Westpac Launches Revamped Online Trading Platform
Australian banking major Westpac Banking Corporation has joined its rivals in improving its online trading platform as the lender gears up to grow its client based by as much as 8 per cent during 2010.
On Thursday, the Sydney based lender launched a new trading platform which it calls Westpac Online Investing. The service aims to provide its 250,000 retail brokerage clients better features including improved access to research, better technical charting tools, and home page customization.
James Staltari head of Westpac Securities says the new trading platform would be a market leader.
“There is no single, online trading platform that provides all the new features and functionality on one platform that we’ve made available to our customers,” Mr Staltari told AAP.
Westpac believes that the upgraded trading platform will generate as much as 8 per cent growth in its brokerage customer base during 2010.
According to Investment Trends, a market analyst, the number of active Australian online traders has leapt 20 per cent since September 2008 and stood at approximately 600,000 by June 2009.
Westpac’s upgrade follows on the heels of rivals Macquarie and CBA’s CommSec, both of which made improvements to their platform last year.
According to Westpac, the lender has seen an increase in the number of customers who traded exchange traded funds (ETF’s), contracts-for-difference (CFD’s), and options last year.
“We saw a decline in CFD activity across the entire marketplace during the financial crisis (in 2008) but those numbers have really rebounded,” he said.
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Big Four Banks Expected To Deliver Strong Profit Growth
The Australian banking sector can expect a broad based re-rating after CBA surprised the market and issued unaudited profits that were in excess of analyst expectations. Most lenders are now expected to post improved earnings forecasts.
Banking stocks rallied on Monday on strong buying of financials, pushing the broader equity market higher.
CBA, which is Australia’s largest bank as measured by its $90 billion market capitalisation, issued a trading update on Friday, informing investors that it expected to post a 44 per cent rise in first half profits of $2.9 billion.
CBA’s update suggested a profit increase of more the $200 million in excess of consensus analyst forecasts, and its improved performance is expected to be replicated at other lenders.
Analysts believe Westpac is also like to show a marked improvement in performance due to its strong focus on the domestic Australian market.
Most analysts agree that the reasons for the improved performance at CBA are likely to also be profit drivers for CBA’s rivals.
“CBA’s upgrade has reiterated several positive themes for the banking sector: good revenue growth, disciplined costs and declining bad debts,” Goldman Sachs JBWere banking analyst Ben Koo said.
Some analysts believe that this is just the beginning of a rally in Australian banking stocks despite the fear by some that their valuations have appreciated too quickly.
“Some people are still cautious about the banks because they have rallied so hard,” Macquarie Private Wealth divisional director Lucinda Chan said
“The CBA upgrade should stand the rest of them in good stead and the banks have been supported on the market. Australian banks have outperformed their US peers in the crisis and are going to remain very resilient.”
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CBA Breaks Silence On Dubai World Exposure Says No Material Loss Expected
Australian banking major Commonwealth Bank of Australia (CBA) broke its silence Monday and issued an announcement confirming that the lender does not have a large enough exposure to incur a material loss from a possible default by troubled sovereign holding company Dubai World.
CBA released a terse one sentence statement saying:
“Commonwealth Bank of Australia confirms that it does have a financial exposure to Dubai World but it does not expect to incur a material loss as a result of the recently announced debt moratorium,”
CBA made its announcement on Monday, after maintaining silence on Friday, even after its three other Big Four rivals all confirmed that their exposure to the sovereign holding company of the Dubai government would not generate any material losses for them.
Dubai world wants a six month moratorium on its debt repayments. The company has a US$3.5 billion bond due in exactly two weeks, and is seeking to delay its repayment.
On Thursday, the government of Dubai said it wanted to restructure its investment holding company, Dubai World, which included a moratorium on the debt payments of the company including those of its property unit Nakheel.
The prospect of a quasi sovereign default sent shivers down the spines of financial markets on Thursday, with European markets plunging, on fears that sovereign defaults would not be confined to Dubai, and would result in other debt laden countries defaulting on their debt.
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On Friday, Westpac, ANZ and NAB all confirmed that they had exposure to the troubled sovereign holding company, but their exposure would not result in any material losses for the lenders.
Shares in ANZ, Westpac, NAB and CBA dropped over 3.4 per cent on Friday amid a market-wide sell-off of over 2.7 per cent.
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Super Funds Record First Decline in Eight Months
October was the first month of negative returns for superannuation (super) funds, after seven consecutive months of gains, which is the first suggestion that the recovery in the pension fund industry may be faltering.
Independent research firm Chant West released new data on Tuesday showing that the median fund showed a negative return of 1.2 per cent during October, following seven straight months of gains, after equities and listed property trusts saw their valuations decline.
Chant West chief Warren Chant however says that October was most likely an aberration, and the recovery story for the super fund industry would continue.
“Despite the slight drop in October, the median fund has now risen by 17.4 per cent (in returns) since the end of February, when share markets around the world started rallying. Going into November, markets have picked up momentum again, so at this stage it looks as though October was just a brief ‘time out.” Mr. Chant told The Australian.
The median growth fund, which most Australian’s are invested in according to Chant West have gained 8.9 per cent during the financial year.
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AMP May Itself Become Target In The Wake of AXA Asia Pacific Bid
Shares of Australian wealth manager AMP surged over 4 per cent during Tuesdays trading session, driven by speculation that the company itself could be the target of a takeover, after launching an audacious $11 billion joint acquisition attempt with Paris based AXA SA for AXA Asia Pacific Holdings (APH).
Some analysts believe that the Big Four Banks are circling AMP and a bid for the company may be imminent.
On Tuesday market participants awaited a revised takeover bid for APH, after APH rejected the initial proposal, claiming the stock and cash bid significantly undervalued the group.
The $5.34 a share proposed price is well below AXA APH’s Tuesday closing price, after the stock leapt 32.5 per cent during Monday’s trade.
AMP’s shares finished 27 cents, or 4.41 per cent higher at $6.39 on Tuesday on the speculation of a possible bid, IG Markets’ analyst Ben Potter said.
On Monday CBA ruled itself out of a possible bid for AMP, after chief executive Ralph Norris outright denied the lender was interested in such an acquisition
“We’re happy with where we are in the wealth management space,” he said.
A sweetened bid for AXA APH from its parent, Paris-based AXA SA and partner AMP, is more likely, broker Merrill Lynch said.
AXA SA, Europe’s second biggest insurer, is the largest shareholder of AXA APH and owns 53.93 per cent. Together with AMP, the bidders put a cash and share proposal to AXA APH’s board last Saturday that valued the target at $5.34 each.
The initial bid was unsolicited and rejected by the board of AXA APH, though indications were left that the company would be open to a deal on better terms.
Andrew Penn AXA APH chief executive said an appraisal of the company valued it at between $4.80 to$5.75 a share.
If successful, the acquisition would see AXA APH’s minority shareholders get 0.6896 AMP shares plus $1.3796 in cash for every AXA APH share they own.
Investment bank Merrill Lynch said that support of AXA PH’s minority shareholders would be needed in order to for the bid to be successful, and that would most likely mean a higher price, which would probably not exceed $6.00 a share.
“We cannot envisage an offer for AXA APH above $6.00 a share flying with either AMP or AXA SA shareholders,” the broker said.
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CBA Has Strong First Quarter
Australian banking major, CBA, in a trading report said its unaudited profits during the first quarter surged to $1.4 billion, boosted by a strong performance in its wealth management unit, and savings wrung out from cost control.
CBA’s credit impairment charges stood at $700 million for the quarter ending September 30th and were in line with expectations.
Cash earnings are a closely watched measure that strip out volatile items.
Shares of the lender outpaced the broader based ASX 200 on Monday, with the trading report following on the heels of earnings announcements by its three main rivals, which show robustness in the Australian banking industry.
“The group performed strongly through the quarter, with good income growth and continued cost discipline across the organization,” CBA chief executive Ralph Norris said.
Mr. Norris was careful to point out however, that business conditions continue to remain challenging, and was uncertain about the extent of the recovery in economic conditions.
Wealth management was responsible for driving the lenders earnings during the first quarter, as equity markets recovered. Mr. Norris sounded a note of caution and said the result may not be repeated in the future.
“Our capital, provisioning, funding and liquidity levels all remain very strong,” Mr. Norris said.
CBA’s wealth management unit has seen an 8.3 per cent increase in assets under management to $190 billion, whilst net outflows were $2.3 billion.
Mr. Norris said that intense competition for deposits would continue and added that CBA’s institutional banking and markets arm, and business and private banking arms, performed well in a slowing credit market.
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Australian Banks Emerge From Financial Crisis In Better Shape
Australia’s largest banks have emerged from the financial crisis stronger and in better shape than they were prior to the onset of the crisis, with the market value of both Commonwealth Bank and ANZ now exceeding their peak valuations before the crisis began in mid 2007.
Westpac was the first Australian lender to cross this milestone, after issuing $12 billion in equity to fund its acquisition of St George.
On April 3rd, Westpac’s market capitalisation exceeded its previous record of $57.9 billion set on November 1st 2007.
CBA and ANZ took more time to scale their peaks, but both lenders this month exceed previous records set in November and October 2007 respectively.
Of the Big Four banking groups, NAB is the only lender yet to surpass its previous market capitalisation record of $71.5 billion set on November 15th 2007.
Currently NAB is valued at $64.4 billion, reflecting persistent investor concern at the lenders exposure to UK property.
Stock prices of all the major banks, continue to remain below their peak levels, however the expansion of capital bases has meant that market valuations have grown larger.
Earnings per share amongst the majors are expected to decline in 2009, with analysts predicting drops of between 5 per cent for ANZ and 18 per cent for NAB.
In August, CBA revealed a 14 per cent decline in earnings per share. Westpac’s EPS is expected to fall by 7.5 per cent.
Research last week by Boston Consulting Group placed all the big four comfortably inside the top 30 banks by market capitalisation in developed countries at the end of September.
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Super Funds Continue To Record Impressive Gains
Australian superannuation (super) funds have continue to record impressive gains over the last quarter, returning their levels to that of pre financial crisis according to new research.
On Wednesday, research firm SuperRatings released research showing that the average balanced Super Fund recorded a 9.27 per cent gain in the quarter ending September, producing a total gain of just over 17 per cent since March.
“Never have we seen super funds jump so quickly, with the median one year rolling return on balanced options set to return to positive territory in October despite hovering around minus 20 per cent just seven months ago,” SuperRatings said.
Chant West, another research firm, released data saying that super funds achieved 9.9 per cent growth for the quarter ending September.
Balanced funds allocate about 60 to 76 per cent of their holdings to growth assets, whilst growth funds allocate between 60 to 80 per cent.
Both firms apportioned credit the gains to the recovery of both the equity and property markets.
The Australian equity market recorded a gain of 21.6 per cent for the quarter ending September, whilst listed real estate investment trusts (REIT’s) gained 30.8 per cent, Chant West said.
Average balanced funds were now at the same level they were at three years ago, according to SuperRatings.
The strong Australian dollar however has had a negative impact on Super Funds, Chant West principal Warren Chant said.
“While sharemarkets around the world have been rising strongly, most super fund members haven’t picked up the full benefit because earnings measured in overseas currencies – especially the US dollar – are worth less when converted into Australian dollars,” Mr. Chant said.
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Big Four Australian Banks Continue To Be Highly Profitable Despite Financial Crisis
Australian banks continue to be some of the most highly profitable financial institutions globally, ending the year relative to their peers on a high note, with three of the Big Four generating cash profits of $11 billion between them.
Westpac, NAB and ANZ are expected to deliver more than $15.8 billion between them in 2009, with CBA being the first to report full year profits, which came in at $4.3 billion for the year ending June 30th.
September 30th marks the end of the financial year for the other three, and bumper profits highlight just how much they have extended their dominance over the domestic Australian banking market.
Westpac, which merged with St George last year, is expected to deliver a staggering group profit of $4.5 billion banking analysts.
Despite the extremely positive profit, the result can be interpreted in two ways. Despite Westpac having increased its year on year profit by $800 million, had St George reported its results as an independent entity, its previous year’s profit was $1.3 billion.
The reason for the disparity is the same for all four majors, who have seen their year on year profits decline as a result of rising bad debt provisions.
When Westpac chief executive Gail Kelly does release full year results on November 4th, it will confirm its ascent to the position of Australia’s most profitable bank. The previous holder CBA will remain Australia’s largest lender as measured by assets and market capitalisation.
CBA shares which have rallied along with equities globally, and are at their highest level since January 2008, now values the group, which includes Bankwest at nearly $78 billion. Westpac is just behind at $77 billion.
NAB and ANZ are valued at $63 billion and $59 billion respectively, and both lenders are expected to also deliver robust results despite rising credit impairment charges and slower economic conditions.
Their expected cash earnings results of $3.7 billion and $3.2 billion will be on a par with the previous year and will be considered a good outcome given their bad-debt write-downs.
Big Four banking stocks have rallied more than 14 per cent during the last month and recovered more than a third during the quarter.
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ANZ To Seek Further Acquisition Opportunities
Australian banking major ANZ may raise a further $2 billion in capital, bulking up its war chest as it seeks further acquisitions which take advantage of opportunities that have arisen from European lenders that are distressed as a result of the global financial crisis.
According to a report in The Australian, ANZ intends to raise as much $2 billion from the market, which, when leveraged could be used to fund acquisition opportunities that cost as much as $5 billion.
Last week ANZ announced that it would be buying out its life insurance and wealth management joint venture partner ING in a transaction worth $1.8 billion.
ANZ chief Mike Smith in China to open its first regional branch in that country, making ANZ one of the few international lenders with a wholly owned Chinese operation, said that he favoured foreign investment banks and insurance companies as the most likely targets.
“We have raised $9bn over the past two years in a very systematic way. People haven’t really realised we have been doing it, because it’s been quite a softly, softly approach. People thought we were last out of the blocks, but really we were first in terms of adding quite an additional bit more capital than we needed. We could go into the market with quite a big hybrid offer, and even after this deal we are still looking very strong.” Mr. Smith told The Australian.
Mr. Smith said he believes that the Dutch government put enormous pressure on ING to divest some of its international assets, after the financial services firm was forced to seek government support in order to weather the financial crisis.
“It was the global financial crisis that allowed us to do it — we were locked in. In fact, we had a look at the Aviva deal but we couldn’t move unless ING were prepared to move.” Mr. Smith said.
In June, NAB acquired British insurer Aviva PLC’s Australian insurance and wealth management businesses for $925 million, outbidding AMP.
The transaction was similar to the ING deal, in the sense that the financial crisis allowed both NAB and ANZ to behave predatory, and acquire businesses that ordinarily would not have been put up for sale, and at relatively low valuations.
“We have seen the opportunities and moved on them, so fortune favours the brave, doesn’t it? This is the time to do it. You might as well have your powder dry, it gives us an opportunity to grow. We have positioned the balance sheet to do this sort of stuff and I think there is a couple more that we can do.” Mr. Smith said.
Mr. Smith is keen for ANZ to scale up its Asian wealth management business, believing the market to be nascent. “I want to be up there with the best of them, and I want to take that knowledge into Asia.”