mr. Smith maintained a cautious outlook for the global economy saying that the global financial crisis had entered a “second and more protracted phase”
Mr. Smith suggested that the poor international economic climate has resulted in both Australian consumers and business displaying cautious behavior.
Additionally, Mr. Smith said that proposed new banking regulations would have the effect of permanently increasing funding costs.
“I think when looking at changes like Basel 3, whilst these reforms were well-intentioned, some of the changes are coming at the worst possible time for the world economy. I really do worry about the consequences for growth and stability, especially in Europe,” he said.
The Australian Prudential Regulation Authority, the banking regulator says that the new rules are primarily focused towards making lenders safer, aiming to shore up investor confidence in financial institutions.
Suncorp May Send As Many As 2000 Jobs Overseas
The government of Queensland is calling for Suncorp to support local jobs as speculation mounts that the banking and insurance company is looking to send as many as 2000 jobs overseas.
Suncorp has already shipped 150 positions abroad, and is considering expanding its partnership with international vendors. The company says it is still undecided on the move.
Andrew Fraser, the Australian Treasurer has personally taken up the matter, sending a letter to Patrick Snowball, Suncorp chief executive at the end of 2011.
“Suncorp is a great Queensland company with a well-regarded local reputation for supporting Queensland jobs. I’ve made the Government’s view clear in writing and in person. We believe Suncorp should support Queensland jobs given the support Queensland has given them as a company.” Mr. Fraser said.
In its response to the letter from Mr. Fraser, Suncorp fails to even mention the possibility that as many as 2000 jobs may be shipped overseas.
The company did acknowledge that jobs would be lost “over the medium term as a result of our plan to simplify the business”.
Over the last five years, the Finance Sector Union estimates that industry wide, as many as 6,000 jobs have been sent overseas, of which approximately 200 were sent by Suncorp.
Most of the major lenders have signaled their intent to cut thousands of jobs in Australia.
Bill Shorten, Minister for Finance said such plans were risky. According to Mr. Shorten, the country has one of the best banking systems in the world, largely the product of a well trained and intelligent workforce.
“Offshoring is a policy with many risks. For an industry that needs to remain customer-focused in an ever more competitive environment, the banking sector needs to achieve more than just cost cutting. Banks will need to enhance the customer experience to survive. This will require highly trained staff.” he said.
Monash University’s Greg Bamber, a professor in the department of management said the strong dollar was another reason for the rising trend of sending jobs overseas.
“The higher the Australian dollar goes the more advantageous it appears for Australian companies to offshore. But some companies say they can find the IT skills in Bangalore easier than in Australia.” He said.
ANZ Survey Shows Number Of Jobs Ads Increased
A new survey by Australian banking major ANZ suggest that the number of job advertisements jumped by their largest monthly rate since February 2010.
According to the ANZ job advertisement survey, the number of job advertisements placed in major newspapers and on the internet increased by 6.0 per cent in January. For the year ending January the growth was more moderate, posting a 0.7 per cent rise.
Ivan Colhoun, who runs Economics and Property research for the lender said that the trend could be attributed to increased activity in the mining areas of the Northern Territory and Queensland.
“The awaited significant acceleration in mining investment is now beginning to boost labour demand in these states. We remain mindful of the usual problem of significant volatility in the monthly data over the December-January holiday period. In spite of this caution, the pick-up in advertising in the resource states is of sufficient magnitude to outweigh any of these seasonal concerns.” Mr. Colhoun said.
According to Mr. Colhoun, the lender is predicting that despite the increase in job advertisements, the unemployment rate would continue its upward trajectory in December, rising to 5.5 per cent from 5.2 per cent, citing that the number of jobs had not kept pace with a rising population and labour force.
“This month’s job ads data, if sustained in coming months, suggests any rise in unemployment should remain very modest.”
The lender say it does not expect the Australian central bank to cut interest rates when the board meets on Monday, but is predicting rates to ease when the board meets the following month in March.
“Inflation is well-contained and the economy can afford to grow a little faster, in particular, we will be less likely to see further interest rate cuts.” he said.
The survey results indicate that the number of job advertisements posted on the internet rose 6.4 per cent in January, up 1.4 per cent from the previous year. In contrast, job ads placed in newspapers fell by 2.6 per cent and were a whopping 11.5 per cent lower than the previous year.
Westpac Likely To Cut Hundreds Of Jobs
Reports are suggesting that Australian banking major Westpac is embarking on a cost cutting program and is likely to announce cuts to its head count as soon as today.
According to the Sydney Morning Herald, Westpac is set to announce the cuts on Thursday afternoon, though the number of people that are affected is still not known, though other sources are speculating that the cuts could number in the hundreds.
“We’re conducting consultations to a number of our employees around changes to our staff,” said a spokeswoman for the bank.
Westpac recently began discuss the cuts with its employees and has informed the Finance Sector Union of its plans.
According to a report by ABC TV the job cuts are likely to number in their hundreds, following the lenders review of a number of management roles in the IT department of the Westpac itself, and its subsidiary BT Financial Group.
The SMH also suggests that the lender will cut jobs in its business equipment financing unit, with those jobs being sent overseas.
Westpac began pruning its headcount at the end of 2011, sending 200 back office jobs overseas. Earlier in the month a Westpac spokeswoman acknowledged that the lender had intentions to cut more jobs this year.
The bank has been cutting jobs since the end of last year, when it shifted about 200 back-office jobs offshore.
“We can expect that staff numbers will decrease as we reduce higher cost contract-based staff and reduce duplication in roles at head offices,” she said.
Banking analysts are predicting that as many as 7000 jobs in the Australian banking industry will be cut over the next couple of years, as households debt levels fall, reducing the demand for loans.
ANZ Holds Mortgage Lending Rate Steady But Plans Staff Cuts
Mortgage holders who borrowed from Australian banking major ANZ can breathe a sigh of relief as the lender said it would hold its variable mortgage rate, however employees of the bank are not so lucky as they await news over a possible cut in jobs.
Last week, the Finance Sector Union confirmed that the lender has plans on axing hundreds of positions over the following six moths.
Leanne Shingles, communications officer for the Union, in an interview with news.com.au said that whilst ANZ had indicated there would be a number of job cuts, did not specify exactly how many, or where they would be cutting.
Some reports suggest as many as 1000 jobs would be cut at the lender.
Ms. Shingles said there was “no justification” for lenders cutting back on staff after posting record profits during the previous year.
“Whenever there is a need or a perceived need to cut costs the first thing that employers or industry do is cut jobs. There are other ways of cutting costs but it’s always workers that cop it first.” She said.
Leon Carter, president of the union, said the news was alarming, and is worried that many more jobs were at risk.
“Whilst they don’t have a final number, it’s clear that the number of jobs that will disappear will be in the hundreds, and we would say many hundreds, not just one or two,” he told AAP.
Mr. Carter warned that job cuts could occur at the other major lenders.
“Our thinking here is, the same cost pressures that are applying to ANZ also apply to the other three,” Mr Carter said.
“If the community and the government stand by and say that an acceptable response to that pressure is to slash jobs, then nobody wins, in fact everybody loses.”
Mr. Carter said it was not acceptable for profitable big businesses such as ANZ to cut employees at the first sign of cost pressures.
Major Australian Banks Likely To Cut Thousands Of Jobs
Australia’s biggest lenders are likely to cut thousands of jobs nationally as they seek to consolidate record earnings from last year.
Amidst a backdrop of soaring funding costs and slower growth in mortgage lending, ANZ, Westpac and CBA have devised plans to reduce expenses according to the Daily Telegraph.
CBA’s plan, with an intriguing code name “Project 35”, seeks to achieve a cost to income ratio at its retail banking division of 35 per cent by next year. According to banking analysts reducing the ratio to that level from its current rate of 38.7, will mean a loss of at least 600 jobs.
In August last year, CBA announced a record $6.4 billion in profits for the year. Rival NAB delivered a record $5.5 billion, whilst Westpac also produced a record $7 billion. ANZ also reported a record profit of $5.36 billion.
Gail Kelly, chief executive of Westpac in the past has said it is likely that employee numbers are probably going to “trend downwards” whilst admitting that the lender currently has no firm plans to cut staff, many analysts are of the opinion that Westpac will likely cut as many as 1600 jobs over the course of the year.
In 2008 rival ANZ restructured its banking unit, with the axing of 1000 jobs, with unnamed sources at the lender saying that a similar restructuring is likely, with the loss of a further 1000 jobs.
Leon Carter, the national secretary for the Finance Sector Union said it would not be acceptable for the major lenders to implement cost cutting programs designed to lower costs by firing staff.
“In our experience, whenever they mention the word `costs’ all they do is focus on the staff costs,” Mr. Carter said.
Mr. Carter says he intends to seek reassurances from the major lenders that no jobs will be cut.
According to banking analysts, wages represent as much as 60 per cent of the annual $32 billion in costs incurred by the major lenders every year. Currently Australia has experienced the slowest rate of growth in mortgage lending since the Second World War.
Hopes are running high that the central bank will engage in another round of easing in interest rates next month.
Major Lenders Experience Strong Growth In Retail Deposits
According to the assistant governor of the Australian central bank, the big four lenders in the country are no longer depending so heavily on wholesale funding markets for their needs, and have chosen instead to raise their finance using the more traditional method of retail deposits since.
Guy Debelle RBA Assistant Governor says that the major lenders have experienced an annual 11 per cent growth rate in their retail deposits, which is in excess of the growth in credit, which has remained flat at 5 per cent.
Mr. Debelle did warn the lenders not to rely exclusively on one source of funding and have a diversity of sources.
Mr. Debelle encourage the lenders to examine covered bond options for fund raising which Australia allowed in October to enable the banks to diversify their funding sources, and which have a major effect on the cost of funding.
Last week ANZ and Westpac both issued covered bonds in the US, raising $2.25 billion between them. The Federal government approved the issue of covered bonds in October, but capped the amount that could be raised using this method at 8 per cent of the total balance sheet, designed to ensure that banks maintain a diversified source of funding.
“A world where the only source of funding available is secured is just not sustainable,” Mr Debelle said.
CBA is expected to issue its maiden covered bond denominated in Euros, whilst rival NAB is also widely expected to follow suit shortly.
“Any pricing gain obtained from issuing covered bonds is likely to be offset to some extent by a demand from unsecured debt holders for more compensation in the future.
“So I see the role of covered bonds as primarily broadening the potential investor base rather than a means of reducing overall funding costs for banks,” Mr Debelle said.
One analyst offered a contrasting opinion, agreeing that whilst covered bonds will give Australia’s major lenders access to a whole new category of investor and expand their funding options, the ability to issue such bonds will not reduce their cost of funding.
The analyst said whilst it would however provide help to regional lenders, credit unions and building societies, by reducing their funding costs and providing diversity of funding.
Australian Consumer Confidence Rises In Response To Rate Cut
In November the Westpac-Melbourne Institute Consumer Sentiment index surged for the first time since the beginning of 2009, after the central bank cut its benchmark interest rate in response to a declining threat of inflation, and fears of uncertainty in Europe.
The index of consumer confidence rose by 6.3 per cent in November after the Reserve Bank of Australia slashed borrowing costs to 4.5 per cent from 4.75 per cent at the start of the month.
The index rose to 103.4 points during November, up from 97.2 points October, the Institute said in a statement.
“This result is around our expectations and is clearly driven by the decision by the Reserve Bank to cut the official cash rate,” said Westpac chief economist Bill Evans.
In justifying its decision the Reserve Bank cited easing inflation pressure, an increased threat of higher unemployment and the potential for the sovereign debt crisis in Europe threatening to spill over into the rest of the world.
In November the RBA also revised down its economic growth and inflation forecasts out until the end of 2013.
Unsurprisingly, Mortgage were the most optimistic, posting a 13.9 per cent gain in confidence as all major lender quickly reacted to the interest rate decision, by passing on the rate cut to their borrowers. Mortgage free home owners posted a 6 per cent increase in confidence, whilst the confidence of tenants fell by 6.8 per cent.
The index’s level is the highest it has been since May, suggesting that pessimists are slight outnumbered by their optimistic counterparts for the first time since June
NAB Chief Clyne Receives Whopper Pay Package
Cameron Clyne, chief executive of Australian banking major NAB who controversially passed on just 20 basis points of the 25 basis point cut enacted by the Australian central bank, despite the fact that the lender posted a 19.2 per cent increase in full year net profits on $5.5 billion is in line for a large pay hike.
The lender released its annual report recently which shows the NAB chief received a pay hike of 12 per cent, meaning Mr. Clyne received $8.67 million in compensation during the last financial year.
Mr. Clyne’s total compensation was increased by over $950,000 compared to the previous year, which comprises a base salary worth $2.7 million, and stock worth $3.8 million, and short term cash bonuses worth $2 million.
Mr. Clyne’s contemporaries at ANZ and Westpac have both had their cash bonus components of their compensation packages cut. ANZ chief Mike Smith saw his cash bonus cut by as much as $750,000, whilst Westpac chief Gail Kelly had her short term cash bonus component cut by $460,000. In contrast Mr. Clyne saw his cash bonus component rise by $108,000.
”Executive remuneration at NAB is directly linked to the performance of the company and includes the achievement of customer, employee and shareholder objectives.” An NAB spokesperson said.
NAB’s cash earnings rose by 19 per cent to $5.46 billion for the full year ending September 30th. The lenders Return on Equity also rose by 2 per cent to 15.2 per cent.
Despite his pay hike, Mr. Clyne’s compensation package is the third largest amongst the big four lenders. Ms. Kelly’s package is worth $9.86 million, CBA chief Ralph Norris received $8.64 million during his last year in the role, whilst Mike Smith received over $10 million.
CBA To Launch Credit Card Payment App
Credit cards may soon go the way of the dinosaur as increasingly mobile smart phones usurp plastic for instant payments.
The most recent innovation that is helping credit cards on their way to extinction is Australian banking major CBA introducing a new application is calls tap and pay, which allows smart phones to connect to payment devices such as cash registers, and also allows for facebook and email payments.
CBA has named the app Kaching, and it works by taking the information that is coded into into the magnetic strip of a credit card, and storing and transmitting it by phone instead.
The app makes use of Near Field Communication (NFC) technology, and has already been introduced in America, where its use already encompasses the replacement of keys, passports, receipts and business cards.
Users of the application need not be customers of CBA in order to be able to receive payments made using Facebook or by email, and are instead taken to an external collection site.
A CBA spokesperson said the lender would like the app to be able to penetrate across all payment gateways in Australia from businesses to individuals.
“Mobile and online social payment is the next step in transaction technology and now Australian consumers will no longer have to rely on cash or cards to make payments to family, friends or businesses, the spokesman said.
He added that Kaching would also enable businesses to reduce their reliance on cash.
The application was designed in close collaboration with Apple, with security of the system being the key ingredient in its development.
The app will make use to password encryption technology, so that if a user loses or has their phone stolen, their personal data including banking information could not be compromised, since it is not stored locally on the phone.
He said the app would also help businesses reduce the need for cash.
Receivers of payments would also be protected with any funds that had not been credited, restored after 14 days.
Kaching will be available before Christmas to Apple iPhone users with iOS4 and above.