Bank stocks

[whatsup]

The N Z RBA has just ann that bank stocks cannot pay dividends until there is a recovery, this means that on top of the N Z banks not paying a dividend to N Z investors they cannot pay any dividend to their Aust parent bank !

[Tomtom]

Everything possible must be done to prop up the housing bubble that stands in place of our deceased economy. If banks stop lending a 7x price-to-income ratio will not remain sustainable.

[macduffy]

The N Z RBA has just ann that bank stocks cannot pay dividends until there is a recovery, this means that on top of the N Z banks not paying a dividend to N Z investors they cannot pay any dividend to their Aust parent bank !

The big NZ banks don't pay dividends to NZ investors, of course, it's the Aust parents who pay, in "normal" circumstances. How they ( the parents) will be affected we wait to find out. The shareholders of the smaller NZ banks are the ones directly affected by the RBNZ's dictum.

[beetills]

If i own Anz shares purchased on the ASX what would be my prognosis regarding a divie?

[percy]

You would be entitled to it.

[peat]

The big NZ banks don't pay dividends to NZ investors, of course, it's the Aust parents who pay, in "normal" circumstances. How they ( the parents) will be affected we wait to find out. The shareholders of the smaller NZ banks are the ones directly affected by the RBNZ's dictum.

There are some debt issues that pay out "dividends" though I think, and there are capital buybacks which were going to take place.

[macduffy]

You would be entitled to it.

Provided ANZ declared one and the RBA didn't follow the RBNZ lead.

[percy]

Provided ANZ declared one and the RBA didn't follow the RBNZ lead.

Agreed................................
ie ANZ Aussie.
Banks supply the "Oil" for economies to function,that is why RBNZ is relaxing capital ratios and providing liquidity.
After the South Canterbury Finance fiasco they are not guaranteeing 100% of loans,just 80% which should stop "foolish" bank lending.Lesson learnt.
RBNZ and the Govt are playing their part,and I expect the banks will play their part.


ps.I doubt there are many business people, who have not at some time, been very lucky to have had a supportive bank.

[Arthur]

Europe has done it too. We could hear the squealing from here if they did it in Australia. From what I've heard self managed super schemes in Australia are heavily weighted to the banks and other losers.

[Scrunch]

Europe has done it too. We could hear the squealing from here if they did it in Australia. From what I've heard self managed super schemes in Australia are heavily weighted to the banks and other losers.

Marketscreener.com has the market cap of financial stocks within the ASX200 as being $295b (and that is after the recent price declines). The next three biggest categories are basic minerals at $177b, Healthcare at $110b and Industrials at $66b. Any Australian super scheme (be it self managed or not) that kept anything close to ASX200 weightings will have a big holding in Australian banks.

[airedale]

So after yesterday's announcement will the banks pay a dividend to retail investors?

[huxley]

So after yesterday's announcement will the banks pay a dividend to retail investors?

RBNZ says no sorry.

[traineeinvestor]

Marketscreener.com has the market cap of financial stocks within the ASX200 as being $295b (and that is after the recent price declines). The next three biggest categories are basic minerals at $177b, Healthcare at $110b and Industrials at $66b. Any Australian super scheme (be it self managed or not) that kept anything close to ASX200 weightings will have a big holding in Australian banks.

FWIW, Citibank has just updated its reports on the big 4 Australian banks saying it does not expect the RBA to follow the European and NZ regulators in banning dividends because so many people depend on them. Citi does expect dividends to be cut which is hardly surprising.

[airedale]

If they suspend divi payments then ANZ should re test its recent lows of NZ$ 15. {or lower}

[ynot]

Is the high kiwi$ relative to au$ an advantage when buying into nzx Ausi banks. Are they starting to look reasonably priced all things considered ?

[traineeinvestor]

Is the high kiwi$ relative to au$ an advantage when buying into nzx Ausi banks. Are they starting to look reasonably priced all things considered ?

As to the currency, the NZD has gained against the AUD over the last ten years (link to chart below) meaning shifting money from here to there has been a losing trade as far as the FX is concerned. I've been around long enough to remember all the smart, sophisticated investors who, on the advice of their smart, sophisticated bankers, took out low interest loans in Swiss francs in the 1980s and then got pummelled when the FX rates moved against them. Then there's me, thinking that buying NZD at 5.08 to the HKD back in January was a smart move (it's now at 4.63). So forecasting FX movements is a bit of a mug's game as far as I'm concerned.

That said, right now, while I'm expecting NZ to get past the worst of Covid-19 faster than Australia, I'm worried that NZ's more rigorous and total shut-down will hit the economy harder and for longer. So, as far as I'm concerned buying AUD (which is effectively what you are doing if you buy ANZ or WBC on NZX) is a bit of a punt. A better reason for buying shares in non-NZ companies is diversification away from NZ's small economy. Of course, if you are buying to diversify away from NZ Inc, your choices need not be limited to a couple of Australian banks.

As to ANZ and WBC, IMHO it depends on whether or not they need to do a capital raise. Of the 7 brokers' summaries listed on FNArena, only the Macquarie summary mentions a capital raising but all of the brokers are assuming that the dividends will be substantially cut - in some cases to zero in the near term.

Side note: if you want diversification away from NZ while staying on the NZX there're a few listed investment trusts including Barramundi which invests in Australian equities.

Disclosure: hold WBC


https://www.xe.com/currencycharts/?from=NZD&to=AUD&view=10Y

[Snoopy]

nzx Ausi banks: Are they starting to look reasonably priced all things considered ?


I have been looking closely at WBC from an historical basis recently in an exercise that is continuing. But I am wondering if my analysis will become an historical irrelevant discourse. What got me thinking was this latest capital adequacy update from WBC (pre Covid-19 era I might add).

https://www.westpac.com.au/content/dam/public/wbc/documents/pdf/aw/ic/Westpac_Pillar_3_Report_December_2019.pdf

On page 10 there is a break down of credit risk by sector. But all of those sector risks are adjusted and represented to produce RWA or Risk Weighted Adjusted figures. Yet nowhere in the document, or anywhere else I can find for that matter, does it state what these risk weighted adjustments are. I find myself wondering if in these Covid-19 times, these risk weighted adjustments are still correct. Because if they are not, then these risk weighted adjustments may be producing a seriously misleading picture of the capital requirements of the future WBC in particular and all banks in general. Thus the 'reasonably priced' question posed becomes very difficult to answer.

Thoughts?

SNOOPY

[traineeinvestor]

I have been looking closely at WBC from an historical basis recently in an exercise that is continuing. But I am wondering if my analysis will become an historical irrelevant discourse. What got me thinking was this latest capital adequacy update from WBC (pre Covid-19 era I might add).

https://www.westpac.com.au/content/dam/public/wbc/documents/pdf/aw/ic/Westpac_Pillar_3_Report_December_2019.pdf

On page 10 there is a break down of credit risk by sector. But all of those sector risks are adjusted and represented to produce RWA or Risk Weighted Adjusted figures. Yet nowhere in the document, or anywhere else I can find for that matter, does it state what these risk weighted adjustments are. I find myself wondering if in these Covid-19 times, these risk weighted adjustments are still correct. Because if they are not, then these risk weighted adjustments may be producing a seriously misleading picture of the capital requirements of the future WBC in particular and all banks in general. Thus the 'reasonably priced' question posed becomes very difficult to answer.

Thoughts?

SNOOPY

I don't know specifically what the RBA requires but Basel III (which provides the global capital adequacy framework for banks) increased the risk weightings used in calculating banks' capital requirements (especially exposures to real estate). There's a summary of risk weightings on pages 3-4 of the attached paper from BIS. There are a number of other factors which go into calculating how much risk weighted capital a bank needs and how much it has (most of which is well beyond my level of understanding) but two points can be noted:

1. banks have higher capital levels now than they did pre-GFC; and

2. those higher capital levels are are measured using higher risk weightings than they were pre-GFC

I had a brief look at the RBA website but didn't get very far. I did note the following from an April, 2020 report:

"Post-GFC reforms have ensured that large banks had much bigger capital and liquidity buffers before the onset of the pandemic than they did prior to the GFC. Regulators are encouraging banks to draw down these buffers rather than curtail lending and other activities. Other parts of the global financial system have also been strengthened over the past decade, including over-the-counter derivatives markets."

https://www.bis.org/bcbs/publ/d424_hlsummary.pdf

https://www.rba.gov.au/publications/fsr/2020/apr/the-australian-and-global-financial-systems.html

[macduffy]

A good question, snoopy. Like a lot of our current assumptions, credit weightings will need to be re-thought in the light of the new reality when the world resumes some level of "normality".

[Snoopy]

https://www.bis.org/bcbs/publ/d424_hlsummary.pdf


Thanks for the above reference



I don't know specifically what the RBA requires but Basel III (which provides the global capital adequacy framework for banks) increased the risk weightings used in calculating banks' capital requirements (especially exposures to real estate). There's a summary of risk weightings on pages 3-4 of the attached paper from BIS.


Pages 3 and 4 look like an index. The tables on 'Overview of revised standardised approach to credit risk' seem to be on pages 7 and 8.

It is interesting that you mentioned 'real estate', because that was a sector that was in the forefront of my mind.

I am not so sure you are right about real estate being treated more conservatively. The old Basel 2 standard had residential real estate given a blanket RWA factor of 50%. This means that a bank was allowed to loan $2 for a real estate loan, and they would have been regarded as having the same adjusted leverage as if they had lent just $1 on a standard loan. This was a serious incentive to lend against residential real estate.

Now if we look at residential real estate, page 8 of your reference, then under Basel 3 the RWA factor changes according to the equity you hold in your house.



Homeowner EquityRWA Factor


Below 50%20%


50%< <60%25%


60%< <80%30%


80%< <90%40%


90%< <100%50%


>100%70%



This looks in every way less conservative than the old Basel 2 standard to me. Think of the case of the young couple who buy a house with a 10% deposit. The house market falls by 10% wiping out their equity. Now their loan changes from an RWA rating of 50% to 70%. That means a bank that has $1bn of capital to support such loans now suddenly needs $1.4bn to support those same loans. And that 40% increase in Tier 1 capital (probably shareholders funds) must be found overnight! This has surely to be a very scary prospect for bank shareholders!



There are a number of other factors which go into calculating how much risk weighted capital a bank needs and how much it has (most of which is well beyond my level of understanding) but two points can be noted:

1. banks have higher capital levels now than they did pre-GFC; and

2. those higher capital levels are are measured using higher risk weightings than they were pre-GFC


I agree that the banks have more capital than at GFC time. But it looks like they might require more capital as well, as people they loan to either have their equity either wiped out or significantly diminished. And change RWA rating as a result. Scary times ahead for bank shareholders? Or more mortgagee sales?

SNOOPY

[ynot]

Thanks for the above reference



Pages 3 and 4 look like an index. The tables on 'Overview of revised standardised approach to credit risk' seem to be on pages 7 and 8.

It is interesting that you mentioned 'real estate', because that was a sector that was in the forefront of my mind.

I am not so sure you are right about real estate being treated for conservatively. The old Basel 2 standard had residential real estate given a blanket RMA factor of 50%. This means that a bank was allowed to loan $2 for a real estate loan, and they would have been regarded as having the same adjusted leverage as if they had lent just $1 on a standard loan. This was a serious incentive to lend against residential real estate.

Now if we look at residential real estate, page 8 of your reference, then under Basel 3 the RMA factor changes according to the equity you hold in your house.

The $2 leverage into real-estate makes sense. Lend to real-estate at any opportunity. Apparently over the last few years in Ausi banks have also encouraged interest only mortgages.

[Snoopy]

The $2 leverage into real-estate makes sense. Lend to real-estate at any opportunity. Apparently over the last few years in Ausi banks have also encouraged interest only mortgages.

It makes sense in a real estate market that is going up or liable to go up. Under Basel 2 the RWA would not change if the real estate market had a downturn. But under Basel 3, the RWA goes up if property prices fall. That means the bank needs more capital to support the same loan. At least that is how I read it.

SNOOPY

[Snoopy]

https://www.westpac.com.au/content/dam/public/wbc/documents/pdf/aw/ic/Westpac_Pillar_3_Report_December_2019.pdf

On page 10 there is a break down of credit risk by sector. But all of those sector risks are adjusted and represented to produce RWA or Risk Weighted Adjusted figures.


Reading about credit risk, it strikes me that there are so many 'credit risk' buzz abbreviations, that it is almost impossible to read up on the subject. So I have decided to list some of these abbreviations for future reference.

Most of these are those definitions from the following book.

"Final Basel III Modelling: Implementation, Impact and Implications by Ioannis Akkizidis and Lampros Kalyvas"

CCB = Capital Conservation Buffer

CCR = Counterparty Credit Risk

CVA = Credit Valuation Adjustment
VaR = Value at Risk

DR = Default Rates

EAD= Exposure at Default

ECRA = External Credit Rating Assessment (One alternative approach for calculating RWA)

EL = Expected Loss
UL = Unexpected Loss

ES = Expected Shortfall

FRTB = Fundamental Review of Trading Book (Revision of the market risk framework).

IMA = Internal Models Approach

IRB = Internal Ratings Based

LGD = Loss Given Default

LR = Leverage Ratio

NSFR = Net Stable Funding Ratio (A longer term ratio designed to monitor maturity mismatches over the entire balance sheet).

PD = Probability of Default

RWA = Risk Weighted Assessment

SA = Standardised Approach (The advanced approach is based on an IMA that has to be approved by regulators)

SMA = Standardised Measurement Approach (a standardised way to deal with operational risk).

SCRA = Standardised Credit Risk Assessment (Second alternative approach for calculating RWA). The SCRA requires an assessment of credit risk exposures into three categories: Grade A, Grade B and Grade C. SCRA is usually used when there is no ECRA available. Each grade must have a minimum criterion.

SNOOPY = Snotty Nerdy Outrageous Orderly Puny Yelling

[peat]

virus adjusted NTA.


NTA-V = virus adjusted NTA.

[nztx]

NTA-V = virus adjusted NTA.


Before or after ?

Cleansed or needing deep cleansing ? lol

[Snoopy]

Like a lot of our current assumptions, credit weightings will need to be re-thought in the light of the new reality when the world resumes some level of "normality".


One area that is causing me concern in this "Covid-19 market" is the amount of money that banks have loaned towards business. In particular I am thinking about those businesses not large enough to be listed on any market, yet still large, right down to SMEs (excluding traditional 'really small business' that is likely to be funded by a mortgage taken out over the proprietors home, out of sight of these rules). These businesses do not have externally verified credit ratings. Yet they are still a significant part of the business loan book for any bank.

Using traineeinvestor's supplied reference:

https://www.bis.org/bcbs/publ/d424_hlsummary.pdf

I think such investments are classified under the Standardised Credit Risk Assessment Approach (SCRA) approach. Under SCRA there are three risk weight grades: Grade A, Grade B and Grade C.

Grade A: This grade bucket would include exposures to bank counterparties that have adequate capacity to meet their financial commitments (including repayments of principal and interest) in a timely manner, for the projected life of the assets or exposures, and irrespective of economic cycles or business conditions.

Grade B: This grade bucket would include exposures to bank counterparties that are subject to substantial credit risk, with repayment capacities dependent on stable or favourable economic or business conditions.

Grade C: This grade bucket would include higher credit risk exposures to counterparties that have material default risks and limited margins of safety.

Unlike exposure to retail mortgages, where there are definite risks ascribed based on the amount of equity the home owner holds, these 'grade' classifications seem somewhat wishy washy. Nevertheless, there is probably no reasonable alternative way to rate business loans.

The standardised credit risk table and associated risk weighting for the three grades of loans is as follows:



Grade AGrade BGrade C


Risk Weightings40%75%150%


Risk Weightings (Short Term)20%50%150%



There is flexibility from the banks point of view as to how each business loan is classified.

"A bank may classify an exposure to a higher-risk grade (ie with a higher risk weight) even if it meets the minimum criteria set out for a lower risk grade, or has not breached the triggers of the higher risk grade."

One might imagine our banks are applying this 'revision' clause right now as they review support for business after the lock down. Yet any damage behind the scenes from such downgrades will also flow through to shareholders. If a business loan goes from 'Grade B' to 'Grade C' the amount of capital required to support such a loan doubles. That must be a huge concern to all bank shareholders! Who could have imagined back in January that a small operator like a dental practice, trading successfully, could be suddenly instructed by the government to close. Would not the bank have to suddenly downgrade such a business's risk profile from 'Grade A" to "Grade B"?

SNOOPY

[kiora]

Guaranteed up to 80% by Government?

[Snoopy]

Guaranteed up to 80% by Government?


Yes there is a scheme for new small business loans to be 80% guaranteed by the government. But I don't think that applies to existing business loans?

However, these government guarantees are a different issue to the one I am raising here. The rating of a loan, be it 'Grade A' , Grade B' or 'Grade C' is dependent on how well a business can operate in a given business environment. Guaranteeing a loan (to 80%) won't change the environment in which the business operates. So for capital adequacy purposes under Basel 3, as far as the bank is concerned. I don't think the government guarantee makes any difference. My interpretation on this point could be wrong. But right now I find myself far from pacified by the governments 80% loan guarantee, in relation to the amount of capital a bank is required to hold to support a business loan.

Of course once a loan fails, that is where the 'benefit' (the bank still must wear 20% of the loan loss remember), comes in. I would love to be wrong on this point though!

SNOOPY

[Ecks]

I would very much like to know what the debt to GDP ratio would be estimated at and the impact of this to banks, I can't seem to find any policy document or fiscal forecast from the government!?

[sb9]

From across the ditch...

April 27 (Reuters) - National Australia Bank Ltd (NAB (https://hotcopper.com.au/asx/nab)) on Monday announced plans to raise up to A$3.5 billion as it reported a 51% slump in first half earnings and booked A$1.04 billion in provisions,due to the coronavirus pandemic and customer compensation.
Australia's third-largest lender slashed its interim dividend as it also said it would increase forward-looking provisions to more than A$2 billion to bolster its cash position and guard against a hit to business from the outbreak. NAB surprised the market with the announcement, giving just a few minutes notice that it was bringing its earnings report forward from its scheduled May 7 date.
NAB said provisions made to offset a hit to business from the coronavirus, as well as to compensate customers after a series of missteps last year, led cash earnings to slump 51.4% to A$1.44 billion ($919.73 million).
The lender cut its dividend by 64% to 30 cents per share, following a nudge from the Australian Prudential Regulation Authority for banks to reduce or defer dividends and conserve cash amid virus-generated uncertainty.
"We are taking decisive action to manage the rapid and unprecedented upheaval caused by COVID-19 while at the same time being clear about our long term strategy for NAB," Chief Executive Ross McEwan said.
The bank planned to raise A$3 billion in a discounted share placement and about A$500 million through a share purchase plan.

[Scrunch]

From across the ditch...

April 27 (Reuters) - National Australia Bank Ltd (NAB (https://hotcopper.com.au/asx/nab)) on Monday announced plans to raise up to A$3.5 billion as it reported a 51% slump in first half earnings and booked A$1.04 billion in provisions,due to the coronavirus pandemic and customer compensation.
Australia's third-largest lender slashed its interim dividend as it also said it would increase forward-looking provisions to more than A$2 billion to bolster its cash position and guard against a hit to business from the outbreak. NAB surprised the market with the announcement, giving just a few minutes notice that it was bringing its earnings report forward from its scheduled May 7 date.
NAB said provisions made to offset a hit to business from the coronavirus, as well as to compensate customers after a series of missteps last year, led cash earnings to slump 51.4% to A$1.44 billion ($919.73 million).
The lender cut its dividend by 64% to 30 cents per share, following a nudge from the Australian Prudential Regulation Authority for banks to reduce or defer dividends and conserve cash amid virus-generated uncertainty.
"We are taking decisive action to manage the rapid and unprecedented upheaval caused by COVID-19 while at the same time being clear about our long term strategy for NAB," Chief Executive Ross McEwan said.
The bank planned to raise A$3 billion in a discounted share placement and about A$500 million through a share purchase plan.

Interesting. I guess they figured there was a good chance others like CBA / ANZ / Westpac may raise capital with their results and wanted to get in first.
Last year they were ANZ (1st May), WBC (6th May), CBA (15th May).

[whatsup]

Taste of things to come, what the betting that all of the Aust banks big and small will follow ?

[Balance]

Taste of things to come, what the betting that all of the Aust banks big and small will follow ?

A dead certainty.

[zacman]

Interesting. I guess they figured there was a good chance others like CBA / ANZ / Westpac may raise capital with their results and wanted to get in first.
Last year they were ANZ (1st May), WBC (6th May), CBA (15th May).

I find this quite interesting. I generally don't worry about Aussie banks, no franking credits etc, but based on the above they may all be seeking over $10 billion. Where will it come from when credit risks for clients are increasing and dividends are reducing. Sure, share prices seem to have dropped significantly so room for growth but still 10 billion is a lot

[Tomtom]

NAB divident cut and capital raising where flagged by Morgan Stanley back in December, I don't recall the exact amount for dividends but the capital raising looks close to what was forecast. NAB is the least efficient of the big four Australasian banks by many metrics, I suspect that Ross McEwan was hired from RBS for that reason.

The entire industry will need to make cuts. Lending margins will be far lower in the future, credit growth slowed for a couple of years and NPLs will blow out. Luckily large banks tend to have a lot they can cut without touching revenue generating operations.

[macduffy]

I find this quite interesting. I generally don't worry about Aussie banks, no franking credits etc, but based on the above they may all be seeking over $10 billion. Where will it come from when credit risks for clients are increasing and dividends are reducing. Sure, share prices seem to have dropped significantly so room for growth but still 10 billion is a lot

Aussie super funds have a lot of bank shares and won't take kindly to seeing their investments being diluted, or alternatively, stuck for capital. I'm picking that there's a lot of cash prepared to subscribe for cut-price bank shares if there's anything left over from the expected capital raisings.

[Beagle]

Some Aussie banks now trading at quite a big discount to NTA, e.g. :-
Bank of Queensland BOQ $4.63, last reported NTA $7.26 = 64% of NTA
Bendigo Bank BEN $5.69, last reported NTA $8.10 = 70% of NTA
ANZ $15.65, last reported NTA $19.59 = 80% of NTA

We know banks do not do well in a recession but HGH is currently trading at 107% of NTA - Something to ponder, is that warranted in the circumstances ?

[peat]

half a billion in extra software amortization for NAB this half. but even including that they still only 'charged' a similar amount against earnings to last half and yet the profit is down a lot.

[Snow Leopard]

Some Aussie banks now trading at quite a big discount to NTA, e.g. :-
Bank of Queensland BOQ $4.63, last reported NTA $7.26 = 64% of NTA
Bendigo Bank BEN $5.69, last reported NTA $8.10 = 70% of NTA
ANZ $15.65, last reported NTA $19.59 = 80% of NTA

We know banks do not do well in a recession but HGH is currently trading at 107% of NTA - Something to ponder, is that warranted in the circumstances ?

I put my Aus Super to 100% cash a while ago. But the above seems tempting.

As for HGH it is not a bank, just owns one.

[macduffy]

For an insight into why Barramundi have increased their weighting of Australian banks, see Pennypicker's post on the BRM thread.

[Norwest]

A dead certainty.

WBC and ANZ will probably follow NAB, however there is a lessened likelihood of CBA doing this due to their financial position.

[Blue Skies]

BNZ increases profit 6 months to March to $562 Million up 6% on a year ago, even as NZ economy hit by Covad crisis & lockdown. (While it's Aussie parent, NAB halved it's profit)

https://www.rnz.co.nz/news/business/415280/bnz-profit-improves-6-months-to-march

[peat]

Re all bank stocks incl HGH
I am struggling to understand how the direct losses have been incurred from Covid 19 already.
Provisions get made and they are best estimates etc but surely the amount of actual definite losses at this point is SFA

[macduffy]

Re all bank stocks incl HGH
I am struggling to understand how the direct losses have been incurred from Covid 19 already.
Provisions get made and they are best estimates etc but surely the amount of actual definite losses at this point is SFA

Yes, they're provisions based on estimates of the effect on the economy and the overall creditworthiness of their lending portfolio. The provisions may prove to be excessive, adequate or inadequate but in previous instances its sometimes been an opportunity to clear the decks and err on the side of caution, ie over rather than under-provide.

[Tomtom]

The provisions may prove to be excessive, adequate or inadequate... No one is going to disagree with you on that.

[iceman]

I am surprised to read Sir John Key say in the Herald today that the Government has banned banks to lend to both commercial property and agriculture, under the business loan guarantee scheme. It seems very odd to include agriculture in this !

[Balance]

I am surprised to read Sir John Key say in the Herald today that the Government has banned banks to lend to both commercial property and agriculture, under the business loan guarantee scheme. It seems very odd to include agriculture in this !

Logical, I would have thought?

The loan guarantee is to enable struggling businesses to access bank loans and retain jobs.

Agriculture is doing very well and commercial properties are purely investment.

[iceman]

Logical, I would have thought?

The loan guarantee is to enable struggling businesses to access bank loans and retain jobs.

Agriculture is doing very well and commercial properties are purely investment.

Agree with the commercial property but not agriculture. Some agriculture businesses are struggling with all sorts of unforeseen issues related to the lockdown, transport and employment problems. Don't see why they had to be excluded.

[bull....]

I am surprised to read Sir John Key say in the Herald today that the Government has banned banks to lend to both commercial property and agriculture, under the business loan guarantee scheme. It seems very odd to include agriculture in this !

there all trying to get farmers to reduce debt , its a big risk for banks and govt if ag rolls over.

[ynot]

[QUOTE=bull....;811834]there all trying to get farmers to reduce debt , its a big risk for banks and govt if ag rolls over.[/QUOTE

What scenario would that be likely ?

[stoploss]

[QUOTE=bull....;811834]there all trying to get farmers to reduce debt , its a big risk for banks and govt if ag rolls over.[/QUOTE

What scenario would that be likely ?
Mycoplasma Bovis , Foot and Mouth ,Drought , floods plenty of risks , collapse of milk prices ( who knows oil did )

[Tomtom]

In my view Reserve Banks should actually be imploring Commercial Banks and other listed companies to pay dividends if they can. Paying a steady dividend is good counter-cyclical behaviour, people purchased bank shares because they required continuity of income and banks where run accordingly.

[macduffy]

In my view Reserve Banks should actually be imploring Commercial Banks and other listed companies to pay dividends if they can. Paying a steady dividend is good counter-cyclical behaviour, people purchased bank shares because they required continuity of income and banks where run accordingly.

Central banks are more concerned with banks retaining their profits to bolster capital in present circumstances.

[peat]

Central banks are more concerned with banks retaining their profits to bolster capital in present circumstances.

sure no one wants a bank to go under and I guess most shareholders relying on shares for income have an alternative way to fund their lives, but this doesn't sit well with all the statements out there about strength and resilience.

I find the banks accounts a bit overwhelming to analyse however it would appear to me that while there are big provisions either already or imminent the ones we've seen aren't as huge as you'd think they might be which , along with other evidence (some factual some not) says to me that there is none or very little risk of Australian banks going under , provided of course that the post covid19 world goes vaguely according to plan . Naturally their profits will be constrained by impairments and bad debts but they will also be increased in the medium to long term by more lending over a longer time frame as folks struggle to claw their way out of debt.

Regulators are already going easy , Orr has relaxed his increased capital requirement time frame

[Aaron]

In my view Reserve Banks should actually be imploring Commercial Banks and other listed companies to pay dividends if they can. Paying a steady dividend is good counter-cyclical behaviour, people purchased bank shares because they required continuity of income and banks where run accordingly.

Maybe banks could increase the interest they pay to depositors instead.

[Beagle]

Rant about BNZ.

Tried to bank a cheque yesterday. Went to a BNZ smart ATM and with gloves on entered all relevant details and inserted cheque. Machine rejected cheque and spat it back to me. There was a notice that said there was a limit on the dollar amount that could be deposited through a smart ATM but no notice of what that amount was ?

Drove to another BNZ smart ATM thinking it might be different, obviously a waste of time in highsight. Came home and searched on their website for ages, no detail of the limitations are on their website. By this stage I have invested over an hour in this process plus travelling costs. Rang their 0800 number and sat in a queue of more than half an hour only to be cut off. Got back in the queue and about 15-20 minutes later when they finally answered I was told no cheques over $2,000 can be deposited through a smart ATM. Asked why, they said new money laundering rules under Covid 19. Anti money laundering legislation only applies to transactions over $10,000 I told him. He could not explain why the limit wasnow $2,000. Asked how I can deposit the cheque he suggested going to my nearest branch which is open one day a week for just 4 hours. When I suggested there's likely to be a very long queue, (which there most certainly was when I just tried that half an hour ago), probably a 2 hour queue which is what it looked like) all he could do was suggest if you don't need the money wait until lock down 2 protocols when there might be more branches open.

When asked why the BNZ have moved from 2 days cheque clearance to 4 days late last year and now 6 working days which seems completely absurd he could offer no explanation.

BNZ says all over their website they are here for Kiwi's during the lockdown. I would say that's just a public relations bull ****. There is no reason they couldn't open branches more often now with 2 meter distancing protocols. They are after all an essential service. Unless I want to stand in a long queue for several hours I will have to wait for 11 May to bank this cheque and a further 6 working days for it to clear. Before anyone suggests asking for payment by internet banking this client is very old school and doesn't do internet banking. All up I am an least 2.5 hours of time down a rathole with this already and have got nowhere. Thanks for nothing BNZ, your "service" standards and information available on your website and call centre wait times are truly appalling and pathetic. What an absolute shambles.

End of Rant.

Epilogue (I suppose I should be glad I am plenty solvent enough to wait until what will be late May by the time the cheque is cleared) to have this honoured and I know the client well enough that it is highly likely to be honoured. I can't help wondering how less solvent people are getting on...

[macduffy]

provided of course that the post covid19 world goes vaguely according to plan .

But does anyone know what that is? Meanwhile, banks are following their regulators' directions in conserving capital.

Disc: Holding ANZ and WBC.

[macduffy]

What an absolute shambles. End of Rant.

Yes, good to get that off your chest, Beagle!

Banks are very sensitive about such matters since the CBA's ATM debacle last year. No excuse for sending a customer all over town on a false scent, though.:(

[peat]

how does AML even apply to cheques , they are fully traceable instruments these days , no negotiability at all!

[Beagle]

how does AML even apply to cheques , they are fully traceable instruments these days , no negotiability at all!

Exactly ! Lets not forget this is really National Australia bank and you'd be forgiven for thinking they really do not care about customer service.

[thedrunkfish]

Exactly ! Lets not forget this is really National Australia bank and you'd be forgiven for thinking they really do not care about customer service.

Who even owns a cheque book anymore!

[peat]

Who even owns a cheque book anymore!

obviously one of Beagles clients.

I made a comment at a branch recently and the teller said there are still lots of cheques going through, though even NZ Post is going to reject them soon.


So ANZ has made a bout 2 B of provisions related to Covid19 factors , though almost half of that was related to writedowns on assoc subsidiaries. No dividend for now but they will reconsider and I note the CFO comments at the end

"We’ve also looked at a range of more severe stress scenarios; including a more extreme scenario that might arise from an economy-wide shut down for a full 6 months, and a 24% fall in GDP.

This would take us further into management and regulatory capital buffers, and would therefore take more time for us to rebuild to unquestionably strong. While this scenario is becoming increasingly unlikely given the way that Australia and New Zealand have managed the COVID 19 crisis it’s these uncertainties that have influenced our announcement to defer the decision on the dividend"

Like many they're just hanging onto it for good measure.

[Beagle]

Who even owns a cheque book anymore!

Older people who don't want to do internet banking. They are the generation that the banks don't seem to care about and are happy to expect them to stand in a queue for hours even though many have blood circulation issues and really struggle to stand for hours on end. Its an absolute disgrace.

[macduffy]

Older people who don't want to do internet banking. They are the generation that the banks don't seem to care about and are happy to expect them to stand in a queue for hours even though many have blood circulation issues and really struggle to stand for hours on end. Its an absolute disgrace.

Easy there, Beagle! We're still at level 3 and most businesses are closed or on restricted hours, as are the banks. In "normal" times, cheques are still accepted at branches, except for Kiwibank?

[Tomtom]

I made a comment at a branch recently and the teller said there are still lots of cheques going through, though even NZ Post is going to reject them soon. Most of the cheques I get are from overseas or business related. I suppose if you live or work in an area without a mobile signal...

[Cyclical]

Older people who don't want to do internet banking.

Surely Beagle, that time you've wasted on this and the associated frustration is enough to push you over the edge and...start using Internet banking? Covid19 is going to be a catalyst for change for a lot of businesses and people, and this would be one example. You're not that old and you're doggedly proficient with a keyboard. But yeah, I hate it when I need to talk to the bank these days. Kiwibank for me...they used to be very good at answering the phone in a timely manner, but in the last year or two it's been terrible.

[percy]

All he was trying to do was bank a cheque which was under $10,000,but the ATM would not do the business as it was over $2,000.
Bank has wasted his time.
Bank had no good reason why the ATM would not accept the cheque.Cheque would have the drawer's details, and Beagle would have had to put it into his account.
Traceability was all there.

[Tomtom]

Government to lend money directly to SMEs. (http://COVID-19 Response (Taxation and Other Regulatory Urgent Measures) Bill) What could possibly go wrong with government making credit decisions and managing loans to private enterprises? :mellow:

[Cyclical]

Government to lend money directly to SMEs. (http://COVID-19 Response (Taxation and Other Regulatory Urgent Measures) Bill) What could possibly go wrong with government making credit decisions and managing loans to private enterprises? :mellow:

The link don't appear to work there Tomtom.

[Tomtom]

The link don't appear to work there Tomtom.

Apologies, this article (https://www.interest.co.nz/business/104786/another-wave-government-support-way-business-crown-give-covid-19-affected-smes-loans) contains a link to the legislation.

[Snoopy]

Apologies, this article (https://www.interest.co.nz/business/104786/another-wave-government-support-way-business-crown-give-covid-19-affected-smes-loans) contains a link to the legislation.


"While both Finance Minister Grant Robertson and Reserve Bank Governor Adrian Orr have urged banks to lend courageously to businesses under this scheme (the Business Finance Guarantee Scheme, through which taxpayers are underwriting 80% of individual bank loans to eligible SMEs), banks will ultimately lend according to their own criteria and within their own risk appetites."

"Banks can also only lend to businesses under the scheme if those businesses have exhausted other options with their banks."

If those quotes are right, then no wonder the banks are hesitant to lend to small business. Banks are still expected to lend according to their own risk appetites (understandable). But the 'Business Finance Guarantee Scheme' will only kick in if all other finance options have been turned down. So the finance scheme can only be offered to those deals the bank has rejected. And since the bank has rejected such loans, they won't be happy with taking a 20% risk in a loan they have determined is no good. That means the 'Business Finance Guarantee Scheme' cannot work - no loan can qualify. Or have I got that wrong?

SNOOPY

[Tomtom]

Seems reasonable. It's quite alarming to me this is even being considered.

I'm of the view that stimulating demand will ultimately save businesses and the best way to do that is injecting cash into consumers accounts.

[nztx]

Seems reasonable. It's quite alarming to me this is even being considered.

I'm of the view that stimulating demand will ultimately save businesses and the best way to do that is injecting cash into consumers accounts.

What will a change of Govt do to these ?

- turn them into taxable grants (as the loans should have been in first place) perhaps spread over forward years ?
- make them interest free for 5 years perhaps ?

I really cant see many businesses on the bones of it's ar*e taking these loans up being in any position to repay
these fully any time in the next 2-3 years, unless they get a really really good tail wind...

[nztx]

Seems reasonable. It's quite alarming to me this is even being considered.

I'm of the view that stimulating demand will ultimately save businesses and the best way to do that is injecting cash into consumers accounts.

What will a change of Govt do to these ?

- turn them into taxable grants (as the loans should have been in first place) perhaps spread over forward years ?
- make them interest free for 5 years perhaps ?

I really cant see many businesses on the bones of it's ar*e taking these loans up being in any position to repay
these fully any time in the next 2-3 years, unless they get a really really good tail wind...

As per usual, the Labor Govt still haven't thought things through to ensure these are 'working for intended purpose'

- What use is throwing a Govt Loan to a Business already sitting on the edge fighting to claw back ?
- What use is increasing Small Asset write-off limits to bulk of businesses who wont be in position to buy those assets up to $5k ?
- What use is tinkering with winding 2021 losses backwards - when most businesses wont have prior year profits undistributed
(as shareholder salaries) subject to tax to see any prior year tax refund ?

Most Businesses need Cash to pay Overheads etc, not an additional hefty repayable Loan Exposure & particularly not to Robertson & Nash's Department of Taxation ..

On another score - what has Nash actually done (if anything) for SME's & Small Business - he is the Minister for Small Business I believe
and appears to be mostly lost in action ..

[Scrunch]

"While both Finance Minister Grant Robertson and Reserve Bank Governor Adrian Orr have urged banks to lend courageously to businesses under this scheme (the Business Finance Guarantee Scheme, through which taxpayers are underwriting 80% of individual bank loans to eligible SMEs), banks will ultimately lend according to their own criteria and within their own risk appetites."

"Banks can also only lend to businesses under the scheme if those businesses have exhausted other options with their banks."

If those quotes are right, then no wonder the banks are hesitant to lend to small business. Banks are still expected to lend according to their own risk appetites (understandable). But the 'Business Finance Guarantee Scheme' will only kick in if all other finance options have been turned down. So the finance scheme can only be offered to those deals the bank has rejected. And since the bank has rejected such loans, they won't be happy with taking a 20% risk in a loan they have determined is no good. That means the 'Business Finance Guarantee Scheme' cannot work - no loan can qualify. Or have I got that wrong?

SNOOPY

There are probably loans that could qualify, but whether they are a meaningful proportion of lending is a different issue, and my gut feeling is that the potentially eligible market isn't anywhere near the scheme's ceiling.

If you had clarity that a borrower had a 75% chance of replaying the loan and was to pay a 10% margin (assuming for simplicity a 1-year loan with one payment at the end of the loan), the loan should be declined by normal bank processes. The payoff's are 1.1 * 75% + 0 * 30%. At 0.825 this is less than 1 and a bad risk to take on. The bank might lend on this if they were only exposed to 20% of the losses. The payoff's would become 1.1 * 75% + 0.8 * 25% = 1.025. With the guarantee the loan now has an expected margin of 2.5%.

Even here, the loan is still risky because you don't know how many hurdles the government of the day is going to impose to collect on the guarantee. Is this about to set up a scenario similar to the pending court case between EQC and Tower? If the loan above's true probably of repayment was lower than 66.7% it still doesn't make sense. If the loan is anything close to the $500k ceiling, what is the risk profile if more bridging money is need before normal operations generate sufficient cashflow to repay loans? What if the customer is not in default but extensions mean the loan hasn't repaid within 3 years? What are the additional losses on existing loans if your recovery specialists are now focusing on ticking any government boxes on these loans?

[Tomtom]

I'm reminded of Frédéric Bastiats parable about broken windows where he illustrate why destruction, and the money spent to recover from destruction, is not actually a net benefit to society.

We are lending a lot of money to a lot of people to fix windows I suppose because...well we have to feel like we are doing something, don't we?


"Society loses the value of things which are uselessly destroyed;" and we must assent to a maxim which will make the hair of protectionists stand on end – To break, to spoil, to waste, is not to encourage national labour; or, more briefly, "destruction is not profit."

[nztx]

I'm reminded of Frédéric Bastiats parable about broken windows where he illustrate why destruction, and the money spent to recover from destruction, is not actually a net benefit to society.

We are lending a lot of money to a lot of people to fix windows I suppose because...well we have to feel like we are doing something, don't we?


But Govt set the scene for those windows to get broken in the first place, through their tardiness in doing very little through January through best part of February, intently watching the distant horizon & many would guess sitting with heads in sand saying for weeks 'this wont happen to NZ' ...

So why shouldn't Govt just be paying up for all those broken windows to get fixed & forget all thoughts of some further dumb ill-conceived Loan Scheme (probably only to give another large bunch Public Sector papershufflers further jobs for the next 5 years) and of which will likely only cause further grief down the track ? ;)


After all many Employees of affected employers sort of got a non repayable Loan didn't they ? Are the other bundle who got saddled by Govt with the privilege paying out 100% of subsidy received to workers for 'stay in the job but at home twiddling your fingers purposes because Govt decrees you must' any different ?

[Waltzing]

money supply in the USA apparenty greater in this last month than in all of 2008-09 and due to increase farther. DR Siegel say inflation will turn up due to the vast increase... how ever that hasnt happen in japan.. so we will see...different population dynamics and low oil will have an effect eventually.. there may be no way they can avoid another bull market that will over shot like the last one...another cycle of boom and bust but this time even faster and higher than the last one? history repeats its self. In 5 years time you wont even remember this 12 month period...

[winner69]

Know somebody who sacked an employee yesterday because the employee said because the subsidy was his and he didn’t have to work

Told him on your bike son and I’ll repay the balance of ‘your’ subsidy to the government ..,,and hope the dole queue is not too long.

[Biscuit]

Know somebody who sacked an employee yesterday because the employee said because the subsidy was his and he didn’t have to work

Told him on your bike son and I’ll repay the balance of ‘your’ subsidy to the government ..,,and hope the dole queue is not too long.

They should have promoted him to manager - clearly has management potential.

[macduffy]

So why shouldn't Govt just be paying up for all those broken windows to get fixed & forget all thoughts of some further dumb ill-conceived Loan Scheme (probably only to give another large bunch Public Sector papershufflers further jobs for the next 5 years) and of which will likely only cause further grief down the track ?

Let's not forget that the "Govt just be paying up" is really the taxpayers of NZ, current and future, paying for these broken windows! As for who's responsible for breaking them in the first place, I wouldn't hazard a guess at this early stage of the inquest!

[Tomtom]

Govt set the scene for those windows to get broken in the first place... Just to be clear here your argument is that restitution, in the form of a subsidised loan scheme, is owed due to what is essentially an Act of God?

[ynot]

Just to be clear here your argument is that restitution, in the form of a subsidised loan scheme, is owed due to what is essentially an Act of God?


Don't think it was God that instigated the lockdown.

[Tomtom]

Don't think it was God that instigated the lockdown. Would the alternative course of action (https://www.cnbc.com/2020/04/30/coronavirus-sweden-economy-to-contract-as-severely-as-the-rest-of-europe.html) have been any better for SMEs overall?

[Tomtom]

Update: It looks like MPs passed the wrong legislation (https://www.interest.co.nz/opinion/104814/jen%C3%A9e%C2%A0tibshraeny-what-was-worse-parliament-mistakenly-passing-law-enabling-taxpayers) because they didn't read it before rubber stamping it.

[Cyclical]

Update: It looks like MPs passed the wrong legislation (https://www.interest.co.nz/opinion/104814/jen%C3%A9e%C2%A0tibshraeny-what-was-worse-parliament-mistakenly-passing-law-enabling-taxpayers) because they didn't read it before rubber stamping it.

What a shambles. I actually thought the COL were doing pretty well with dealing with this covid thing, given the immense pressure and timelines they've been under, but now I'm getting really concerned about the constant lolly scrambles consisting of billions in loans etc that we'll likely never get back, while all the good hardworking people out there spend the rest of their lives paying it back in the form of tax. Whatever happened to the days when poorly run businesses were allowed to fail when there was an economic crisis? In a lot of instances, we're just putting off the inevitable anyway.

[percy]

No1 daughter's employer has just suffered a mental breakdown.
Cause.Worry about her business surviving.Still can not open under level 3.
There will be thousands of small business owners worrying themselves sick.
Not only the employers,but all their staff.
In a couple of years time we may be able to look back, and see in hindsight, what the correct course of attention would have been.
At present time it is a dark trip into the unknown.

[Waltzing]

the real problem is most MP's dont know one end of a balance sheet from the PL to the equity from the liabilities to the assets... and reserve banks dont really want to put money directly into bank accounts.. but you dont want complete destruction of the system due to a virus... they have no choice but to just move fast and apply a very limited set of parameters and clean the mess up later. The internal systems cannot be changed over night to cater for something that happened this fast. Its a case of just move the credit out there. As it is the destruction will be huge in NZ. But stock markets like the USA are already looking thorough the destruction due to the amount of credit being extende is greater in ONE month apparently than 2 years worth under the GFC. My simple book keeping and transaction knowledge does not extend to reserve bank systems.

[Tomtom]

In a lot of instances, we're just putting off the inevitable anyway. Yeah, banks realised that but the government where not happy as they wanted to do something - or anything.

Will this help? It depends what you mean by "help". In 2008/9 providing liquidity to banks worked because what we where facing was predominantly a liquidity crisis. However this is more of a traditional recession scenario where cashflow and ultimately solvency tend to be the limiting factor for business survival.

I'm hesitant to say that however because I'm not sure Grant Robertson would flinch at the idea of fully subsidising businesses cashflow at this point. I suspect a lot of this is aimed at being able to point at having "done something" come the next election and hoping people don't look too hard at what has been done.

[Snoopy]

"While both Finance Minister Grant Robertson and Reserve Bank Governor Adrian Orr have urged banks to lend courageously to businesses under this scheme (the Business Finance Guarantee Scheme, through which taxpayers are underwriting 80% of individual bank loans to eligible SMEs), banks will ultimately lend according to their own criteria and within their own risk appetites."

"Banks can also only lend to businesses under the scheme if those businesses have exhausted other options with their banks."

If those quotes are right, then no wonder the banks are hesitant to lend to small business. Banks are still expected to lend according to their own risk appetites (understandable). But the 'Business Finance Guarantee Scheme' will only kick in if all other finance options have been turned down. So the finance scheme can only be offered to those deals the bank has rejected. And since the bank has rejected such loans, they won't be happy with taking a 20% risk in a loan they have determined is no good. That means the 'Business Finance Guarantee Scheme' cannot work - no loan can qualify. Or have I got that wrong?



Update: It looks like MPs passed the wrong legislation (https://www.interest.co.nz/opinion/104814/jen%C3%A9e%C2%A0tibshraeny-what-was-worse-parliament-mistakenly-passing-law-enabling-taxpayers) because they didn't read it before rubber stamping it.

The article mentioned there were issues with the previous Business Finance Guarantee Scheme too

"But here’s the kicker - a line was slipped into the bottom of the release, saying the Government is no longer requiring banks to take security when issuing taxpayer-backed loans under the existing Business Finance Guarantee Scheme (which is distinct from the new scheme)."

"So it will be at banks’ discretion whether they take security for the $6.25 billion of loans they’re expected to give businesses, which taxpayers are 80% on the line for. No big deal!"

Looks like I was right. The original terms of the first announced 'Business Finance Guarantee Scheme' were unworkable.

SNOOPY


'

[Cyclical]

I'm hesitant to say that however because I'm not sure Grant Robertson would flinch at the idea of fully subsidising businesses cashflow at this point. I suspect a lot of this is aimed at being able to point at having "done something" come the next election and hoping people don't look too hard at what has been done.

And with this huge groundswell of public support they are currently enjoying, they probably think they've got the mandate to just keep pouring it in.

[Baa_Baa]

No1 daughter's employer has just suffered a mental breakdown.
Cause.Worry about her business surviving.Still can not open under level 3.
There will be thousands of small business owners worrying themselves sick.
Not only the employers,but all their staff.
In a couple of years time we may be able to look back, and see in hindsight, what the correct course of attention would have been.
At present time it is a dark trip into the unknown.

So true, dark time for so many with only darker times immediately ahead. Feeling so powerless to help, can only think to spend my money local, every bit helps doesn’t it?

[nztx]

What a shambles. I actually thought the COL were doing pretty well with dealing with this covid thing, given the immense pressure and timelines they've been under, but now I'm getting really concerned about the constant lolly scrambles consisting of billions in loans etc that we'll likely never get back, while all the good hardworking people out there spend the rest of their lives paying it back in the form of tax. Whatever happened to the days when poorly run businesses were allowed to fail when there was an economic crisis? In a lot of instances, we're just putting off the inevitable anyway.

You nailed it there ...

3-4 years with the current mob & they will have pulled off the classic massive dubious trick of reducing a stable reasonably economy into a broken *** heavily indebted shambles, with many businesses in sectors wondering if they will even be there tomorrow, wholesale unemployment and future generations likely to be left paying dearly for the current mob's tardiness, stupidity & incompetence.

There can be little doubt that things could have been managed very considerably better, with less carnage, disruption & cost across the board, and above all effective C19 management measures resulting in less infection & deaths..

All Kiwi's deserve to see considerably better than the current mob have managed to deliver up / orchestrate..

Aside from the Clark/Cullen fairweather dreaming along session - has any previous Labour lead Govt achieved such a feat so fast ?

[macduffy]

I'm not sure what this discussion is doing in the "Bank stocks" thread but nevertheless, it's a bit harsh to blame today's situation on the present government. There's an international pandemic ranging, remember.

Rebuttal of this post belongs in the politics threads, I believe.

[justakiwi]

Well said.


I'm not sure what this discussion is doing in the "Bank stocks" thread but nevertheless, it's a bit harsh to blame today's situation on the present government. There's an international pandemic ranging, remember.

Rebuttal of this post belongs in the politics threads, I believe.

[Tomtom]

I'm not sure what this discussion is doing in the "Bank stocks" thread... I put it in as I felt that having a new competitor(?) in the business banking space might weigh on peoples investment decisions. After all without peripheral concerns, like making sure loans will be repaid and are secured, this might leave traditional lenders at a disadvantage to Bank of IRD.

[ynot]

I put it in as I felt that having a new competitor(?) in the business banking space might weigh on peoples investment decisions. After all without peripheral concerns, like making sure loans will be repaid and are secured, this might leave traditional lenders at a disadvantage to Bank of IRD.
Would that be the "Left Bank of NZ"

[Cyclical]

I put it in as I felt that having a new competitor(?) in the business banking space might weigh on peoples investment decisions. After all without peripheral concerns, like making sure loans will be repaid and are secured, this might leave traditional lenders at a disadvantage to Bank of IRD.

Seems fair to me. Wasn't that long ago we were discussing how loans 80% underwritten by the govt would be great for the likes of HGH. Maybe the likes of HGH didn't play ball proper, so the posts have now been removed. I'm not sure if that's a blessing or otherwise TBH.

[Leftfield]

ABC article on the recession threats facing Australian banks. See it here (https://www.abc.net.au/news/2020-05-04/are-australias-big-four-banks-equipped-for-recession/12210538).

[peat]

So ANZ has made a bout 2 B of provisions related to Covid19 factors , though almost half of that was related to writedowns on assoc subsidiaries. No dividend for now but they will reconsider and I note the CFO comments at the end

"We’ve also looked at a range of more severe stress scenarios; including a more extreme scenario that might arise from an economy-wide shut down for a full 6 months, and a 24% fall in GDP.

This would take us further into management and regulatory capital buffers, and would therefore take more time for us to rebuild to unquestionably strong. While this scenario is becoming increasingly unlikely given the way that Australia and New Zealand have managed the COVID 19 crisis it’s these uncertainties that have influenced our announcement to defer the decision on the dividend"

Like many they're just hanging onto it for good measure.

c,mon guys lets try and stay on track,


WBC have made about 1.5B of Covid 19 impairments

"In aggregate, COVID-19 related impairment charges were $1,581 million."


price has found support at $NZ16 today which seems to be holding very recently.






Note that WBC will not be including borrowers who have applied for deferral into their future stress testing!! ?

[Tomtom]

ABC article on the recession threats facing Australian banks. See it here (https://www.abc.net.au/news/2020-05-04/are-australias-big-four-banks-equipped-for-recession/12210538). I don't think a recession is the biggest risk.

I would single out an over reliance on credit growth as holding banks back from performing. ROE has been eroded by the low rates environment as a result. Time to diversify revenue.

[peat]

I see WBC released its interim for the US market today and I noticed that there was an NTA in it. I couldnt see one in the Aussie interim report. Maybe I missed it
But the USA release states $A15.43 as the NTA as at 31 March 2020. Current trading at $A15.93.

[tomm]

ANZ and WBC which one will you go for ?

[peat]

my gut feeling is ANZ

but my charts say we are still bearish
the chart of ANZ (NZ) is here definitely forming a triangly flaggy thing which would normally continue (down)

11507

[tomm]

my gut feeling is ANZ

but my charts say we are still bearish
the chart of ANZ (NZ) is here definitely forming a triangly flaggy thing which would normally continue (down)

11507
Thanks for that , look like both of them are moving almost identical with each other. I will go for ANZ .

[stoploss]

[QUOTE=bull....;811834]there all trying to get farmers to reduce debt , its a big risk for banks and govt if ag rolls over.[/QUOTE

What scenario would that be likely ?

https://loveracing.nz/News/30326/Equineexportssuspendedduetosuspectedpiroplasmosisp ositive.aspx

[beetills]

[QUOTE=ynot;811888]

https://loveracing.nz/News/30326/Equineexportssuspendedduetosuspectedpiroplasmosisp ositive.aspx
Do you know if this includes horses going over to Aus on a Melbourne Cup campaign or similar.

[macduffy]

I'm having a slow day today. Could someone please explain to me the connection between this news item and the thread "Bank Stocks"?

:confused:

[Snoopy]

They are all trying to get farmers to reduce debt , it's a big risk for banks and govt if ag rolls over.




https://loveracing.nz/News/30326/Equineexportssuspendedduetosuspectedpiroplasmosisp ositive.aspx



A bit of a long bow drawn here. You are suggesting that a ban on exporting horses from NZ will tip the rural sector as a whole over the edge and cause havoc for banks? The breeder sale season is well over. Wouldn't you expect all the horses bought by Australians to already be in Australia by now?

"Theileria equi is a blood disease that causes anaemia and is spread from animal to animal by ticks. The ticks that are known to transmit the disease are a species not present in New Zealand. It is not infectious between horses."

"The horse in question was imported to New Zealand from the EU early last year for breeding."

Looks like it will be pretty easy to eliminate this disease if it cannot be spread from horse to horse. If I was a banker I wouldn't be quaking in my banking shoes at this news.

SNOOPY

[stoploss]

Sorry to clog the thread Snoopy . It was in reply to the original question re black swan events . I pointed out various biological things that could upset the apple cart . ( Foot and Mouth being the worst ) . I thought I would put it up as it is just another example like mycoplasma bovis of something we don't have that seems to mysteriously appear ....

[bull....]

the other big threat to most banks worldwide now is commercial loans

In AUS

Why $63b of commercial office loans have bankers worried


https://www.afr.com/companies/financial-services/why-60b-of-commercial-office-loans-have-bankers-worried-20200520-p54unu


imagine it the same in NZ


and motely fool has expanded on the afr article

The hidden threat to big banks that may be worse than a housing collapse
https://www.fool.com.au/2020/05/21/the-hidden-threat-to-big-banks-that-may-be-worse-than-a-housing-collapse/

no dividends for years

[sb9]

Mortgage wars on with ASB dropping their one year rate down to 2.85% and 2 year rate down to 2.69%...bring it on!

[Ricky-bobby]

Wonder when they will start dropping their floating as well?..

[tim23]

What lit a fire under the banks today?

[Waltzing]

what lit a fire under banks. Probably a few things but remeber reserve banks have got there balance sheets , i mean there backs... take a look at bank share in the GFC and chart there monthly movements....markets are decoupling in sectors from the economies. The Aussi government drew down less than was though to cover support payments by over half. They are now thinking about extending the support payments in sectors through to september... Vacines trails are going well so markets are going to start looking right through the next 12 to 24 months. This is not your 1928 crash. Nor is it your grand fathers 1930's depression when interest rates were raised and there was no QE.

[Cyclical]

What lit a fire under the banks today?

Good question. Probably the fact I sold my ANZ holding on the bounce last week.

[macduffy]

The positive report from the RBNZ on the health of the financial sector was probably a factor. Although it refers to NZ and not Aus, the latter take notice of our conditions for two reasons. Their banks have a big stake in NZ and the two countries' economies tend to move in sync , if not at the same tempo.

[Cyclical]

The positive report from the RBNZ on the health of the financial sector was probably a factor. Although it refers to NZ and not Aus, the latter take notice of our conditions for two reasons. Their banks have a big stake in NZ and the two countries' economies tend to move in sync , if not at the same tempo.

There is some concern about their relationship with China though and the corresponding reliance on all the stuff they pull out of the ground. Even if the relationship was all hunky dory, a downturn in global consumption is going to hurt OZ. But then we'll likely get smashed on the tourism side more, so there's probably not a lot in it.

[flyer]

Wow, good jumps

[Cyclical]

Wow, good jumps

I know right, crazy. Chickened out of my ANZ last week at 17.16, it's currently hitting $19!

[Grimy]

And I chickened out of adding to my holdings in the low 16s...…..

[Cyclical]

And I chickened out of adding to my holdings in the low 16s...…..

The chart suggested it was heading down to it's recent low, so I thought I'd jump out on the bounce and look to get back in later. More than happy to sit on the sideline re this one though and see how things unfold in the coming months...it's going to be interesting.

[thegreatestben]

I pulled my sell of $17.85 at 11:50am this morning haha...

[bull....]

banks on a tear. basing patterns since april offered good risk to reward propositions for a short term bounce. i wouldnt hold long term who knows how many bad debts are too come

[peat]

What lit a fire under the banks today? (yesterday)

I spent ages last night trying to get a good answer to this question and obviously didnt find one good enough to warrant posting.
The AFR had a article that their market was out of the bear so maybe that helped. Not much else though apart from WBC's Disclosure statement released which I doubt was new information as such. And in any case all the banks moved not just WBC. They certainly have jumped up today... so it was a timely question

[peat]

banks on a tear. basing patterns since april offered good risk to reward propositions for a short term bounce. i wouldnt hold long term who knows how many bad debts are too come

lets face it though huh most trading banks have good security over their loans and while there will of course be some bad debts unless there is a wholesale collapse of property prices the banks will be sweet because they just ride anything out and if necessary wait a little while to liquidate the collateral i.e. sell the property.

[bull....]

lets face it though huh most trading banks have good security over their loans and while there will of course be some bad debts unless there is a wholesale collapse of property prices the banks will be sweet because they just ride anything out and if necessary wait a little while to liquidate the collateral i.e. sell the property.

margins being squeezed all the time too. i would say peak dividends has long gone

[Waltzing]

US banks rallied last night. While peak dividends are long gone 3.5% will be the new peak dividend. Banks are always best seen as tradable stocks at least that is the view i have had. A bit like air lines and retail. DISC; Always selling and buying the banks.

[bottomfeeder]

Yes, WBC up three dollars in three or so days, So I unloaded a few, only 10%. Always a drop after a bit of a run, just hope the drop is enough to buy back in. If not RB worst case scenario, makes me feel a little more comfortable. I fear the worst is yet to come for banks generally. But still holding on hoping to be at breakeven soon.

DISC: HOLD and am HOLDING

[bull....]

What lit a fire under the banks today?

they been up in US as well started moving last week funny about the same time i started talking on this thread lol , the us banks provide a good lead on movement in the aus banks

[peat]

yes I should disclaim
I bought a small parcel of WBC using CFD's on the Covid way down at 23. Been hurting quite a bit but not selling a Pillar at a loss.
Might buy more at 13 but otherwise I'm just keeping an eye on things as part of a broadening into Aussie stocks

I did short the SPDR S+P Bank ETF for two weeks from 2/5 to 16/5 covering off some of the fall though the commission on those trades was high.

I simply cant ignore the sector given its capitalisation total.

[bull....]

Dangerously naive': APRA warns the worst is ahead


In a speech delivered overnight to the Board of the International Banking Federation, Mr Byres also urged lenders to give investors and shareholders as much information as possible to maintain investor faith in the banking sector and financial markets

https://www.afr.com/companies/financial-services/dangerously-naive-apra-warns-the-worst-is-ahead-20200527-p54x0b

anyway after todays pop open looks like intraday over extended , nice fade?

[bull....]

the pop and fade seems to working at the moment

[bull....]

have to decide do i take profits on the fade today or do i wait and see trumps announcement tonight affects markets for monday

[bull....]

sometimes a good strategy is to take half the profits on the short and ride the rest esp if going for more based on a news event

[macduffy]

sometimes a good strategy is to take half the profits on the short and ride the rest esp if going for more based on a news event

Do you take your own advice?

;)

[bull....]

Do you take your own advice?

;)

of course it helps to become more self reliant and confident in your trading

[bull....]

gap down open was good spot to close the short , almost the reverse senario of the other days gap up and fade

[macduffy]

ANZ sells UDC - finally?

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/ANZ/354034/323702.pdf

[IAK]

Regulator takes action against ANZ for insurance that offered no cover lol.

https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12337416

[bull....]

should be a good day monday , glad we reversed the short again the other day gone ballistic up since then

[bull....]

banks getting hammered , looks like lows going to re tested again

[JSwan]

banks getting hammered , looks like lows going to re tested again

Reason being the reintroduction of lockdown/grim GDP figures in Aus?

[bull....]

Reason being the reintroduction of lockdown/grim GDP figures in Aus?

yep , stock prices have to factor in more bad debts being likely. I see the regulator in aus allowing banks to pay out 50% divs now so be interesting in light of the new lock downs if they do this

[Jaa]

Reason being the reintroduction of lockdown/grim GDP figures in Aus?

Could be... Two cases in SA today and still cases in NSW.


Housing market could still see major recession to come as coronavirus ravages economy (https://www.abc.net.au/news/2020-08-03/why-your-house-isnt-worth-what-you-think-ian-verrender/12516960)

[Snoopy]

yep , stock prices have to factor in more bad debts being likely. I see the regulator in aus allowing banks to pay out 50% divs now so be interesting in light of the new lock downs if they do this


Just putting up the web reference to confirm what Bull has said;

Here is what was said on 7th April 2020.

https://www.apra.gov.au/news-and-publications/apra-issues-guidance-to-authorised-deposit-taking-institutions-and-insurers

"In a letter to ADIs (Authorised Deposit Taking Institutions) general insurers, life companies and private health insurers, APRA outlined its expectations that these institutions limit discretionary capital distributions in the months ahead, including deferrals or prudent reductions in dividends."


Here is what was said on 29th July 2020.

https://www.apra.gov.au/news-and-publications/apra-updates-guidance-on-capital-management-for-banks-and-insurers

"In additional guidance for the banking sector, APRA (Australian Prudential Regulation Authority) has indicated that for the remainder of the calendar year bank boards should:

1/ Seek to retain at least half of their earnings when making decisions on capital distributions (and utilise dividend reinvestment plans and other initiatives to offset the diminution in capital from capital distributions where possible);
2/ Conduct regular stress testing to inform decision-making and demonstrate ongoing lending capacity; and
3/ Make use of capital buffers to absorb the impacts of stress, and continue to lend to support households and businesses."

In New Zealand, from 2nd April 2020, the paying of dividends by banks was specifically banned " during the period of economic uncertainty caused by COVID-19. But it doesn't look like paying dividends by banks was ever something that was specifically banned in Australia. The way I read that July release is that if an interim dividend decision has been deferred, then a final dividend of up to half the annual earnings could still be made, capital strength requirements permitting.

To further expand on how flexible capital buffers can be. (From HY2020 p40 Interim Financial Report for Westpac)

"On 19 March 2020 APRA announced that during the period of disruption caused by COVID-19 APRA would not be concerned if banks were not meeting its 10.5% “unquestionably strong benchmark” for CET1 (Common Equity Tier 1 Capital). Banks may use their current capital buffers provided they remain above the current regulatory requirement (currently at least 8.0% for domestic systemically important banks (D-SIBs)). APRA has also indicated that they do not envisage reinstating the “unquestionably strong” benchmarks for at least 12 months"

The potential 'threat' to reinstate capital buffers in just twelve months indicates that banks can't be 'too flexible' for long. 'Flexibility' is likely to require a concomitant 'cash issue' to square up the books.

SNOOPY

[bull....]

bit of a fake rally yesterday , support at GFC lows which were also the covid lows at this stage

[Waltzing]

If there was a move to MMT from the NZ or AUSSI RB we could see lower over night but the Aussi reserve bank has not restarted QE 2 yet.... that im aware of. MMT would likely be viewed as an automatic default of government bonds anyway and trigger a review of credit ratings on sovereigns.

[nztx]

A bit of a roller coaster in the bank shares over the past few days -- looks like pick a good entry point & time to press the button to go.. then wait .. useful in accumulating & averaging down again

we may be a while off seeing return to 'normal times' .. but when we do, buying into the bank certainly seems to be showing a Dividend Yield multiple of the return for tossing coin at the bank for a tiny bit of usury, which IRD then help themselves to fairly sizable portion of as reward for the exercise..

North of 8% + Full if not partial Imputation credits dont look too foul at all, against the pittance the suckers depositing readies are having to stomach (before the IRD heist comes out)

Now note - I did say 'normal times'

Normal times may also see something else too - a ratcheting up the SP's - not only HGH but also the two big NZX listed Aussies

[nztx]

I see that a certain broker had a bit to say about NAB etc and a sort of mention about if BNZ returned to NZX

A dream, hope whatever .. if it does happen could provide additional variety, should NAB get bored
of their captive Kiwi Money Box and were to consider spinning it back into listed territory.

The once Corporate Raider on the earlier Board wont likely be anywhere around, as he was in BNZ's distant past
& dubious NZX times in times of an earlier Labour Party 'Spin the Disaster' session in hands of Douglas (if memory
serves correct also holder of an added accolade to include a failed Pig Farm company in distant past)


The earlier session does have something similar to current times - with avalanches of funny money being pulled out fresh air
& created .. and in places lost (as well) along with umpteen 10's or 100's of thousands of Kiwi jobs sacrificed in process.


At the end of the current term, many could be forgiven if they were once again sitting down wondering what has
been achieved out of the exercise, after the fairy dust has since mysteriously long evaporated and the country sees
itself wading through gumboot deep long term debt, at whim of prevailing currents of foreign jacked up (or depressed)
Interest rates for a very very long time thereafter ahead.. (unless a future Govt does something very very stupid to
try rein it in faster than is beneficial)

[ratkin]

I see that a certain broker had a bit to say about NAB etc and a sort of mention about if BNZ returned to NZX



Was that Chris's newsletter you are referring too?
I did not understand it. He started off saying their was going to be a float of BNZ.
Then said it would never happen, before saying it was widely expected in banking circles.

A google search did not reveal anything

[macduffy]

I would guess that any rumour about NAB selling the BNZ is speculation based on the Aussie banks having been directed to strengthen their capital positions. That seems to be happening by restricting dividends without the need for asset sales. Anything else is pure speculation perhaps coupled with wishful thinking.

[macduffy]

CBA increases profit - with a bit of help from asset sales.

https://www.abc.net.au/news/2020-08-12/commonwealth-bank-full-year-profit-matt-comyn/12547702?section=business

[percy]

Australia’s big banks are eventually going to have to find an answer to the frozen loans festering away right down the back of their vaults, with 1 in every 9 Australians having now frozen their mortgages as a result of the COVID-19 pandemic.
https://smallcaps.us14.list-manage.com/track/click?u=ac3a9fdb691a7372f8b04b033&id=320a11f0e4&e=6c1ad5cc63

[Snoopy]

CBA increases profit - with a bit of help from asset sales.

https://www.abc.net.au/news/2020-08-12/commonwealth-bank-full-year-profit-matt-comyn/12547702?section=business


Talk about making the results opaque!

"CBA said 59,000 business loans worth $14 billion are still deferred, which is 15 per cent of total balances."

"The most affected sectors are commercial property (15 per cent of deferrals), hospitality and accommodation (12 per cent), agriculture and forestry (11 per cent), retail trade (10 per cent), business services (9 per cent) and property services (7 per cent)."

I can see a big problem with this information. Take 'retail trade' as an example. We are told that 0.1 x $14b = $1.4b of retail loans are in deferral But to judge whether this is 'good' or 'bad' we need to know the total number of retail loans on the books. If you look on p224 of CBA AR2020 "Impaired assets by industry and status" there is no breakdown of the total number of retail loans there are. So the percentage of total retail loans on the books that are in deferral (which is actually what bank shareholders should be worried about) is unknown.

There is a bit more about this subject in the annual presentation for FY2020 on slide 26. There we can see that the total in arrears for 'retail trade' was $541m. That represents 4.9% of the 'retail trade' loan book, So the total size of the retail trade loan book at balance date must be:

$541m/0.049 = $11.041b

So the $1.4b in deferred retail trade loans represent: $1.4b/$11.0b = 12.7% of all 'retail trade' loans. That figure is 27% higher than the '10%' headline figure that a casual reader might take from the article.

SNOOPY

[percy]

Warren Buffett's Berkshire Hathaway Inc said on Friday it has sold shares of some of the largest US banks, slashing its stakes in Wells Fargo & Co and JPMorgan Chase & Co and exiting an investment in Goldman Sachs Group .

[Waltzing]

if worst come to collapse im sure the RNBZ and RBZ will step in and buy bank bonds of various kinds. Im not an expert on banks but we do trade them since the BOJ moved to buys shares in there market listed companies. What the BOJ buys im not sure but even if that fails there is always MMT but that would be considered an automatic default to government bonds i think. Buffet is probably just rebalancing in light of the current situation in the US and of last month the FED has not as far as general statements on CNBC started buying bonds of listed companies on the US exchanges but that may be now old news.

[LAC]

Yeah and he is banking on gold.... unlike him. But I guess it just suggests how weird the market is atm

[percy]

Banks are very leveraged,Great when the economy is booming,but scary in recessions/depressions.
The following are NZ Banks' equity ratios as at 31st March 2020.
ANZ 13.9%....BNZ 14.1%....ASB 13.6% ....Westpac 15.9%....Kiwibank 13%....TSB 14.3%...SBS 13.8%...HGH 12.9%....CoOp 16.3%.

[Leftfield]

Banks are very leveraged,Great when the economy is booming,but scary in recessions/depressions.
The following are NZ Banks' equity ratios as at 31st March 2020.
ANZ 13.9%....BNZ 14.1%....ASB 13.6% ....Westpac 15.9%....Kiwibank 13%....TSB 14.3%...SBS 13.8%...HGH 12.9%....CoOp 16.3%.

'Scuse my ignorance Percy, but while I get the point you are making, when you talk 'equity ratios' and then detail percentages..... I struggle.

Could you please provide a source for your info' and/or perhaps more details on the debt:equity ratios or bank leverage positions you are basing your figures on? Thanks.

FWIW here is a link to RBNZ's May 2020 Financial stability report (https://www.rbnz.govt.nz/-/media/ReserveBank/Files/Publications/Financial%20stability%20reports/2020/fsr-may-20.pdf?revision=5e407e63-0ed6-409d-8a84-fdf62b65526e)

[percy]

'Scuse my ignorance Percy, but while I get the point you are making, when you talk 'equity ratios' and then detail percentages..... I struggle.

Could you please provide a source for your info' and/or perhaps more details on the debt:equity ratios or bank leverage positions you are basing your figures on? Thanks.

FWIW here is a link to RBNZ's May 2020 Financial stability report (https://www.rbnz.govt.nz/-/media/ReserveBank/Files/Publications/Financial%20stability%20reports/2020/fsr-may-20.pdf?revision=5e407e63-0ed6-409d-8a84-fdf62b65526e)
Equity ratio Your house is worth $500,000,you owe the bank $400,000 your equity ratio is 20% $100,000 divided by $500,000.If you owe the bank $450,000 your equity ratio is 10% ie $50,000
Equity ratio.12%For every $12 dollars of equity banks lend $100.
Equity ratio 15%.For every 415 dollars of equity banks lend $100.
https://www.google.co.nz/url?sa=t&rct=j&q=&esrc=s&source=web&cd=&cad=rja&uact=8&ved=2ahUKEwi5ypyX4Z7rAhUExzgGHZAYBSIQFjACegQIAxAB&url=https%3A%2F%2Fbankdashboard.rbnz.govt.nz%2Fcap ital-adequacy&usg=AOvVaw0FTe9fgH3l6XHGxmXHLoFq
I remember GFC to well.
Pyne Gould Corp lost [I can't remember the exact amount] between 20% and 30% of their loan book on property developments.Wiped out [shareholders funds] or total equity.Should the property market and general lending go pear shape. we could see banks losing their capital,forcing shareholders to front up with more capital.So equity ratios between 12.9% and 15% do not leave a great margin of safety.Retail,tourism and other sectors could cause a ripple affect.

[winner69]

Leftie ....percy probably got his numbers here

Another rbnz thingie

https://bankdashboard.rbnz.govt.nz/summary

Heartland stand out on the non-performing loans chart ...sort of says when you look at returns charts Heartland takes more risk for greater returns

[Leftfield]

Thanks Percy and Winner - much appreciated (every day I learn.)

The comparative bank profitability chart on Winners link makes HBH look ok, Snoopy will be happy. ;)

[percy]

You will note both my link and W69's link were to the same Dashboard .
Note the Dashboard date was 31st March.
The sh+t has not started to hit the fan.Do not know when it will,but it will,and it will be ongoing.
I still do not think we will see any clarity until late next year.
Some businesses will wait to see how Christmas goes,then they will wait for the end of their financial year,then they will wait to see how their accounts look.Just pushing the growing train wreck further down the track.

[Brain]

It seems to be horse sense to stay well clear of the banking sector - far to many unknowns, these guys will have to run hard just to stay in the same place.

[winner69]

It seems to be horse sense to stay well clear of the banking sector - far to many unknowns, these guys will have to run hard just to stay in the same place.


...but Heartland will be a good buy at around 60 cents

[Waltzing]

Buy gold and pray?

still looking to return to europe in 2022.

https://www.cnbc.com/2020/08/15/virus-flareups-in-europe-lead-to-club-closings-mask-orders.html

virus flare ups in europe.

[Scrunch]

Warren Buffett's Berkshire Hathaway Inc said on Friday it has sold shares of some of the largest US banks, slashing its stakes in Wells Fargo & Co and JPMorgan Chase & Co and exiting an investment in Goldman Sachs Group .

A lot of the news value of this depends on the sale price and the context of other banking stocks held. Most of the Goldman Sachs holding was disclosed as sold (84%) in the Q1 regulatory filing with news articles reporting it on 16 May 2020 and what was left was for Berkshire a tiny holding - 1.9m shares at circa $200 each is only $400m and under 1% of Goldman Sach's stock.

What is as interesting is that Buffet didn't file a change in share holding for the 925,008,006 shares held in Bank of America. With Bank of America having a $26/share price this holding is worth $24 billion. And as per the article below, has been adding to this already large shareholding and is now up to 11.9% of the company.
https://www.gurufocus.com/guru/warren+buffett/stock-picks

https://www.marketscreener.com/BANK-OF-AMERICA-CORPORATI-11751/news/Bank-of-America-Buffett-s-firm-has-bought-2-1B-of-Bank-of-America-stock-31062923/

[Snoopy]

Warren Buffett's Berkshire Hathaway Inc said on Friday it has sold shares of some of the largest US banks, slashing its stakes in Wells Fargo & Co and JPMorgan Chase & Co and exiting an investment in Goldman Sachs Group .


True. But Buffett also increased his shareholding in Bank of America

https://www.marketscreener.com/business-leaders/Warren-Buffett-6/news/Warren-Buffett-s-Berkshire-Hathaway-Unloads-Bank-Stocks--31122862/

So Buffett isn't pulling back from all bank stocks.

SNOOPY

[Brain]

...but Heartland will be a good buy at around 60 cents

At that price I would show some interest and my guess is that it is more likely that Heartland would trade at 60c than $1.40

[bull....]

recent moves during reporting

cba - dividend
ben - no div
westpac - no div

value proposition not there at the moment

[macduffy]

recent moves during reporting

cba - dividend
ben - no div
westpac - no div

value proposition not there at the moment

Different balance dates. I expect ANZ and WBC to declare modest divs following their 30 September balance, ie sometime in November.

[peat]

“While there have been some signs that the economy is performing better than earlyexpectations, significant uncertainty remains..." from todays WBC 3Q


update:
the capital ratios of WBC are actually better than before although leverage has slightly increased but is no worse than Dec 19

[macduffy]

Different balance dates. I expect ANZ and WBC to declare modest divs following their 30 September balance, ie sometime in November.

Update. WBC confirm it won't pay an interim dividend but will reassess a final div following result, which is to be announced on 2 November.

https://www.abc.net.au/news/2020-08-18/asx-recover-wall-street-nasdaq-record-high-reporting-season/12568088?section=business

[bull....]

Update. WBC confirm it won't pay an interim dividend but will reassess a final div following result, which is to be announced on 2 November.

https://www.abc.net.au/news/2020-08-18/asx-recover-wall-street-nasdaq-record-high-reporting-season/12568088?section=business

probably to no div then too. as defaults are pushed into next year over in aus so most banks wont have a good year next either

[Grimy]

ANZ will release its ANZ Third quarter to 30 June Trading Update tomorrow.

[macduffy]

ANZ will release its ANZ Third quarter to 30 June Trading Update tomorrow.

ANZ "cautiously optimistic" and will pay an interim dividend of A25cps.

https://www.abc.net.au/news/2020-08-19/wall-street-sp500-nasdaq-record-high-asx-market/12572574?section=business

[peat]

ANZ "cautiously optimistic" and will pay an interim dividend of A25cps.


yeh thats an interesting contrast with WBC , and the 3Q looks pretty awesome actually from what I can quickly see.

[thegreatestben]

How does the dividend payout go vs. RBNZ saying no dividends? Has that concluded or will it have by then?

[stoploss]

How does the dividend payout go vs. RBNZ saying no dividends? Has that concluded or will it have by then?
talking about ANZ australia listed on the ASX. He might be able to stop NZ branches of the banks paying a dividend to the parent , but has no power to stop the Listed entity in Australia paying a dividend.

[macduffy]

talking about ANZ australia listed on the ASX. He might be able to stop NZ branches of the banks paying a dividend to the parent , but has no power to stop the Listed entity in Australia paying a dividend.

Correct. ANZ are complying with the Aust regulator's directive to restrict dividends to a maximum of 50% of profits, to strengthen capital.

[thegreatestben]

Showing on my NZX sharesies market depth this morning

https://i.ibb.co/HY0Wpm0/ANZ.png

[iceman]

UDC finally sold, to Japan's Shinsei Bank https://www.interest.co.nz/banking/106834/udc-says-shinsei-bank%E2%80%99s-strong-funding-international-experience-and-reach-coupled-its

[winner69]

UDC finally sold, to Japan's Shinsei Bank https://www.interest.co.nz/banking/106834/udc-says-shinsei-bank%E2%80%99s-strong-funding-international-experience-and-reach-coupled-its

On price book basis Heartland would be about $1.40 .....(discounted by what the huge impairment to be announced next week or so ;);):(;))

[nztx]

Despite the UDC Sale news -- SP seems to be taking a bit of a hiding .. WBC similarly today

[macduffy]

Despite the UDC Sale news -- SP seems to be taking a bit of a hiding .. WBC similarly today

It's hardly news though, merely confirmation that the sale has been settled. Aussie banks are sharing in the general market "down" day.

[kiora]

Physical branches, bad idea
https://www.livewiremarkets.com/wires/5-bad-ideas-to-avoid-in-2021

[Norwest]

Interesting call Today from a Bank Manager (one of the big four if it matters), I have a sizeable Term Deposit reaching maturity date this week, the interest rates I was offered even over their carded rates are terrible compared to last time I renewed a TD in June so I won't be reinvesting.

Being cheeky I decided to ask the Bank Manager how many of his clients are doing what I am doing i.e. not renewing their their TD's and they said "a lot".

Digging further information from the RBNZ regarding TD's we can see this is true across the NZ Banking sector as a whole. The below table details TD's (in $millions)




Jul 2020
Aug 2020
Sep 2020


$185,411m
$180,784m
$178,218m



This is not a monthly cyclical pattern either, in September 2019 there was $195,802m in TD's

Thinking to what Beagle had told me regarding Kiwi Bonds, I looked up the application form which he had provided and these small returns given their guarantee were probably my best bet. Unfortunately getting the latest up to date form to apply I now see that those rates have been slashed by 40% since Beagle had posted these merely 6 weeks ago.

Interesting times indeed.

[macduffy]

I use maturing T/D's to buy bank, and other, stocks.

:cool:

[Soolaimon]

I use maturing T/D's to buy bank, and other, stocks.

:cool:

Been doing the same for some time now. So far still getting some sleep at night.....

[Waltzing]

Buy ARG its better than money in the banks and you get over 4% imputed.

[peat]

27/5/20 yes I should disclaim
I bought a small parcel of WBC using CFD's on the Covid way down at 23. Been hurting quite a bit but not selling a Pillar at a loss.
I'm just keeping an eye on things as part of a broadening into Aussie stocks

I simply cant ignore the sector given its capitalisation total.

it was a long ride but WBC came back to the black for me......
I said somewhere that all those provisions wouldnt be needed

Also I managed to buy some more this morning on NZ market before price jumped in response to the good news in the announcement. Who'd have thought you could still do that in this age of HFT .

[macduffy]

Nicely done, peat!

:)

[Waltzing]

Yes we have sold recovered 2 bank positions from pre crisis, 2 to go.. Always trade the Aussi banks but since the royal enquiry they really are suspect. A trade going forward. Could be a while till they hit the mid 30's again. Cant seent them back to all time highs any time soon .. i mean this decade. Pitty those who bought in the high 30's and above.

[Tomtom]

Physical branches, bad idea
https://www.livewiremarkets.com/wires/5-bad-ideas-to-avoid-in-2021 At the moment many banks are struggling to find staff to process loan applications due to the white hot housing market. Probably best not to start firing them just yet.

[peat]

ANZ releasing provisions this morning

and posting massive profit - oh yeh forgot to mention that.

[Ohdoyle]

ANZ releasing provisions this morning

and posting massive profit - oh yeh forgot to mention that.

Its sickening how much money these aussie banks make. Only thing that makes me feel better is buying shares in them.

[peat]

ANZ ctd

margins up
expenses down

https://www.asx.com.au/asxpdf/20210218/pdf/44ss32kh63rqpm.pdf

[peat]

there we go guys it jumped 5% on Aussie open
dont say I dont give you anything.

[thegreatestben]

:t_up::t_up::t_up:

[macduffy]

And now for some numbers:

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/ANB/367774/340576.pdf

[peat]

And now for some numbers:

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/ANB/367774/340576.pdf

yeh they are staggering in comparison to the previous figures .

saw those and jumped in just like yesterday.

12318

NZ market slow to respond.

[Waltzing]

amazing revaluation in this sector.. similar to GFC.. then it rolled over. But with the huge amount of local QE valuations could go still higher.. Amazing and took out all our positions except one.

[Waltzing]

these are now a trade again. unless the FED starts to enter the long end of the market its banks banks banks.

sadly we dont hold HGH as its a bit to local. Those fake store fronts are a bit to scary and it has to move into FIN Tech if it want to grow outside NZ.

[macduffy]

these are now a trade again. unless the FED starts to enter the long end of the market its banks banks banks.

sadly we dont hold HGH as its a bit to local. Those fake store fronts are a bit to scary and it has to move into FIN Tech if it want to grow outside NZ.

No need to be sad - you have your reasons.

[macduffy]

Deleted. Duplication.

[Waltzing]

HGH held for many years in a family trust.

Company with a very strange history compared to HLG.

[Waltzing]

10 yr stable - rally in T bills and any positions held in AUS banks should be regained in the next few years even above the 30 level.

going to 2 on the 10 year but this could simple add to trading conditions.

equities will adjust but it could be a dumpy ride and that is tradable.

very tradable sector again going forward.

what start to the century.

[Sgt Pepper]

I am considering buying shares in Westpac NZ. I am not seeking advise on WBC as that is not appropriate on this forum.
What i would be interested in is any any comments on my proposal as a concept.
I am 63, have 95 % equity in our residential property with a market valuation around $800 K. I have a superannuation plan which I have been contributing to since 1990 I work for a district health board and plan to work for another 4 year. I have no interest in investment property and remain somewhat concerned about this sector once interest rates return to normal ( I well recall the mid 1980s when my mortgage was 21%l.
I am considering an add on to our mortgage to purchase 2000 shares in Westpac NZ. Any comments would be of interest

[Waltzing]

WBC has been slower to recover compared to ANZ and MR B has gone into HGH. Detective Inspector SNOOP would have something to say about WBC .

[BIRMANBOY]

As a concept directed to what aim? Are you looking to trade the shares or as a dividend stock? Its returning 1.29% as a dividend but that is based on last year when the dividend was reduced to Au $0.31 from AU 1.74 to 1.88 for previous 6/7/8 years. Will it return to paying out those pre-covid dividends? Hmmm.what do you think? As a concept of borrowing on your house to fund this transaction not sure if that is prudent but interest rates are certainly low (at the moment) and who knows where that will go. As a buy and hold for growth if you look at the 5 year chart you might consider that you may have missed the boat? There may be better targets for your interest?
I am considering buying shares in Westpac NZ. I am not seeking advise on WBC as that is not appropriate on this forum.
What i would be interested in is any any comments on my proposal as a concept.
I am 63, have 95 % equity in our residential property with a market valuation around $800 K. I have a superannuation plan which I have been contributing to since 1990 I work for a district health board and plan to work for another 4 year. I have no interest in investment property and remain somewhat concerned about this sector once interest rates return to normal ( I well recall the mid 1980s when my mortgage was 21%l.
I am considering an add on to our mortgage to purchase 2000 shares in Westpac NZ. Any comments would be of interest

[percy]

I am considering buying shares in Westpac NZ. I am not seeking advise on WBC as that is not appropriate on this forum.
What i would be interested in is any any comments on my proposal as a concept.
I am 63, have 95 % equity in our residential property with a market valuation around $800 K. I have a superannuation plan which I have been contributing to since 1990 I work for a district health board and plan to work for another 4 year. I have no interest in investment property and remain somewhat concerned about this sector once interest rates return to normal ( I well recall the mid 1980s when my mortgage was 21%l.
I am considering an add on to our mortgage to purchase 2000 shares in Westpac NZ. Any comments would be of interest

I can only say what I did.I concentrated on paying off our mortgage. I worked until I was 69 as I loved ,selling books to school libraries .
Having three sources of income was great once we were debt free.Book selliing income,Govt super,and divies. Wife and I cashed in our Kiwi Savings when we turned 65 ,and invested the funds in the market,.[with great success].
So I would suggest paying off your mortgage.Great feeling.

[percy]

I am considering buying shares in Westpac NZ. I am not seeking advise on WBC as that is not appropriate on this forum.
What i would be interested in is any any comments on my proposal as a concept.
I am 63, have 95 % equity in our residential property with a market valuation around $800 K. I have a superannuation plan which I have been contributing to since 1990 I work for a district health board and plan to work for another 4 year. I have no interest in investment property and remain somewhat concerned about this sector once interest rates return to normal ( I well recall the mid 1980s when my mortgage was 21%l.
I am considering an add on to our mortgage to purchase 2000 shares in Westpac NZ. Any comments would be of interest

I can only say what I did.I concentrated on paying off our mortgage. I worked until I was 69 as I loved ,selling books to school libraries .
Having three sources of income was great once we were debt free.Book selliing income,Govt super,and divies. Wife and I cashed in our Kiwi Savings when we turned 65 ,and invested the funds in the market,.[with great success].
So I would suggest paying off your mortgage.Great feeling.

[Scrunch]

I am considering buying shares in Westpac NZ. I am not seeking advise on WBC as that is not appropriate on this forum.
What i would be interested in is any any comments on my proposal as a concept.
I am 63, have 95 % equity in our residential property with a market valuation around $800 K. I have a superannuation plan which I have been contributing to since 1990 I work for a district health board and plan to work for another 4 year. I have no interest in investment property and remain somewhat concerned about this sector once interest rates return to normal ( I well recall the mid 1980s when my mortgage was 21%l.
I am considering an add on to our mortgage to purchase 2000 shares in Westpac NZ. Any comments would be of interest

At the current super-low borrowing rates, there's a decent chance that equities could provide a higher return than the cost of borrowing. While conventional wisdom is to repay the mortgage then invest, it isn't silly to invest first. There is basically no substitute to actually investing to learn.

One stock with a $50k investment. There can be a place for a focused portfolio of only one or a few stocks. BUT it adds to the risk profile and should only be used by experienced investors who properly understand the risks they are taking. Read some of the ATM thread. In your situation I would suggest choosing at least 5-10 shares across different industries (so not ANZ, WBC, HGH). If you see a $60k+ portfolio as the end-game in 3 years, consider making three sets of 20k investments across 2021, 2022 and 2023. This way you aren't trying to time 100% of the investment at one time. Also if you find equity investments aren't for you, you have learnt that before going more all-in.

As an aside, check your mortgage as to whether there is any age limits. When we refinanced recently we had a shorter than expected term as the bank effectively imposed an age 70 limit on the borrowing provided. If you had similar terms, any redraw may need to be repaid quite quickly.

Good luck

[Waltzing]

amazing performance by the banks as all our under water position except WBC bounce past cost price from the days of the royal commission on banking. In fact we are miffed that had we held on another month generous profits would have emerged after being underwater for 3 years in some portfolios...

i get very nervous when things start to look too good to be true..

[Waltzing]

The banks are where the fight between the reserve banks and the market is being played out.

Anz shares are an extreme example of what a rising 10 year black hole does to the market.

It s hard lesson to learn when positions that were struggle for the last 2 years are blow sky high in the space of 2 months.

This is where the damage to the market is being done. The banks are now a big trade again.

We are looking to rotate if the bond buying programs look to be ineffective at the long end of the curve.

[Waltzing]

Reports of AUS banks may start share buy backs as they have access capital.

DI SNOOP got any thoughts on the capital reserves of AUSSI banks?

certainly not applicable to NZ banks.

[greater fool]

Reports of AUS banks may start share buy backs as they have access capital.

DI SNOOP got any thoughts on the capital reserves of AUSSI banks?

certainly not applicable to NZ banks.




https://www.smh.com.au/business/banking-and-finance/banks-under-pressure-to-lift-long-term-rates-as-funding-costs-rise-20210328-p57eon.html

Banks are under pressure to start raising interest rates on longer-term fixed rate mortgages to preserve profits amid a blow out in funding
costs on global financial markets.
The Commonwealth Bank last week became the first of the big four to move upwards on long-term rates, blaming higher funding costs as it
increased its four-year fixed rate by 0.2 percentage points to 2.19 per cent, as it also cut two-year rates.

[iceman]

https://www.smh.com.au/business/banking-and-finance/banks-under-pressure-to-lift-long-term-rates-as-funding-costs-rise-20210328-p57eon.html

Banks are under pressure to start raising interest rates on longer-term fixed rate mortgages to preserve profits amid a blow out in funding
costs on global financial markets.
The Commonwealth Bank last week became the first of the big four to move upwards on long-term rates, blaming higher funding costs as it
increased its four-year fixed rate by 0.2 percentage points to 2.19 per cent, as it also cut two-year rates.

I question whether there is any need for NZ banks to increase even their long term rates anytime soon. They are currently flush with money on short term deposits and have hardly touched the $50 or so Billion dollars the RB has printed. It's just sitting there and the RB paying the trading banks 0.25% interest on it in their accounts. The RB will not want to do that for too long so what to do ? Reduce OCR or even make it negative to force the banks to actually lend it out into the economy. The FED is in the same situation. But hang on, they can not lend it to residential properties as the Government doesn't want that. They're in a real bind on what to do but I'd be very careful in "fighting the Fed" on this one. The World's reserve banks are hellbent on keeping interest rates low and flooding the World economy with cheap money to raise economic growth & inflation.

[dabsman]

Looking forward to share buybacks with the massive reserves the banks currently have. Prefer a buyback to a dividend with no access to franking credits

[macduffy]

Looking forward to share buybacks with the massive reserves the banks currently have. Prefer a buyback to a dividend with no access to franking credits

Banks should always operate with "massive reserves", it's their best bulwark against the risk of their business - borrowing short and lending long. Incidentally, the restriction on NZ banks paying dividends, in respect of the Aust bank subsidiaries, affected their NZD quasi-capital issues. The Aust parents continued to pay divs, albeit at reduced rates, on ordinary shares. Not so for Heartland etc. of course.

[Waltzing]

ANZ result out increases in home lending . Div 70 AUS.

No payment from NZ to AUS Parent.

[tim23]

ANZ result out increases in home lending . Div 70 AUS.

No payment from NZ to AUS Parent.

Market price ANZ v WBC closing - its been about $3 recently in ANZ favour traditionally they have been about the same so maybe we are seeing a switch back to WBC?

[Tomtom]

There seems to be some indication they may buy retail assets from Citi in Australia. Let me be very blunt in saying that ANZ Banks recent history suggests it currently lacks managerial capability to execute M&A effectively. I hope they are capable of reaching the same conclusion independently as management hubris has not served this bank well in the past.

Disc: Holding.

[macduffy]

Disc: Holding.

Why? Confidence in management is a "must" in my opinion.

:confused:

[Scrunch]

Why? Confidence in management is a "must" in my opinion.

:confused:

Running existing operations well and doing M&A well are different skillsets. I'm with tomtom that you can concurrently hold shares, have confidence in them running existing operations and have doubts about M&A abilities. Part of the issue is the increased likelihood that any M&A acquisitions for somone the size of ANZ is more likely to be offshore or in sectors only aligned to banking. This makes mistakes easier to make as there are differences between the target and the business you know well.

[maclir]

Running existing operations well and doing M&A well are different skillsets. I'm with tomtom that you can concurrently hold shares, have confidence in them running existing operations and have doubts about M&A abilities. Part of the issue is the increased likelihood that any M&A acquisitions for somone the size of ANZ is more likely to be offshore or in sectors only aligned to banking. This makes mistakes easier to make as there are differences between the target and the business you know well.

Even when it's another bank I think they've struggled historically, for example with the PostBank back in the 90s and then again with the National Bank. Both aligning product lines and in particular IT systems are tough to get right.

[Norwest]

CBA hitting all time high's again and again, looks like it's going to touch $100 very shortly.

[Crypto Crude]

https://7news.com.au/business/banking/commbank-westpac-anz-app-outages-reported-around-australia-as-websites-stop-working-c-3138889

Aussie banks are down... no problems with bitcoin it keeps going