CBA See’s Increase In Funds Under Management.
Australian banking major Commonwealth Bank of Australia (CBA) says it has seen growth in assets is has under management along with a rise in insurance premiums during the most recent quarter ending June, as sentiment in the market continues to improve.
Australia’s largest mortgage lender said on Wednesday that the funds that is it manages had increased by 8 per cent to $138.2 billion during the quarter ending June 30th, from the previous quarter ending March.
The biggest gains were made in its global equities fund management, which rose 18.6 per cent and stands at $35.7 billion, whilst its domestic counterpart Australian equities increased by 9.4 per cent to stand at $17.7 billion under management.
The only major asset class which fell was property and infrastructure, which declined 2.7 per cent for the quarter ending June and stood at $23.3 billion.
CBA chief executive Ralph Norris had made comments during the quarter suggesting that whilst the operating environment was still difficult, he felt that global markets had recovered and were no longer experiencing free fall.
The amount of funds administered by the lender rose 6.9 per cent for the quarter and stood at $173.3 billion.
CBA’s investment platform, part of its acquisition Colonial First State, saw an increase of 10.6 per cent for the June quarter in funds under administration, bringing the total to $35.9 billion.
Australia’s biggest life insurer said in-force insurance premiums rose 3.7 per cent over the quarter to $1.5bn due to strong business volumes in life and general insurance.
During the March Quarter CBA’s in-force insurance premiums rose by as much as 9.1 per cent, with the lender claiming to have seen an increase in its market share. Adverse events during the second half of the quarter including the Queensland storms and Victorian bush fires must have lead to a larger claim ratio.
CBA is scheduled to report full year operating results on August 12th.
Compare Australian Credit Card Deals
Westpac Chief Believes Interest Rates Have Bottomed And Outlook for Australian Economy Improving
Australian Banking Major Westpac Banking Corporation believes that interest rates have bottomed and are likely to begin rising again, according to Westpac chief executive Gail Kelly.
Ms. Kelly who runs Australia’s largest lender by market capitalisation made comments on Tuesday defending the bank’s own interest rate policy, saying that higher funding costs had resulted in higher interest rates as a result of the banking crisis.
“We appear to be getting to the bottom end of the interest rate cycle. If you actually have a look at what’s happening with bill rates you’ll see that they’re on the way up. So the market on the whole is beginning to expect rates to go up.” Ms. Kelly said to journalists after speaking at a business lunch in Sydney.
The banking crisis had caused intense competition for retail deposits which has resulted in higher costs of acquisition of such type of funding. Whilst wholesale fund costs had also risen Ms. Kelly said.
“Our funding costs have materially changed and we think have structurally changed for the medium term. In light of that, for us to retain a double-A [credit rating] and for us to in fact continue to be able to provide funding support to our customers and their borrowing needs, we need to adjust together to this new reality.” Ms Kelly said at the event.
Ms. Kelly also expressed the need for banks to explain their interest rate policies to their customers, and the need for strong domestic financial institutions which are able to maintain high credit ratings despite tough economic conditions.
Australia’s central bank the Reserve Bank of Australia (RBA) earlier this month left official interest rates unchanged at half century lows of three per cent. The RBA did however give itself the option of easing interest rates further if it felt monetary policy needed to be loosened further to support a faltering economy.
Commenting on whether variable loan interest rates could fall further Ms. Kelly said “I think we’re getting near the end, or near the bottom, of the interest rate cycle.”
Westpac’s standard variable home loan rate currently stands at around 5.80 per cent.
Ms. Kelly, who previously ran St. George before it was acquired by Westpac was fairly sanguine about the outlook for the Australian economy. Ms. Kelly told the function she believed the economic slowdown would not be as acute or last as long as had been thought as recently as four months ago.
Ms. Kelly added that Westpac’s commercial and corporate clients continued to remain financially distressed.
“Looking to our business, particularly with our commercial and with our corporate customers, we can see financial distress and operating distress still actually making its way through the businesses of our customers, with all the consequences that that brings. So I think we’re still in for quite a challenging period over the next 18 months.” Ms. Kelly said.
The Westpac chief however warned that there were still foils to the improving business and consumer sentiment and in particular, highlighted unemployment.
Westpac has forecast the unemployment rate, which stands at 5.8 per cent currently, to increase to 7.5 per cent by the end of this year, and to peak at 8 per cent in 2010.
Another obstacle to full economic recovery may arise from regulatory oversight of the financial services sector Ms. Kelly said, calling for better and increased dialogue between the sector and the government.
“There’s a range of things coming our way, some of which is still quite uncertain in their implications, some of which haven’t had a lot of industry consultation, and as occurs in those situations you can sometimes have unintended consequences. We need to work really carefully and thoughtfully with regulators and legislators to make sure that that situation doesn’t arise.” Ms. Kelly told journalists.
NAB To Raise $2.75 Billion In Fresh Equity
Australian banking major and the nation’s third largest lender says it intends to raise $2.75 billion in fresh equity capital in order to strengthen its balance sheet as bad debts continue to rise.
On Wednesday NAB released its quarterly update, which showed that the lender had to increase provisions for bad and doubtful debt to $1.06 billion for the quarter ending June 30th. NAB’s unaudited cash earnings, a metric closely followed by investors stood at around $900 million.
NAB has followed the lead of the other big four banking groups by strengthen its balance sheet to protect itself from deteriorating economic conditions which has produced a rise in bad debt.
NAB says it plans to raise at least $2 billion by way of a fully underwritten institutional equity placement at a 10 per cent discount to its last traded price of $23.58. The final price will be established through book building for the placement.
The lender also plans a retail offering worth $750 million for its retail investors.
“This capital raising not only ensures we maintain a strong balance sheet position, but also provides us with the flexibility to support our existing customers, accelerate initiatives to enhance our SME market position, and pursue additional organic and strategically aligned inorganic opportunities,” NAB chief executive Cameron Clyne said.
The capital raising will bolster its closely watched tier-1 capital positions to 8.8 per cent up, from its current 8.2 per cent.
The lender said the strengthening of its balance sheet was “consistent with the group’s intention to maintain a strong capital position through the economic cycle, accommodating volatility in core and non-core capital items and possible tax case provisions”.
Australia’s third largest lender as measured by market capitalisation said the fresh equity would be used to support growth of existing businesses and give it the ability to take advantage of outside opportunities.
The institutional portion of the capital raising is being fully underwritten by investment banks, Deutsche Bank, Merrill Lynch International and Goldman Sachs JBWere.
Compare Australian Personal Loans
Aussie Home Loans Says Refinancing Of Mortgages Has Risen
Non banking finance company, Aussie Home Loans has said there has been a large increase in the number of mortgage holders who wish to refinance their homes, as borrowers try to take advantage of interest rates which are at half century lows.
The mortgage lender said that 38.5 per cent of home loans written in June were for refinancing. A figure which had increased from 30.2 per cent in March.
“There have been plenty of home owners who have been complacent about their mortgages, but our figures show that more and more of them are taking advantage of record interest rate lows and are actively seeking out the best deal.” executive chairman John Symond said on Tuesday.
The number of first time home buyers however fell to 21.3 per cent of total loans disbursed during the month of June. The number of first time home buyers in March stood at 32 per cent.
“The steam has abated in the first home buyer market as many of them realise that the properties available are probably already at full price, they are reassessing the market.” Mr Symonds said in a statement.
Aussie Home Loans is one of the largest non bank mortgage lenders in the country and has a portfolio valued at over $30 billion.
Compare Australian Home Loan Deals
Federal Treasurer Says Worst Of Economic Slowdown Behind Us
Federal Treasurer Wayne Swan has said that the worst of the economic turmoil is now behind us but added that the country still needs further economic stimulus measures.
Mr. Swan, who made his comments after a report by research house Access Economics was released that forecast better than expected unemployment numbers.
The report suggested that unemployment would peak at 7.5 per cent in 2010. A full percentage point lower than the government estimate of 8.5 per cent.
The Treasurer however said that regardless of the fact, it was still important to maintain fiscal stimulus in order to aid investment.
“It doesn’t show that we’re out of the downturn, it shows that the worst of the global economy may be behind us but that we will live with the consequences of the global recession for some time to come. It is the case that economic stimulus has made the Australian economy one of the strongest in the advanced world with lower debt and lower deficit. There are still very big challenges out there – that’s why we need to keep in place economic stimulus to support business, to keep customers going through the door, to support employment. To withdraw that stimulus would be utterly irresponsible and be a recipe for higher unemployment.” Mr. Swan said whilst in Brisbane.
The Government would maintain its investment in infrastructure projects as part of its fiscal stimulus measures he added.
Compare Australian Credit Card Deals
CBA Chairman Contender For Chairmanship Of BHP
The chairman of Australian banking Major Commonwealth Bank of Australia, John Shubert has been named by Britain’s Sunday Telegraph newspaper, as a possible successor to BHP Billiton chairman Don Argus upon the latter’s retirement from the top post at the global mining giant.
The newspaper tipped both Mr. Schubet and former Ford chief executive Jacques Nasser as potential successors to Mr. Argus when he eventually retires from the resources sector behemoth.
Both Mr. Nasser and Mr. Schubert currently sit on BHP’s board as non executive directors.
The report in the Sunday Telegraph suggested Mr. Argus who is 70 and has held the position of chairman since 1999, may announce his retirement plans at the resource giant’s annual general meeting, scheduled to be held in August.
“Jacques Nasser, a former chief executive of Ford, and John Schubert, a former managing director of Esso Australia, are expected to be interviewed by the company’s succession planning team later this week. Mr. Schubert is understood to be keen to relinquish the chairmanship of the Commonwealth Bank of Australia, in order to take on the role at BHP. Although Mr Argus, 70, has not announced his intention to retire, the company has said succession planning is `well in hand’.” the newspaper said.
Nasser, a Lebanese-born Australian, was dubbed “Jacques the knife” after cutting jobs while running Ford before being ousted in 2001.
Compare Australian Bank Accounts
Australian Banks Continue To Shed Staff
In a bid to cut costs and increase efficiency Australian banks are looking at cutting jobs and reducing the size of their workforce.
Regional lender Suncorp Metway says it intends to cut up to 250 jobs, whilst rival Bendigo & Adelaide Bank is encouraging its workers to consider taking unpaid leave, whilst Australian banking major National Australia Bank (NAB) has refused to rule out the closure of more of its branch network.
Despite having one of the most robust banking systems in the world, Australian banks continue to cut their costs and rein in expenses.
Last financial year regional lender Suncorp axed 700 positions and last week announced its intention to cut a further 250 more jobs, 50 of which would be management positions.
Rival regional lender Bendigo and Adelaide Bank last week also revealed that it had asked its 4000 strong staff to take unpaid leave of up to 10 days in a bid to reduce costs amid the economic slowdown.
Australian banking major NAB which is in the process of closing down 35 branches refused to rule out the closure of more of its branches. NAB has doubled its ATM network as part of NAB chief executive Cameron Clyne’s plan to refocus on its core retail banking business.
Almost 10,000 jobs have been eliminated from the financial services sector since October when the global banking crisis reached its zenith, and more cuts are expected as Westpac and St George merge their IT and back office operations as part of the Westpac acquisition of St George.
A recent report in the Melbourne Herald Sun suggested that as many as 250 ANZ employees would have to reapply for new positions within the organization after the lender revealed plans to restructure its mortgage processing operations.
Compare Australian Bank Accounts
Top Executive Departs Suncorp-Metway
A top executive with bancassurance group Suncorp Metway will depart from the company by the beginning of September.
Mark Blucher who is responsible for integrating the Promina acquisition with the rest of the bancassurance group will leave Suncorp at the end of August after having completed the task.
Acticing chief executive of Suncorp Chris Skilton announced on Friday that Mr. Blucher had decided the time was right to leave the company given the successful integration of the Promina with the group.
“I would like to acknowledge Marks contribution during his time at Suncorp and, in particular, the outstanding leadership he provided during one of the largest financial services integrations in recent years,” Mr Skilton said.
Mr Blucher joined Suncorp in 1997, and was appointed group executive in charge of integration in 2007.
Compare Australian Bank Accounts
Sir Rod Eddington’s Appointment As ANZ Chairman In Doubt
Australian banking major Australia & New Zealand Banking Corporation (ANZ) has signalled its intention to stick with its original succession plan for the role of chairman.
On Wednesday ANZ said that the plan for Sir Rod Eddington to replace retiring chairman Charles Goode was still in place, despite evidence pointing to the contrary.
Australia’s fourth largest banking group maintained its announcement last November that Sir Rod would join the lenders board towards the second half of 2009 and eventually succeed Mr. Goode at the end of a transition period.
“There has been no change to that plan since the announcement was made last year,” spokesman Paul Edwards said.
Media reports on Wednesday suggested that Sir Rod would meet the incumbent chairman later in the week and would use the meeting to reveal whether he intended to take on the new role.
In April, a report in The Australian suggested that Sir Rod had not fully made up his mind and was vacillating over whether to take up the position of chairman in the wake of the failure of Allco Finance Group. Sir Rod was a non executive director of the failed company.
If Sir Rod decides not take the appointment, then it is likely that ANZ director John Morschel, a director of telecom giant Singapore Telecommunications is the most likely candidate to succeed Mr. Goode.
When ANZ announced its decision to appoint Sir Rod to the post of chairman, it was at a time when a merger between mining giants BHP Billiton and Rio Tinto was expected, which would have relieved Sir Rod of some of his board duties.
That proposed merger ultimately collapsed in favour of an iron ore joint venture between the two companies.
Sir Rod has a heavy roster of commitments, including serving as chairman of Infrastructure Australia, and sitting as a board member of News Corporation.
Proxy shareholder groups including RiskMetrics have voiced their discontent citing Sir Rod’s involvement in the failed finance group as a concern, and the reason for “on balance” to vote against Sir Rod’s reappointment to the board of Rio Tinto.
Currently the incumbent chairman Mr. Goode is the longest serving director of ANZ, having been appointed to the board in 1991 and assuming the chairman’s role four years later.
Mr. Goode was reappointed for a further three years during last year’s annual general meeting, however ANZ made a commitment then that Mr. Goode would step down by February 2010 to make way for Sir Rod
Compare Australian Credit Card Deals
12 Basic Life Insurance Questions Part Two
We follow up with the second part of our two part series on 12 Basic Life Insurance Questions. For Part One See here
7. How Much Will The Insurance Cost?
Insurance costs depend on a number of factors that insurers use to determine the amount of risk associated with the insured.
- Age, sex and medical history
- Whether the person seeking cover is a smoker or not
- Type of policy and the amount coverage that is being sought
- The term or duration of the policy or cover.
A rough guide to the cost would be a level term insurance policy which provides $100,000 in cover would cost under $7 for a non smoking female 35 year old, and under $8 for a male of the same age who was also a non smoker.
Obtaining a quote on the cost of premiums from either an insurance broker or the insurer directly is an easy thing to do.
8. Are Joint Policies A Good Idea?
Joint policies do not provide the cost effectiveness that one would imagine and are usually only a little less cheaper than having two separate policies in place. Two separate policies provides double the cover for only a fractionally higher cost.
Under a joint policy, the insurer will only make one payout in the event of a single death for a single life.
9. What Would Stop A Policy From Paying Out?
Non disclosure is the most common reason for life insurance policies not paying out. When buying insurance and filling out the form, the individual should be careful to make sure that all the details provided are accurate; any inaccuracy may result in the whole policy being invalidated.
A lot of policies come with exclusions which the policy will not pay out on, so before buying cover the individual should make sure they read the terms and conditions and are aware of the exclusions
10. What Should Individuals Do If Circumstances Change?
When a person changes their circumstances or enters into different stages of their life, they should update their life insurance policies. Reasons for doing so or buying more can be anything from having a new child to buying a new home, but when circumstances change then life insurance needs to reflect the changed circumstance.
11. Should The Policy Be Written In Trust?
Writing life insurance policies in trust can help families avoid inheritance tax on the death of the insured family member. Most term insurance policies have forms attached which allow the insured individual to name the beneficiary, and thereby allows the insured’s family to avoid what can be quite a hefty tax on the individuals estate.
12. What Should Be Done If The Policy Is No Longer Required?
The simple answer is to cancel the policy. The individual should endeavor to make sure that the policy is really no longer required however.