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CBA Chief Sees Compensation Nearly Halve

Sharat — Mon, 22 Aug 2011 14:11:33 +0000

Ralph Norris, chief executive of Commonwealth Bank saw his pay packet cut by 47 per cent during the last financial year, receiving total compensation of $8.64 million. In the previous financial year, Mr. Norris earned a package of $16.2 million, however this year, due to a change in the value of his long term incentive, his remuneration fell.

Mr. Norris will step down as chief of CBA in November, and during the course of the year received $4.76 million in cash, of which his base pay was $3.12 million, and a short term incentive package of $1.64 million according to CBA’s annual report.

Additionally, Mr. Norris received $1.82 million of compensation in the form of company shares and rights as his long term incentives. The previous financial year, the value of these incentives stood at $9.19 million.

CBA performed better than expected in the previous year and as a result Mr. Norris long term bonus reflected that.CBA’s net profit rose 20 per cent to $5.66 billion in 2009/10. In the most recent financial year, the bank produced a 13 per cent increase in net profit of $6.4 billion. According to CBA, 59 per cent of Mr. Norris’s compensation package was tied to performance.

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St George Customers Victims Of Card Skimming

Sharat — Sat, 23 Jul 2011 00:17:03 +0000

Two more customers of St George have become victims of a card skimming device, with one claiming that they do not believe their card was skimmed at an ATM. Because the case was still being investigated by the police, St George has refused to divulge any details.

The first victim, a Ms Kay Bank tried to use her card at a retail outlet in Port Macquarie, only to find her card declined.

“I thought it was strange because I knew I had money in there,” Ms Banks said.

Ms Banks followed up by calling St George head office, and was told by the lender that her card had been cancelled because it had been skimmed. Ms Banks says she s unaware whether any cash had been stolen.

“I never use online banking and I have a prepaid bank card for buying anything online, so if someone as careful as me can be caught out anyone can,” Ms Banks said.

The second victim, Ms Lorraine Jones said she was surprised to receive a text message from St George informing her that was the victim of a card skimming scam.

“It had to have happened at a store because I haven’t taken money out of an ATM for at least a fortnight,” Mrs Jones said.

The bank was unable to comment on the matter, but said it actively monitored accounts and customers were not liable for any fraud losses.

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Ratings Downgrade May Result In Big Four Lenders Becoming Target Of Short Sellers

Sharat — Tue, 24 May 2011 03:51:15 +0000

After being downgraded by credit ratings agency Moody’s Investor Services last week, the major Australia banks may find themselves the target of short selling by global hedge fund managers.

Influential analyst Charlie Aitken of Southern Cross Equities said “While just about everyone, including the banks themselves, dismissed Moody’s downgrade, I would suggest it is significant and may well trigger global hedge funds shorting the big four banks, particularly now that all but NAB are ex-dividend.”

Last week Moody’s downgraded the long term senior unsecured debt of the big four Australian lenders from Aa1 to Aa2 on concerns by the ratings agency of the lenders dependence on wholesale funding markets.

As the Australian economy becomes increasingly skewed around the commodity boom that have produced favourable terms of trade and high asset prices “there is a potential for confidence shocks to impact the banks’ access to funding”, Moody’s said.

Of the major lenders, according to Mr. Aitken Westpac was most vulnerable.

“My gut feel is the stock the hedge funds will target from the short side is Westpac, with the highest percentage of domestic earnings and the highest exposure to east coast Australian property, small and medium enterprises and households,” he wrote. Westpac also had the highest wholesale funding requirements, he said.

Despite the warning, many analysts remain unperturbed by the downgrade. In a note to clients Macquarie said that the big four banks were amongst the highest rated lenders in the world in spite of a downgrade by the credit ratings agency.

“In addition, given that asset growth is largely being funded by deposit growth now (which is likely to be the case in the future), the downgrade would seem a moot point anyway,” the analysts said.

“We believe this is likely to seal the low asset growth outlook for the sector as the banks steadily move to lower loan-to-deposit ratios and a more balanced funding structure.” NAB appeared most exposed to issues highlighted by Moody’s, it said.

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Chief Executives Warn Australian Central Bank Against Further Rate Hikes

Sharat — Wed, 18 May 2011 03:46:13 +0000

Over the next few months the Australian central bank will tighten interest rates despite concern by executives who run some of the country’s largest companies that the economy faces problems that are not being reflected or accounted for properly, due to the impact of the booming mining sector.

During the Reserve Bank of Australia’s May board meeting, the minutes of which were published on Tuesday, the RBA confirmed it was leaning towards pushing interest rates higher as it seeks to wrest back control of inflation, and harness the future growth of the Australian economy.

The RBA did not indicate the timing of any future interest rate rise, but financial markets are pricing in a rate rise within the next three months, which would take the official cash rate from its current 4.75 per cent to at least 5 per cent.

Such a move will anger chief executives of Australia’s largest companies, who are aggressively lobbying the RBA to maintain rates at their current level, rather than risk further deterioration of consumer sentiment as a result of higher interest rates.

Fairfax chairman Roger Corbett who is also on the RBA board said that the Australian economy outside of the mining sector remained remarkably weak.

“The average Australian could quite rightly ask: ‘How is it we are going through the biggest resources boom in the nation’s history and at the same time I am finding it quite hard to make ends meet?’

“This ongoing debate about the economy, and the obvious implication that if things continue there will be further increases in interest rates, is very sobering for most Australians.”

Mr. Corbett’s warning came just a day after Kerry stokes, chairman of Seven Group, Gail Kelly chief executive of Westpac, and Westfield managing director Steven Lowy all said that the economy was not strong enough to cope with tighter interest rates.

Mrs. Kelly in particular said that Australian consumers at best could only cope with a single rate hike this year, whilst Mr. Stokes said that when the Reserve Bank lifted rates in November of last year, the economy effectively ground to a halt.

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Housing Continues Slump As Home Loans Dive To Ten Month Low

Sharat — Tue, 17 May 2011 04:05:38 +0000

Flooding in Queensland and higher interest have taken their toll on the market for housing in Australia which saw finance for home loans in March fall to a 10 month low, suggesting that the property market will remain flat throughout the rest of the year, particularly since the prospect of even higher interest rates loom.

Seasonally adjusted, the number of approvals for housing finance declined by 1.5 per cent during March from February according to the Australian Bureau of Statistics.

Queensland has so far failed to recover from the impact of natural disasters it experienced during the first quarter, which included some of the worst flooding ever recorded in history as well as a huge cyclone which hit the state in February.

In March, home loans declined by 2.4 per cent in Queensland, adding to the 0.5 per cent decline felt in February and the whopping 15.7 per cent drop in January the ABS said.

Wayne Swan, Federal Treasurer last week said that the natural disasters in Queensland could cost the economy as much as $9 billion, two thirds of which as a result of lost coal production in Queensland which saw open cut mines filled with floodwater.

Tourism in the state, which drives much of the economy has also been hit hard as a result of the strong Australian dollar.

Sharp rate hikes have also sent the housing industry reeling as banks reacted to higher funding costs by hiking mortgage lending rates.

The Australian central bank has signalled that it will lift interest rates further during the coming months, as it seeks to counter inflationary pressures that are being felt throughout the economy.

The Reserve Bank of Australia has hike interest rates seven times since the end of 2009, with the cash rate currently standing at 4.75 per cent.

Earlier in the month, the central bank revised its forecast for inflation upward over the medium term, suggesting that it now feel there is urgency in countering price rise pressure now building in the economy.

The resource sector or mining boom has engulfed the entire Australian economy, bringing with it both full employment and upward pressure on wages. Higher interest rates represent a significant headwind for house prices, which are already high by historical standards, and have been moving sideways or lower over the course of the last year.

The data however has not been all bad. Loans to property investors rose 2.1 per cent in March while the proportion of first-home buyers in the market rose to 16 per cent from 14.9 per cent in February.
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CBA Says At Least To Further Rate Rises In Next Six Months

Sharat — Fri, 13 May 2011 05:15:53 +0000

Australian banking major CBA says it expects at least one if not two more official interest rate hikes over the next half year, which the lender says it will pass on to its mortgage borrowers.

CBA chief executive Ralph Norris made the comments whilst announcing a $1.7 billion unaudited quarterly profit. Mr. Norris described the federal budget as being “reasonable” adding that its “bark was probably worse than the bite” though the “The trajectory of the budget is very much in the right direction,” he said.

CBA completes the earnings reporting season of the major lenders with March quarter trading update, after rivals Westpac, ANZ and NAB all made interim profits announcements last week.

Like its rivals CBA said that demand for credit remains subdued as a result of poor consumer and business confidence, though the lender did say there were signs of a rebound.

Like the other banks, CBA said credit demand was subdued due to fragile business and consumer confidence, despite early signs of a rebound in business credit.

“Notwithstanding present challenges, we continue to expect a gradual improvement in operating conditions through calendar 2011, as the economy recovery strengthens and system credit growth rebounds,” Mr Norris said.

Like rivals Westpac and ANZ, CBA also reported a rise in home loan arrears, though that has been attributed to the impact of natural disasters, and normal seasonal factors post Christmas, rather than anything which could be considered systemic.
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Senate Committee Recommends Overturning Mortgage Exit Fee Ban

Sharat — Fri, 13 May 2011 05:10:18 +0000

A Senate committee has rejected a key banking reform proposed by Federal Treasurer Wayne Swan, saying that the government must reconsider its proposal seeking to ban mortgage exit fees.

The Senate economics committee inquiry into competition in the banking sector said that the ban on exit fees may well result in less competition and higher upfront fees.

“The committee recommends that the government reconsider its decision to ban exit fees, before the amended regulations come into effect, with a view to allowing enough time for the effectiveness of the existing ban on unfair and unconscionable exit fees … to be assessed If it proceeds with the ban, it should only apply to authorised deposit-taking institutions.” The committee, which is primarily made up of opposition lawmakers said.

The proposal to ban exit fees is set to be implemented by July 1^st.

The exit fee ban has been enacted by regulation and is due to take effect from July 1 this year.

A minority report authored by a separate group of government senators said it was surprised by the committee’s findings.

“The government senators cannot support the Coalition’s majority report recommendation to keep exit fees in place. Exit fees for new customers only reinforce the barrier to switching, and weaken the power of customers.” it said.

As part of its much hyped set of banking reforms, the government announced a ban on mortgage exit fees in December of last year, which was immediately challenged by the Australian Banker’s Association, which said such a ban would result in either higher interest rates or higher establishment fees.

Banking majors NAB and ANZ have both voluntarily ceased charging mortgage exit fees, pre-empting the introduction of legislation.

“An outright ban will reduce competition from this sector. The committee believes that banning exit fees may lead to higher upfront fees, including for borrowers who never incur exit fees. It is notable that the only financial intermediaries that openly welcomed the abolition of exit fees were the major banks.” the majority report noted.

Wayne Swan said he was disappointing by the fact that the Coalition believes Australian families should be locked into uncompetitive mortgages.

“The Liberals need to stop standing up for the big banks and start standing up for Australian families,” Mr. Swan said.

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Australian Banks Not To Be Impacted By Growing Mortgage Arrears

Sharat — Fri, 13 May 2011 04:51:47 +0000

Noted banking analysts James Ellis and Jarrod Martin of Credit Suisse say that the trend of rising arrears in mortgages reported by the major Australian banks during earnings season is unlikely to have a significant impact or result in losses.

In its review of half year results Credit Suisse said that the overall asset quality for the major lender had suffered from “modest” deterioration, with all lenders suffering from increased impairment with the exception of ANZ.

“But it’s difficult to see substantial losses (in home lending),” Mr Ellis said.

Unemployment remained low, he said, and the price of houses was stable.

Despite the cautious optimism with regard to mortgage losses, Credit Suisse says the key risk faced by major lenders in a dual speed economy is the re-emergence of bad debt charges. Last week banking chieftains said that the strong Australian dollar was taking its toll on the tourism, retail and manufacturing sectors.

Credit Suisse rates NAB as “outperform” and rates its rivals Westpac, ANZ and CBA as “neutral”.

According to the investment bank, NAB has momentum in lending which will last well into the second half of the year. NAB’s return on equity also appears to be improving, and Credit Suisse expects NAB to benefit from a potential recovery in earnings from its British banking assert, and a possible capital release from winding down non core assets.

Mr Martin said NAB’s rising share of the mortgage market had so far been achieved without any cost to the net interest margin, despite the bank having the lowest variable interest rate.

“If they can maintain market share growth without compromising the margin, then the strategy will be a winner,” he said.

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New Australian Credit Bureau Set To Be Launched

Sharat — Fri, 06 May 2011 04:30:16 +0000

Experian a global information services company is set to launch a joint venture with ANZ, CBA, GE Capital, NAB and Westpac.

The venture will be called Experian Australia Credit Services and will function as an Australian credit bureau that will offer business and consumer credit information to credit providers.

Experian says the new joint venture would provide services that will enable lenders to asses risk and therefore provide credit more consistently and efficiently.

The venture will face competition from rival credit companies such as Dun & Bradstreet and Veda Advantage.

“We believe Australia is ripe for healthy competition. Our global experience shows that increased bureau competition drives innovation and delivers better services for clients and consumers.The prospect of an inclusive bureau in Australia, accessible to all industry sectors, will strengthen standards in credit reporting, data quality and governance — which is particularly important in a changing regulatory environment,” said Experian’s newly appointed managing director, Kim Jenkins.

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NAB Delivers Strong First Half Results

Sharat — Thu, 05 May 2011 03:41:48 +0000

Australian banking major National Australia Bank reported better than expected earnings on Thursday, announcing that first half profits rose by 22 per cent, driven by lower charges for bad debt and increased market share.

NAB has made a concerted effort to attract more customers by offering lower interest rates on loans made to businesses and consumers, than those offered by its big four rivals.

Cameron Clyne, the lender’s chief executive says the bank’s decision to aggressively compete on price is starting to be vindicated.

“I think this result is a sign that there is some momentum in this strategy,” Mr. Clyne said.

NAB’s strategy of offering lower interest rates has taken a toll on profit margins at its consumer banking unit which fell by 12 basis points. However the lender has achieved some level of success, having attracted increased customer volumes and increasing its market share by a full percentage point from a year earlier which had the effect of contributing towards a 36 per cent increase in from that business unit.

The improved performance from its consumer banking unit helped drive NAB’s 16 per cent increase in first half net profit to $2.43 billion, from $2.10 billion a year earlier.

In business banking, where NAB has traditionally been strong, the lender also grew its market share from 20.8 per cent to 23.8 per cent.

“Broadly we still see quite a few positives in the economy,” Clyne said, “But there is still some fundamental strength to the economy. Unemployment is relatively low and there is an early sign that businesses are looking to invest again.”

The 22% gain in NAB’s cash profit compares to a 7% gain reported by Westpac on Wednesday and a 19% gain reported by ANZ on Tuesday. CBA which has a June 30th balance sheet reported a 13% increase in cash profit in February.

Profits at NAB’s UK units rose by 14 per cent, however the lender re-iterated its warning that the economic environment in Britain is more challenging than that of Australia.

“Overall this result reaffirms NAB as our top pick in the sector, with above peer pre-provision profit growth, a more rapid improvement in returns and more attractive valuation,” Goldman Sachs analysts said.

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