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Westpac Leaked Document Dubs Melbourne As Provincial
A confidential document authored by Australian banking major Westpac labels the city of Melbourne and its community as being “provincial”, predicting that the city’s media will throw its support behind the $578 million bid to revive the Bank of Melbourne brand.
The document was prepared by Westpac last July for its board members and has been leaked literally weeks before Bank of Melbourne opens its first branch, and is likely to be a little embarrassing for Westpac CEO Gail Kelly, as she seeks to push into the Victorian banking market.
A Westpac spokesperson said the document was prepared over a year ago and does not make an accurate representation of Westpac’s business plan for Bank of Melbourne.
”It was not the business model put to the Westpac group board for final approval and therefore should not be relied on as an accurate source of information,” she said.
The rebranding of St George in Victoria, dubbed by Westpac as Project crest is designed in large part to rebuild the lenders market share in the state, and is primarily aimed at offering a strong regional alternative to the big four banks.
As part of the plan, Westpac will rebrand 34 St George branches in Victoria as Bank of Melbourne branches, and says it intends to triple the size of the network over the next five years.
David Morgan who was Gail Kelly’s predecessor as Westpac chief, made the controversial decision to bin the Bank of Melbourne brand in 2004, after having promised to keep it when Westpac bought the business in 1997 for $1.5 billion.
The document admits St George has ”a small position and a relative weak performance” in the state. Adding that a ”lack of brand awareness and lack of a branch network” were among the key reasons why St George had failed to gain traction.
Professional women aged between 40 to 59 years of age living in Melbourne’s outer south east have been identified as the prime target customer for the new franchise.
In a sign that a new banking war could erupt, Westpac predicts that most of the franchise’s new customers will come from rival CBA, but also admits that as many as 100,000 new customers maybe cannibalized from Westpac itself.
St George Customers Victims Of Card Skimming
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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Self Funded Retirees To Be Negatively Impacted By Carbon Tax Says Association
Over a quarter million retirees that are self funded will not be entitled to receive compensation that will be generated by the carbon tax according to National Seniors Australia.
Michael O’Neill who runs the organisation says that whilst the government has been very generous compensating holders of the Commonwealth Seniors Health Card, and pensioners, it has been less than stellar in sorting out those who have provided for their own future.
“The very people who have had the good fortune to provide for their own future again fall through the cracks,” Mr O’Neill told AAP.
According to Mr. O’Neill, self funded retirees that are single and surviving on an income of $50,000, or a couple who have an income of $80,000 will not be eligible to receive cost of living assistance.
The NSA says it is not acceptable that a self funded retiree living on $51,000 is considered wealth enough to absorb the impact of a tax on carbon.
Roughly 285,000 retirees that are self funded will acutely feel the impact of the carbon tax.
“Self-funded retirees have very little capacity to earn extra income and already are struggling with basic living costs,” he said.
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St George Branches To Open As Bank of Melbourne By End of July
Australian banking major Westpac has brought forward the launch of its new franchise, Bank of Melbourne, and is telling existing St George customers in Victoria that the bank will be open for business by the 25th July.
The launch of the Bank of Melbourne had previously been scheduled for the start of August. Westpac as part of a push in Victoria is re-branding 34 St George branches in the state as part of a strategy to triple the size of the Bank of Melbourne network over the next half decade.
The strategy is in large part to counter the loss of market share following Westpac’s acquisition of St George a couple of years ago. David Morgan, chief executive of the lender at the time made the controversial decision to bin the Bank of Melbourne brand in 2004, despite promising to maintain it, after acquiring the business in 1997 for $1.5 billion.
Westpac’s strategy of operating multiple brands in parallel has proven successful, and the current chief executive Gail Kelly says that the Bank of Melbourne is indeed a key part of the lenders multi-brand strategy. In South Australia Westpac operates St George under the BankSA brand.
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Fortescue Metals Group Considers Hong Kong or Shanghai Listing
Fortescue Metals Group, the third largest miner of iron ore in Australia is mulling a listing in Asia, and is trying to decide between Hong Kong or Shanghai as it seeks to widen its investor base in its key market China, and entrench its relationship with steel mills in that country according to Andrew Forrest the company chief executive.
Mr. Forrest made his comments in an interview with the Wall Street Journal.
“We study the Shanghai market and Hong Kong market all the time. We’re keeping our iron in the fire there. We haven’t made any decisions as a board, but we are certainly setting up the opportunity,” he said in reference to a possible secondary listing.
If Fortescue decides it would like to list sooner rather than later, then Hong Kong would be its only option since regulators in China have yet to allow foreign companies to list RMB denominated shares in that country, though they have expressed an intention to do so.
Regardless, Fortescue could simply list its shares in Shanghai whenever the regulations permit, since the listing would be largely symbolic, rather than stemming from a desire to raise capital, due to currency convertibility issues.
The Wall Street Journal sees Hong Kong as being some sort of risky strategy, probably because the author of the piece has no idea what an earth they are talking about. Hong Kong is no riskier than any other equity market in the world, currently market conditions do not favour listings, particularly set against a backdrop of the Prada IPO performing rather poorly. However anyone with any experience in such matters is acutely aware that market conditions are certainly not a permanent feature of any capital market and do change, and FMG need simply wait for the wind to be at its back.
Hong Kong has a common law framework making a listing palatable to institutional subscribers, a fully convertible currency that is pegged and stable against the US dollar, any capital raised by the company could be repatriated to Australia for use as investment, and the listing acts as a symbol of Fortescue’s commitment to its largest buyer, all the same reasons Rusal decided to list in that city as well.
The WSJ says it believes a Shanghai listing would somehow solidify the company’s relationship with its customers in China, which is dubious logic at best, buyers of commodities simply do not care about such matters, only regulators and governments do, and Hong Kong ticks all the boxes in that regard.
Fortescue requires roughly $8.4 billion to expand its mining operation in Pilbara Western Australia, and according to incoming chief executive Nev Power, the company will soon begin settling contracts in RMB.
In 2009 China revealed a plan for turning Shanghai into a financial centre, though that depends in large part on the RMB becoming fully convertible and is simply not possible until this is the case. The date set is 2020 for the vision of Shanghai becoming a global financial hub, though according to , Shang Fulin, chairman of the China Securities Regulatory Commission, no official timetable exists, but “we are ever closer to the launch of the international board.”
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NAB Bid For Lloyds UK Branch Network Faces Crunch Time
According to reports in the UK, Australian banking major National Australia Bank is resisting intense pressure to table a bit for 632 branches that have been put up for sale by Lloyds Banking Group.
Bidders for the Lloyds retail branch network were caught by surprise when it emerged that Lloyds chief executive Antonio Horta-Osario had set a snap deadline for an indicative bid for yesterday.
According to the Guardian, NAB is still a contender to buy the branch network, but has told Lloyds that it needs more time before submitting an opening bid. The Guardian reported that the timetable for the asset sale does allow for some flexibility.
NAB is widely seen as a strong contender to acquire the branch banking network that has been put up for sale by Lloyds as a result of EU competition rules following the lender having to bailed out by the British government with a $30 billion lifeline during the financial crisis.
NAB already operates two different brands in the UK, and well capitalized, has the necessary infrastructure, but only a 2 per cent market share. Thus the acquisition of the branch network makes strategic sense, since it would double market share over night and leave it with many more options.
Cameron Clyne, NAB’s chief executive declined to comment, and instead referred to a previous statement he made on its strategy for the UK.
“There is a lot of debate in the UK market at present about the future shape of the UK banking industry, with a common theme being that the UK market would benefit from more traditional banks and more competition,” Mr Clyne said at the time.
“This places our operations in a great position to capitalise on this sentiment. Our No 1 priority is and has always been to grow the business organically, but in this climate it is also only natural that we would look at other options available to us.”
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NAB Business Survey Says Business Confidence Declining
According to the closely watched NAB Monthly Business Survey, in the month of June, business confidence continues to slide as the gap between the strongest and weakest industries widened to near record levels.
The NAB survey suggests that business confidence declined by 6 points, and is not at the same level as it was when the survey was conducted immediately following the aftermath of flooding last summer.
The mining industry displayed the highest confidence levels, whilst the weakest confidence levels were displayed in the construction sector.
NAB says that the sovereign debt crisis in Europe, as well as indications that the US economy could be headed for yet another slowdown is weighing on confidence of Australian companies, which is a little silly really given that the country is now firmly hitched to the Asian bandwagon.
Economy wide business conditions improved marginally in June, rising from 0 to 2.
There are however divergent conditions in different industries, with finance and property both displaying strong signs, as is recreation and personal services, unsurprisingly retail is not feeling very good about itself after being hammered by the internet over the last year.
Alan Oster, chief economist for NAB says weakness in business confidence and conditions as well as subdued demand from households implies that the central bank is likely to pause raising interest rates over the course of the next few months.
Mr. Oster expects at least a 25 basis point hike in the cash rate, though he now believes that hike will be deferred until December, with another 25 basis point hike in May next year, which would mean interest rates hitting a peak of 5.25 per cent.
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St George To Ramp Up Spending On Mobile Banking Applications
Westpac subsidiary St George says it anticipates roughly 50 per cent of all customer transactions online to be undertaken by smartphones over the next 12 to 18 months, and in response, the lender is ramping up spending on its online mobile offering by tens of millions of dollars as it seeks to cater for the burgeoning Gen Y client base.
Currently the volume of smartphone transactions have doubled over the last eight month and now equal the volume of transactions undertaken at 85 physical branches.
Ultimately St George’s goal is for its mobile banking application to act as a platform for customer acquisition, from which products such as credit cards and personal loans can be applied for.
Currently St George’s mobile banking application undertakes 500,000 financial transactions every month and the lender has revamped its applications for all platforms including iOS, Android, Blackberry and Windows Phone 7.
Approximately 80 per cent of the lenders mobile clients access the platform using the iPhone iOS, though 30 per cent of all downloads were Android application downloads. Windows and BlackBerry users represent less than 2 per cent each, and the lenders iPad application is undergoing a revamp is downloaded about 2,400 times a month, and across all applications 25,000 downloads a month take place for St George’s mobile banking application.
Roughly 20 per cent of the lenders online customer base use its banking services through mobile devices. Rob Chapman St George chief executive says that mobile technology is a key differentiator, and in the future would attract a new generation of customers.
“I just think it’s so powerful . . . I’m investing much more of my personal time and my team’s time and resources, people and cash to develop something special,” Mr Chapman said.
Users of St George’s mobile banking platform fall into two distinct categories, 42 per cent of all St George mobile banking app users are under 25 years of age, whilst a whopping 80 per cent are under the age of 35.
“This demographic is really, really important to us. I’m a big believer in mobile technology and where that takes us,” Mr Chapman said.
Mr Chapman said St George would lift its mobile technology spend. “I can see us over the next three years spending a lot more money, as in tens of millions of dollars on it (mobile) as opposed to probably only a couple so far,” he said. “I’m going to open up 100 new branches in the next three years at $1 million a pop, so to spend $10m on mobile banking is not inconceivable.”
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Jonathon Mott Of UBS Downgrades Australian Banking Sector
Investment bank UBS has downgraded the Australian banking sector on the back of subdued growth resulting from the clichéd “two speed” economy, the second of which has slowed down.
Jonathan Mott, noted Australian banking analyst for the Swiss investment bank in his outlook for the big four lenders downgraded his earnings forecast across the entire segment based on expectations that growth of the non resource sector based Australian economy is likely to remain patchy.
“A slower, two speed, de-leveraging economy is not ideal for banks,” he surmised, in another sign of how the non-mining economy is faring.
Mr. Mott says he believes that the Australian consumer will continue the process of deleveraging for an extended period of time, as higher interest rates, energy, food, petrol and utility prices result in sustained pressure on household budgets despite employment being robust and wages rising.
The Australian dollar’s strength continues to weigh on both the tourism, retail, manufacturing and export sectors, which Mr. Mott says has been a significant contributor to the slowdown in the Australian economy over the last half year.
UBS says it believes housing credit growth will slow against this backdrop, and the majors to earn less from their wealth management operations which will be hit by softer financial markets, pressure on fees, and higher charges for bad debt.
On the back of this environment, UBS said it expected housing credit growth to slow, weaker wealth management income given soft markets and fee pressure, and higher bad debt charges as the “lower speed” sectors of the economy weigh.
“The banks’ growth outlook remains subdued given deleveraging and the patchy economy. The banks must refocus on process re-engineering and breaking down bureaucracy to improve returns. Although never as beneficial as revenue gains, cost savings may be the only alternative.” said Mr Mott.
UBS cut its full-year 2012 earnings per share forecasts for the major lenders four, with NAB taking the biggest hit(3.6 per cent) and Westpac the smallest (2.3 per cent). Commonwealth Bank got whacked by 2.9 per cent cut whilst ANZ was cut 2.5 per cent.
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RBA Says Australian Banks Not Stressed By European Sovereign Debt Crisis
The Australian central bank says the country’s financial system is not at risk amid growing concerns that Greek debt default may result in a second financial crisis. Reserve Bank assistant governor Guy Debelle said on Monday that Australian lenders did not appear to have much exposure to the sovereign debt crisis in Europe.
“At this stage, at least, there is no sign of those stresses materialising,” he said, following a speech at a conference in Sydney.
According to Mr. Debelle, Australian banks made heavy use of offshore international funding in 2009, and have been repaying this debt faster than they have been issuing new bonds during three of the last four quarters.
In his speech, Mr Debelle said Australian lenders, heavy users of offshore funding in 2009, had been repaying offshore debt faster than they had been issuing new bonds in three of the past four quarters.
Commonwealth, Westpac, ANZand NAB remained highly profitable during the GFC without government bailouts, unlike many of their counterparts in the US, Europe, and elsewhere.
There are growing fears that the problems affecting Greece may be contagious and affect the rest of Europe, sparking yet another systemic financial crisis.
Money Markets in Australia changed tack earlier in the month, with investors betting that the RBA will cut interest rates in the event of a fresh wave of financial crisis.
Futures markets are now pricing a 70 per cent probability that the central bank will cut borrowing costs before the year is out, which stands in stark contrast to the 72 per cent probability of a rate hike that the Sydney Futures Exchange was pricing as recently as June 1st.
Betting on the futures market has now flipped to a 70 per cent chance the RBA will lower borrowing costs by the end of the 2011 calendar year.
This is a stark turnaround from the 72 per cent chance of an interest rate increase that contracts on the Sydney Futures Exchange had priced in on June 1.