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.
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.
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.
The competition regulator is considering market concerns over the creation of a credit agency that will be part owned by the major Australian banks.
The major lenders will each own a four per cent stake in a joint venture to be called Experian Australia Credit Services, the remaining 76 per cent of the venture will be held by Britain’s Experian group.
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.
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.
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.
Ted Evans, chairman of Australian banking major Westpac will retire after the lender’s annual general meeting which is scheduled for December, and is set to be replaced by Lindsay Maxsted, the current chairman of the board’s audit committee.
Mr. Evans assumed the chairman’s role in 2007, having joined Westpac in 2001. He successfully helped guide the bank through its transformative acquisition of St George, as well the global financial crisis.
Mike Smith, chief executive of Australian banking major ANZ says he is increasingly concerned that consumers will start to struggle to repay their loans against a backdrop of ever higher interest rates.
Mr. Smith said that he was worried about the quality of credit since people had stopped making payments on their credit card debt. The ANZ chief added that the trend was strange since poor credit quality usually only occurred during periods of high and rising unemployment.
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.