ANZ vs WBC

[percy]

For fun go to www.chrislee.co.nz and then read this week's Taking Stock.
Interesting times for UK and European banks.

[huxley]

Interesting read - http://www.wsj.com/articles/hedge-fu...ers-1463943605

[percy]

In Chris Lee's book "The Billion Dollar Bonfire" there was a statement;
"Banks lend long,and borrow short."
Question.Do ANZ or WBC have 20,30,40 or 50 year bonds to match their mortgage lending.?
As property lending makes up a huge amount of their lending,is their real cause for concern,as their capital ratio is under 15%,but I would guess mortgage/property lending makes up over 75% of their lending portfolios..?

[Snoopy]

In Chris Lee's book "The Billion Dollar Bonfire" there was a statement;
"Banks lend long,and borrow short."
Question.Do ANZ or WBC have 20,30,40 or 50 year bonds to match their mortgage lending.?

No ANZ or WBC do not have have 20,30,40 or 50 year bonds to match their mortgage lending.
I'll pass that question on to Chris Lee who on page 36 of "The Billion Dollar Bonfire" explians why.

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(South Canterbury Finance CEO Lachie) "Mcleod did not seem to understand the difference between finance company lenders and those who lend for the banks, Finance company lenders are not smarter than bank lenders. They are different.

Banks have a lower cost of funds, an immense level of savings deposits that are constant and therefore support liquidity, more capital and access to critical information. Banks can and always do borrow short and lend long. They can accommodate delays in repayment and can provide almost indefinite repayment terms for two obvious reasons.

1/ They have immense suns of deposit money in cheap short term savings accounts, only a small portion of which is ever recalled.
2/ They have access to inter-bank borrowing and access to the Reserve Bank, meaning that in normal circumstances they need not fear for being overdrawn.

( Note that neither of those two points apply to "Heartland (not a bank) Australia". )

Banks also have a wealth of information which gives them great power and control. Banks have much knowledge about sectorial problems, they have access to borrowers history and can act swiftly if a client is behaving unwisely. If a client has only enough credit to pay the bank or to meet some other commitment, the bank will stop that person's payment to an outside party and apply the available funds to its own loan."

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As property lending makes up a huge amount of their lending,is their real cause for concern,as their capital ratio is under 15%,but I would guess mortgage/property lending makes up over 75% of their lending portfolios..?

Taking the FY2019 figures:

For the ANZ 'Personal Loans' (which includes not just mortgage loans) made up:

$408,077m / $1,209,364m = 34% of all on and off balance sheet loans (AR2019 p158)

For Westpac 'Housing loans' made up;

$449,540m/ $1,034,734m = 43% of all on and off balance sheet loans (AR2019 p220)

SNOOPY

[percy]

Thanks Snoopy.
57% of all loans I would take would not include commercial property loans or rural mortgages.
So my guess at 75% may not be too far off the mark.

[Snoopy]

Thanks Snoopy.
57% of all loans I would take would not include commercial property loans or rural mortgages.
So my guess at 75% may not be too far off the mark.

Sorry Percy that 57% figure for the ANZ was using data from the wrong column. The actual figure is 34% (now corrected). The way the loans are segmented is a problem for assessing commercial land and buildings, because rural mortgages are lumped in with forestry fishing and mining. There is a similar problem with the likes of 'Retail Trade' (does that mean a commercial property or stock). Hard to be sure, but your 75% for all property looks high to me.

SNOOPY

[percy]

I know Aussie banks property lending is very high.
Just do not know how high.
Perhaps it is high enough for The NZ Reserve Bank to be concerned.?

[Snoopy]

I know Aussie banks property lending is very high.
Just do not know how high.
Perhaps it is high enough for The NZ Reserve Bank to be concerned.?

The Reserve Bank of NZ have no business with what the parent ANZ bank is doing in Australia, under Chairman David Gonski. OTOH they have every right to cast their opinion of subsidiary ANZ,NZ chaired by Sir John Key.

Adrian Orr would be right out of line if he said "David Gonski be Gonski"

OTOH "Sir John be gone", would slip off Adrian's tongue quite well,...

SNOOPY


"

[percy]

Yes it is The Aussie Banks' NZ subsidaries which are of concern to The NZ Reserve Bank of NZ,while their parents are The Australian Reserves Bank's concern.
Reserves Banks are keeping them busy..lol.

[percy]

From June 2018 article "How Australia's Banks became the world's biggest Property Addicts."
Australian banks' mortgages are equivalent to 80% of the economy.
Australian GDP................................A$1.73 T
Bank mortgages;
......................................CBA........A $418B
......................................WBC........A $406B
......................................ANZ......... A$258B
......................................NAB......... $A253B.