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Copyright Infochoice Ltd 2007.
The information published here is correct at the time of publication to the best
of our knowledge. Information on products and services is obtained directly from
the providers concerned. InfoChoice Ltd takes no responsibility for errors or
omissions and provide the information as a guide only.
January 2008
30 January 2008 - Broker fails to settle
The Australian
Stockbroker Tricom Equities has confirmed that it did not settle it trades with
the Australian Securities Exchange last night, prompting speculation that the
company may be in trouble. However the broker said that it was experiencing
"administrative issues" and its net settlement position was that it was owed
money. Managing director Lance Rosenberg said that he expected the problem to be
resolved by morning and that another statement would be made this morning if
required. This is believed to be the first time in many years that a broker has
failed to meet settlement deadlines and the ASX warned that it could suspend the
broker if it does not come up with the money.
30 January 2008 - MFS fund frozen
Sydney Morning Herald
Investors in the $770 million MFS Premium Income Fund will today receive a
letter advising them that they cannot withdraw any money for up to 180 days. The
fund is run by MFS Limited who said that the number of redemption requests had
doubled over the past week or so due to unit holder concerns about the company's
share price. Chief executive of MFS Investment Management Guy Hitchings said
that the deferral of redemptions was necessary as the whole the whole fund
cannot be redeemed at once. "We raised our rates recently and we will continue
to meet distributions to all unit holders at those target rates," he said.
30 January 2008 - Business confidence shaken
The Daily Telegraph
Financial market volatility and weaker profit results saw business confidence
fall at the end of 2007. While the NAB Monthly Business Survey index rose by two
points in December, this followed a five point slump in November to give an
overall downward trend for the end of the year. The index tracking total sales
was down two points in December, and profitability was down three points since
October, while the confidence index is sitting at five points compared with a
long term average of seven.
30 January 2008 - Retailers push into banking territory
The Australian Financial Review
Some of Australia's largest retailers are preparing a range of banking and
insurance products to take on the big banks. Woolworths is planning to launch a
new credit card and is expected to announce a credit card issuing partner in the
next few months. The retailer said that once that was in place it would look at
using its distribution network to sell a simple insurance such as for pets and
travel. David Jones is close to finalising its new credit card, joining those
already offered by Harvey Norman and Myer, and is also considering expanding its
personal finance options to include David Jones branded home loans and
insurance. Consumer focus groups have reportedly been asked if the doubling of
rewards points would be sufficient to persuade them to switch to the David Jones
card. Wesfarmers is busy developing its own range of insurance products to be
distributed through Coles supermarkets.
30 January 2008 - Housing figures point to US recession
The Australian Financial Review
Fears of a recession in the US are building with the latest new home sales
figures showing a 27 per cent drop over 2007. The chances of the US Federal
Reserve cutting interest rates once again increased after new home sales in
December fell by 4.7 per cent. The annualised sales figure of 604,000 is the
worst result since 1995. If as expected the Fed announces a 50 basis point rate
cut on Thursday, there will be further downward pressure on the US dollar with
rates at 3 per cent compared with 4 per cent in the euro zone. The median price
for a new home tumbled 10.9 per cent in December to $US219,200 ($249,000) and
builders have been dumping landholdings and shelving building projects. At the
same time home foreclosures in the US increased by 75 per cent over the last
year.
30 January 2008 - CBA making people happier
The Australian Financial Review
While the ANZ Bank continues to lead customer satisfaction levels with a 78 per
cent rating, the Commonwealth Bank made the biggest improvement over the past
year. Satisfaction at the CBA was up 4 per cent over the year to 68.5 per cent,
putting it just behind NAB's 69.4 per cent, up 1.8 per cent.
30 January 2008 - Green credentials questioned
The Australian Financial Review
The Australian Competition and Consumer Commission will investigate the accuracy
of claims by businesses that their products are "carbon-neutral". Chairman
Graeme Samuel said that the ACCC is concerned that some of the claims may be
excessive as businesses realise that they can charge a premium for products and
services that offer carbon neutrality. So far Origin Energy has had to pull a
television ad for its GreenPower products and Saab Australia has been taken to
court for promoting the idea of carbon neutral driving, however Mr Samuel
believes that this may only be the tip of the iceberg. A formal accreditation
scheme has yet to be produced but thirteen offset schemes have signed up for
voluntary accreditation with the Department of Climate Change.
29 January 2008 - ANZ to let fingers do the banking
The Australian
The ANZ Bank is understood to be trialling a new service that will allow
customers to use mobile phones to conduct their banking. While a spokesperson
declined to confirm the introduction of the service details of mobile banking
are on ANZ's website. The bank will offer both a simple option called TXT
Banking and a more sophisticated service called M-Banking. TXT Banking can be
performed on any phone, delivering account balances and transaction information
via SMS. M-Banking adds the ability to transfer money between accounts but
requires a phone with GPRS internet access and running Java.
29 January 2008 - Margin lenders give Allco a break
Sydney Morning Herald
Two margin lenders have given Allco executives a reprieve by agreeing not to
force the sale of the remaining 6.5 per cent of the company that is held by an
employee-owned trust. It is believed that the lenders have given an undertaking
that they will not make a margin call on the shares until Allco reports its
annual results in August. Shares in Allco recovered to $3.40 by the end of last
week, possibly on the back of founder John Kinghorn's purchase of 6.8 per cent
of the company, after falling to $1.70 earlier in the week.
29 January 2008 - Wild weather to pressure insurance premiums
The Australian Financial Review
Australians will be facing higher insurance premiums with climate change models
predicting an increase in the severity and frequency of extreme weather events
such as floods, cyclones, bushfires and severe hail events. An issues paper by
Ross Garnaut on the insurance industry which has been released for discussion
calls for greater public information and government action, saying that in many
cases owners are not aware of the risk to their property from flooding. Also,
half of all Australian addresses are within seven kilometres of the coastline
with relatively high value so are especially vulnerable to any rise in sea
levels. Increasing premiums could impact the take-up levels for insurance but
already 1.8 million households have no building or contents insurance.
29 January 2008 - Retirees not so stingy
The Australian Financial Review
Retired Australians are more likely to leave their money to their children than
any other people except for Chinese retirees. A survey of 15,000 people from 26
countries conducted by the financial services company Axa found that 62 per cent
of Australians are planning to leave money to their heirs. This falls a little
short of the 65 per cent in China, but well ahead of 23 per cent in Switzerland
and 27 per cent in Japan. The study also found that while most Australians still
in the workforce want to retire at age 57 they don't expect to be able to until
62, and that many people expect to hold some sort of employment during
retirement.
29 January 2008 - Global bankers want more safeguards
The Australian
Reacting to the global financial crisis, central banks are looking at ways to
improve the regulatory regime for banks and financial markets. With the effects
of the market upheavals still being assessed and causes not yet identified,
specific actions have not been determined. However a consensus for radical
change is building and the steps that are being considered indicate that any
policy changes will be wide-ranging. Big banking groups will face changed
incentives which could lead them to scale back some activities and simplify the
structures of some securities and investments. The central banks have also said
that they need to improve their performance with greater co-ordination of their
surveillance and policing of institutions.
29 January 2008 - Melbourne house prices cool off
The Australian Financial Review
While the median house price in Melbourne grew by 12.8 per cent to $485,000 in
the December quarter there are signs that the market may have already peaked.
The Real Estate Institute of Victoria reports that in 16 of the 24 top suburbs
the median house price actually fell in the final quarter of 2007. At auctions
over the long weekend there were reports of high levels of properties being
passed in but also some strong post-auction sales. In the December quarter
prices were down 25.4 per cent in Canterbury, 24.1 per cent in Malvern, 15.4 per
cent in Armadale and 6.1 per cent in the city's most expensive suburb of Toorak.
25 January 2008 - RBA has little choice but to lift rates
Infochoice.com.au
It is hard to see the Reserve Bank board not raising interest rates by another
0.25 percentage points on February 5, following the latest quarterly inflation
figures. Not that there aren't any arguments for keeping rates steady - indeed
there are quite a few on offer. Rarely if ever has the Australian economy and
the US economy been heading in such opposing directions, and banks have already
lifted rates outside any official rates action.
But despite turmoil on world financial markets, a US economy on the verge of
recession and the prospect of a worldwide economic slowdown this year that
Australia can't avoid, incredibly it seems the RBA has no choice but to lift
rates. It is bound by its monetary policy remit to a take-no-chances stance on
inflation and the rise in inflationary pressures evident in the three months to
December takes underlying inflation to its highest level in 17 years.
The Consumer Price Index rose 0.9 per cent in the quarter for a 3 per c ent
annual headline inflation result - at the very top of the RBA's target band. But
the RBA's two preferred measures of underlying inflation, taking out temporary
volatility, are now well outside the band at 3.6 per cent and 3.8 per cent.
The RBA cannot ignore core inflation readings like this. Even with the prospect
that a global slowdown will impact Australia in 2008 and take the heat out of
the economy. And the oil price, which helped feed inflation last quarter, has
already fallen and is set to drop further. The golden lesson from the 1970s and
80s for today's central bankers, however, is that once you let inflation take
hold it takes years to get it back under control.
If the RBA does not continue to clamp down on inflation there is even the risk
of 70s-style stagflation here in Australia - where a world slowdown cuts growth
here yet does not bring inflation down. It will have to act to raise rates next
month and hope that the economy is strong enough to weather an international
downturn with only a mild slowing in growth.
A 0.25 percentage point rise in rates will add around $17 to home loan
repayments for every $100,000 borrowed.
25 January 2008 - US moves prop up markets
Sydney Morning Herald
All the share market losses on Tuesday have been recovered as investors reacted
to moves in the US to shore up its economy. Following a 75 basis point cut in
interest rates by the Federal Reserve earlier in the week, authorities in the US
revealed a plan to bail out bond insurers. The announcement helped to push the
S&P/ASX 200 Index up 3.1 per cent to 5580.5 points however global markets will
be watching the US in the hope that rates will be cut again when it next meets
in two weeks' time. Banks and other financial stocks recovered strongly with
Babcock & Brown up 21 per cent to $19.50, Macquarie Bank up 9 per cent to $64.03
and National Australia Bank gained 4 per cent to $33.75.
25 January 2008 - Rogue trader hits French bank
Sydney Morning Herald
In what may be the largest financial swindle ever seen, a trader has defrauded
France's second largest bank, Societe Generale, of $8.2 billion. The bank said
that it had discovered an "internal fraud of a considerable scope, carried out
by a member of staff in its financing and investment division" through an
elaborate scheme of equity transactions on European equity markets. The rogue
trader has been fired and will face legal action while executives and those
responsible for supervising the operations have also been sacked. The bank said
that it will have to raise 5.5 billion euros of new funding to restore its
balance sheet.
25 January 2008 - Two rate rises may be needed to slow inflation
The Australian
Borrowers may be in for a double whammy with analysts saying that the Reserve
Bank of Australia needs to lift rates by 50 basis points in order to get
inflation under control. The head of market economics at the ANZ Bank, Warren
Hogan, said that the RBA is clearly behind the game on inflation and, in the
absence of global market volatility or an economic slump, called for either a 50
basis point increase next month or two 25 basis point moves over the next two
months. Chief economist at the Commonwealth Bank, Michael Blythe says that the
RBA needs to act cautiously, balancing the risk of a world economic slowdown
with the forecast rise in inflation. He said that if the rest of the world did
not exist it would be an easy decision but that the central bank will always be
biased toward controlling inflation.
25 January 2008 - Super fund members need reassurance
The Australian Financial Review
Superannuation fund members are seeking assurances about the performance of
their funds in record numbers after falls on the share market in the past few
weeks have wiped out much of the returns generated by funds last year. A
spokesman at BT Financial Group said that calls to its customer service team are
up by about 60 per cent while Seafarers Retirement Fund has reported a doubling
in the level of enquiries. "Most members want someone to talk them through
what's going on and how to counter this volatility," said fund secretary at
Seafarers, Glenn Davis. "We tell them to stick to their investment strategy."
25 January 2008 - Melbourne houses catching up to Sydney prices
The Australian Financial Review
While Sydney house prices only gained 5 per cent over 2007, the stellar
performers were Melbourne, Brisbane and Adelaide which each recorded increases
of more than 20 per cent. Australian Property Monitors general manager, Michael
McNamara, said that the rate of growth will slow or even fall in some areas, but
that if Melbourne bucked the trend and continued its rate of growth it would
have higher house prices than Sydney. While the 10 per cent difference between
the median prices in Sydney and Melbourne is the smallest recorded, it would
take a year of 15 per cent growth in apartment prices and 25 per cent growth for
house values to catch Sydney which Mr McNamara said is unlikely to happen.
Growth is expected to be weaker over the next year with more interest rate rises
on the way.
25 January 2008 - ATO to make online systems easier
The Australian Financial Review
The tax office will soon introduce changes to make it easier for businesses and
individuals to lodge tax returns and repay any bills online. The Australia Tax
Office's small business portal will be relaunched in 2009 with improvements
aimed at helping businesses to access their tax records and pay GST. Individual
returns will be prefilled with data such as earnings for the past year, tax
deductions and information about health insurance and education loans. Tax
commissioner Michael D'Ascenzo said that the role of the tax office was simply
to collect revenue and the idea that it tried to maximise the amount of tax
collected was a "devilish error".
24 January 2008 - Investors take a breather from share sell-off
Sydney Morning Herald
The share market slide took a break yesterday after twelve consecutive days of
falls, the longest sell-off in the last 26 years. Following the US Federal
Reserve's announcement that it would slash interest rates by 75 basis points to
3.5 per cent markets around the world showed signs of recovery. The local S&P/ASX
200 Index was up 4.35 per cent to 5412.3 points while the Hong Kong Hang Seng
Index put on 10.7 per cent. However analysts warn that it is too early to say
that the slump is over with more bad retail sales and housing figures expected
out of the US.
24 January 2008 - Inflation surge signals higher interest rates
The Australian
Treasurer Wayne Swan has warned that it could take up to two years of rate pain
to get inflation under control with the underlying rate hitting 3.6 per cent.
The Reserve Bank of Australia is almost certain to increase rates at its
February meeting in an attempt to drive the inflation rate back down into its 2
to 3 per cent comfort zone. Key contributors to the inflation result were
petrol, up 7.3 per cent in the last quarter, and rents which increased 1.6 per
cent over the same period. Rises in most food categories were offset by a 13.5
per cent fall in the price of fruit and a 6.9 per cent reduction in the price of
vegetables. Mr Swan has called on unions, employers and employees to avoid
adding fuel to the fire and exercise restraint in any wage claims.
24 January 2008 - Market plunge causes record trade volumes
The Australian Financial Review
The Australian Stock Exchange saw record volumes on Tuesday with 665,000 cash
market trades worth $10 billion and there were a further 576,000 trades
yesterday worth $9.5 billion. Online broker E*Trade said that the volume it had
processed on Tuesday was 2.2 times more than usual and yesterday was double the
average volume. Managing director John Daley said that the firm had received a
surprising level of requests for new accounts, showing that some people were
seeing the share market fall as an opportunity to invest.
24 January 2008 - Margin call on Allco shares
The Australian
Shares in Allco went against the market trend yesterday by falling 78 cents to
$2.21. The slide was triggered by margin calls which saw executives at the
company sell off 23 million shares. Two margin lenders forced the sale as Allco
shares have shed more than 60 per cent of their value since the start of the
month. Group chief executive David Clarke said that the issue affecting the
company's shareholders is not affecting the underlying business.
24 January 2008 - Households carry burden of higher rates
The Australian Financial Review
Australians are paying more for bank services and insurance according to the
latest figures from the Australian Bureau of Statistics. Over the year financial
service and insurance costs increased by 4.9 per cent as banks pass on higher
funding costs resulting from the US sub-prime crisis. Financial and insurance
service costs were up 2.1 per cent in the December quarter with charges on
deposit facilities and loans increasing 2.7 per cent. As bank fees were not
increased during the last quarter the increased costs on deposits and loan
facilities can be attributed to higher interest rates on loans while deposit
rates have been largely unchanged.
24 January 2008 - Availability keeps pressure on rents
The Australian Financial Review
Rents increased by 1.6 per cent in the December quarter, the fastest rate in 18
years, and are up 6.4 per cent over the year. The latest figures from the
Australian Bureau of Statistics show that Perth has the nation's tightest rental
market with less than 1 per cent of properties vacant. This caused rents to
increase between $100 and $150 over 2007 to an average of $300 per week for
units and $320 for houses. Over the December quarter rents were up by 3.2 per
cent in Perth, 1.4 per cent in Melbourne, and 1.3 per cent in Sydney.
23 January 2008 - Massive market wipeout
Sydney Morning Herald
Investors lost $104 billion on the Australian share market yesterday in the
biggest fall in a single day since October 1989. Since the market peaked in
November a total of $300 billion has been wiped from the value of Australian
companies and further falls are expected today after Wall Street dropped another
4 per cent in trading overnight. The S&P/ASX 200 Index lost 393.6 points or 7
per cent to close at 5186, effectively wiping off all of the gains since October
2006.
23 January 2008 - Repossessions skyrocket in NSW
Sydney Morning Herald
The number of people in NSW who are at risk of losing their homes has jumped by
almost 70 per cent in the last two years. The latest figures from the Sherriff's
Office show that a total of 3935 writs of possession were issued last year
compared with 2357 in 2005. Writs are issued after a lender applies to the
Supreme Court and, if approved, a date is set by which the borrower must vacate
the property. However writs do not always lead to repossession and in many cases
an agreement is reached between the borrower and the lender. Research by the
Consumer Law Centre of ACT has found that while non-bank lenders only account
for around 5 per cent of all mortgages they were behind 68 per cent of
repossessions in 2006.
23 January 2008 - AXA shareholders will hear from Tweed
The Australian
Market predator David Tweed has won his battle to gain access to the shareholder
register of AXA. The Corporations Act says that listed companies must provide a
copy of their share register to anyone who requests it but an exemption can be
obtained if it is to be used for an inappropriate purpose. AXA had planned to
seek a court order to prevent Mr Tweed from gaining access to their list, but
this was dropped after he gave an undertaking that the information would not be
used for any purpose other than those allowed by the Corporations Act.
23 January 2008 - Market heat causes CommSec crash
The Australian Financial Review
CommSec's online trading system crashed yesterday morning as the market went
into meltdown with the service unavailable from 10am until 10.35am. CommSec
accounts for around 50 per cent of the online broking market and the 125,000
trades they processed yesterday beat the previous record of 101,000 trades in a
single day. The system crash has been blamed on the unusually high volume of
trades as well as a database software bug. The head of CommSec, Matthew Comyn,
apologised for the service interruption and said that any complaints from
customer would be handled on a case by case basis.
23 January 2008 - Australians need to lift savings level
The Australian Financial Review
A study has found that Australian households are the worst savers in the
English-speaking world, only putting away an average of less than 3 per cent of
disposable income each year between 1989 and 2006. This is well below the UK and
Canada, even the US has a better savings rate of 3 per cent. All of these
countries are easily shaded by the 16 per cent achieved in Italy, 13.8 per cent
in Korea and 12 per cent in France. The report by the Investment and Financial
Services Association shows that the average household in Australia has gone from
owing $50 for every $100 earned in the 1980's to owing almost $160 for every
$100 earned.
22 January 2008 - Banks keep businesses on their toes
The Australian Financial Review
Anecdotal evidence is emerging that banks are getting tough on repayment and
reporting deadlines for small businesses. One accounting firm in Melbourne,
Pitcher Partners, has reported that some of their clients are receiving phone
calls weeks ahead of reporting deadlines. "It is saying the cost of funds is
increasing we [the banks] want to make sure your businesses are still profitable
to support the funding costs of your business," said David Thomson, partner in
charge of private clients at the firm. Businesses should not only keep accurate
records of their financial position he said, but also understand the mix of
possible funding sources and how they relate to the business' cash flow cycle.
22 January 2008 - Super funds promote long term view
The Age
According to SuperRatings the average superannuation fund has lost 6 per cent so
far this month, following a 0.46 per cent drop in December. However super funds
are urging their members to remain calm and look at the strength of longer term
returns. The median return over the past 5 years is 12.2 per cent with some
closer to 14 per cent. Mark Delaney, chief investments officer at
AustralianSuper which has an average return over the past five years of 13.9 per
cent, said that with such a sharp fall on the markets there is little
opportunity for funds to reposition their portfolios, instead relying upon
diversification of asset allocation.
22 January 2008 - Westpoint investors still looking for cash
The Australian Financial Review
Two years after the collapse of the Westpoint group investors are still waiting
to see any of their cash. The Australian Securities and Investments Commission
is conducting a series of civil lawsuits against former Westpoint directors as
well as planning firms who convinced investors to put money into Westpoint and
says that the proceedings will benefit 85 per cent of those who lost money.
However the investors have criticised a system which they say promises investor
protection but will probably provide little compensation for their losses.
Investor Rod Downie has said that while the ASIC actions are welcome it was a
case of closing the gate after the horse has bolted. "I cannot believe after HIH
that financial planners weren't required to have professional indemnity
insurance. The financial planning industry is just so full of holes," he said.
22 January 2008 - Allco shares hit by market nerves
The Australian
Shares in Allco Finance Group fell by 35 per cent to close at $3.10 yesterday
and are 77 per cent below the $13.24 peak achieved last February. When queried
by the stock exchange the company said that it was not aware of any reason for
such a sharp fall. Hedge funds, institutions and retail investors are nervous
about companies that could have high debt levels with Allco having a complex
structure and opaque accounts which do not report the extent of any
off-balance-sheet commitments. The share market also punished other diversified
financial stocks such as Babock & Brown, Challenger Group and Macquarie Bank
being sold off.
22 January 2008 - Market down again and could keep falling
The Australian
The share market fell 3 per cent yesterday and some analysts are tipping that it
could lose a further 10 per cent. The S&P/ASX 200 closed at 5580.4 after losing
166.9 points and the All Ordinaries was down 168.5 points to 5630.9. The head of
dealing at IG Markets has said that the market could be as low as 5000 by the
end of March as the equities market catches up with the bond markets which have
been predicting a recession in the US for the last three years. "There is the
chance we will have some big up days, but it's going to be overall bearish," he
said.
22 January 2008 - Inflationary pressures in the pipeline
The Australian Financial Review
Economists have reduced their expectations for the December quarter consumer
price index to 0.9 per cent, however markets believe that this will still be
enough to prompt the Reserve Bank of Australia to raise interest rates at its
February meeting. The latest figures show that the rate of growth in the final
stage producer prices eased in the December quarter to 0.6 per cent, compared
with the 1.1 per cent that had been expected. However increases in the
preliminary and intermediate stages of production of 1.4 per cent and 1.1 per
cent respectively suggest a strong building of inflationary pressures
downstream.
22 January 2008 - Misled US home buyer set to sue agent
New York Times
A case due to be heard in the North County Superior Court (Carlsbad, California)
in coming weeks is tipped to be the first of many as resentful or regretful
buyers seek compensation from buyers agents they believe to have misled them on
their property purchase. As prices spiked through the late 1990's and much of
the current decade, buyers' agents have grown in stature so that they now are
involved in an estimated two-thirds of all residential purchases in the United
States. The case brought before the North County Superior Court centres around
allegations of the buyer's agent withholding information regarding prices of
similar properties in the area, selling and exaggerating the value and virtues
of the property the agent was recommending they buy. Only the week after
purchasing their property for US$1.2 million that the some buyers discovered
similar properties in their street selling for $105,000 less.
21 January 2008 - US tries to kick-start economy
The Australian Financial Review
A $US145 billion rescue package for the American economy announced by President
George Bush on Friday has failed to calm investor concerns on Wall Street. The
package equates to around 1 per cent of gross domestic product to be used to
fund tax incentives aimed at encouraging businesses to make major investments
and also through "direct and rapid" income tax relief. Markets indicated that
the move was too little, too late with the Dow Jones Industrial Average losing
59.91 points or 0.49 per cent to 12,099.3. If the Australian share market
follows suit today it will be the 11th consecutive day of losses, its worst
losing streak since January 1982.
21 January 2008 - Bargain hunters scour share market
The Australian Financial Review
The Australian share market has fallen 16 per cent over the last two and a half
months but some say there are now good deals to be had. The S&P/ASX 200 Index
was at 5747.3 at close of trading on Friday which puts the price-to-earnings
ratio of local shares at 13 times compared with an average over the past decade
of 15.7 times. CommSec Economics has said that a price-to-earnings ratio between
13 and 13.5 usually indicates a sharp share market rally and that some stocks
have been oversold. However analysts also caution that just because the market
seems to have reached a temporary bottom it does not mean that all stock are
cheap enough to warrant wholesale purchasing, and that pockets of value need to
be identified.
21 January 2008 - More happy with their choice of fund
The Australian Financial Review
The rate of people switching their superannuation funds continues to slow with
the latest Roy Morgan research finding that only 2.9 per cent changed funds in
the year to the end of September 2007. This is down from 3.3 per cent in the
June quarter report and the 3.8 per cent for the year before. A record high of
63.5 per cent of the survey respondents said that they were satisfied with their
super fund while 6.5 per cent were dissatisfied and only 5.4 per cent said they
were "very likely" to change funds in the next twelve months.
21 January 2008 - Australia has least affordable homes
The Australian
A study has found that on average an Australian family has to spend 6.1 times
their entire household income to buy a home, while Americans need only 3.6 times
their income and Canadians 3.1 times. The study, which looked at 227 cities in
Australia, Canada, Ireland, the United Kingdom, New Zealand and the US, reports
that Australian homes are the least affordable. While Los Angeles remains that
least affordable place to buy property it is Australia's 18 entrants in the top
50 that combine to make ours the least affordable country. Economist and author
of the 2008 Demographia report, Wendell Cox, said that there are no affordable
markets in Australia with 25 of the 28 markets assessed being rated as severely
unaffordable.
21 January 2008 - Rudd takes on inflation
The Australian
The government is stepping up its efforts to drive down inflation by announcing
that it will aim for a budget surplus of 1.5 per cent, up from the 1 per cent
target of the Howard government. Prime Minister Kevin Rudd will today announce a
five point plan to fight inflation which is expected to include a warning that
spending cuts in the May budget will be greater than the $10 billion flagged
prior to the election. Other measures will include increasing incentives to
encourage private saving and policies to address the skills shortage while
increasing workforce participation.
21 January 2008 - GE holds its own in non-bank sector
The Australian Financial Review
GE Money Australia has stopped providing funding to around 80 mortgage
originators over the last year and has retained only 40 of its strongest
performing partners in a bid to improve profits. Chief executive Mike Cutter
said that GE Money is now forming relationships with some of the country's
largest credit unions and had only culled those partners that had been selling
few mortgages. Customers have been increasingly turning to the big four banks
and St George at the expense of the non-bank sector, but Mr Cutter said that GE
has increased its settlement volume in absolute terms while increasing its share
of the non-bank lending market.
18 January 2008 - US slump a major rates challenge for RBA
Infochoice.com.au
The challenge facing the Reserve Bank in setting interest rates in early 2008
just got a lot tougher. At a time when most domestic indicators point toward the
need for higher interest rates in the face of increasing inflationary pressures,
the international picture suggests the opposite.
In the US, poor housing construction figures, a sub-prime inspired $10 billion
loss announced by Merrill Lynch and Federal Reserve chairman Ben Bernanke's
downbeat assessment of the economy are the latest ominous pointers of an
economic slump.
While job creation surges unabated in Australia, recession in the US appears
very likely if it hasn't already arrived. Housing construction is dropping off,
house prices are falling, and consumer confidence and the jobs market appear to
be waning. Bernanke's statement to Congress that the Fed is ready for
"substantive additional action" is being interpreted as a 0.5 percentage point
rate cut coming at the next Fed meeting at the end of the month.
The combination of quick and significant rate cuts and a government rescue
spending package foreshadowed by President Bush overnight appear to be the only
hope of preventing a hard landing in the US economy that would hit the world
economy hard - and it may be too late.
This means further rate rises may not be needed in Australia and may turn out to
be damaging if, later in the year, the economy is pulled back by a worldwide
slowdown. But the RBA has to be sure that, above all else, inflation is kept in
check.
Another 20,000 jobs were created in December and the unemployment rate dropped
back to 4.3 per cent. Yet official rate rises in the second half of 2007 have
already dampened the housing sector. Consumer confidence has fallen sharply in
the face of banks pushing up home loan rates separate on top of expectations
that the RBA will take its own rate action next month.
On balance, the chances of a 0.25 per cent rise in rates coming on top of banks'
recent rises have reduced. But a February rate hike hangs in the balance as we
await quarterly inflation figures due in the coming week, critical to the RBA's
difficult decision. A further rise in underlying inflation will prompt a lift in
rates, but would add to risks of downturn later in 2008.
18 January 2008 - Call for regulation of lending practices
The Australian
Household debt was 159 per cent of disposable income in September last year,
more than double the level of a decade ago. The figures from the Reserve Bank of
Australia prompted the head of AXA Australia-Pacific, Andy Penn, to call for
more regulation of lending. Mr Penn said that the lenders should face similar
requirements to those imposed on financial advisers who have to prepare detailed
analysis of a customer's circumstances. The financial security achieved through
our superannuation regime is at risk from the increasing availability of credit,
he said.
18 January 2008 - Deposit rates lag mortgage rate increases
The Australian
Analysis by the Reserve Bank of Australia has found that banks delay passing
higher interest rates to deposit customers, even though they waste no time in
lifting their mortgage rates when there is an increase in the official cash
rate. While the cash rate has increased by 0.5 percentage points since July last
year, the average standard variable rate loan with the big banks has increased
0.64 percentage points. At the same time the average rate on a cash management
account with a balance of $10,000 has only improved by 0.45 per cent, accounts
with a $50,000 balance are paid an extra 0.50 per cent, and online savings
account rates for balances of $10,000 are up 0.40 percentage points. In cases
where the full 0.25 per cent increase in November was passed on it took over a
month for the increase to take effect.
18 January 2008 - Consumers start to moderate credit card use
The Australian Financial Review
The average outstanding balance on a credit card grew by $32 in November to
$3025. However, in a sign that consumers may be more sensitive to higher
interest rates, the annual growth of a little over 5 per cent is the slowest
rate since records began in 1994. In the year to November purchases grew by
nearly 12 per cent but cash advances were down 4.5 per cent, the seventh
consecutive year of decline.
18 January 2008 - Unemployment rate puts pressure on wages
The Australian Financial Review
Unemployment has fallen 0.2 of a percentage point to 4.3 per cent after more
than 20,000 jobs were created in December. The increase was made up of 13,800
part-time jobs and 6,300 full-time jobs, driving the unemployment rate close to
its lowest point in 33 years. Over the year employment grew by 2.5 per cent or
260,000 jobs. Despite the tight labour supply wages only grew by 4.5 per cent
over the year, but there is a risk that this could escalate if conditions do not
improve. The market currently has the odds of a rate rise in February at 39 per
cent.
18 January 2008 - Banks may have to quit off-balance-sheet funding
The Australian
The practice of banks using off-balance-sheet financing vehicles to fund some of
their mortgage books has come under scrutiny by the Reserve Bank of Australia.
The RBA said that while such arrangements are legally independent, there is a
risk that guarantees over the funding conduits could be invoked if a commercial
paper issue was unable to be rolled over. This type of funding has been one of
the most troubled areas of the US sub-prime crisis, however Australian banks
only have 2.3 per cent of their risk-weighted assets in these vehicles compared
with large US banks which have 10 per cent or more. Under the new capital
adequacy regime of Basel II off-balance-sheet-financing will become less
attractive as capital will need to be set aside for any liquidity guarantees.
17 January 2008 - Share market on the skids
Daily Telegraph
The local share market fell for the eighth consecutive business day yesterday
with the All Ordinaries Index shedding a total of $35 billion. The S&P/ASX 200
Index lost 2.52 per cent or 150.3 points yesterday and since the start of this
year has fallen 8.4 per cent. The market is following the lead of the US, where
building concerns about a recession saw the Dow Jones industrial average lose
2.17 per cent overnight. Resource stocks and the major banks were the big losers
with miner Rio Tinto falling $3.74 to $122.96, the Commonwealth Bank down $2.21
to $52.74, and NAB lost $1.06 to $34.74.
17 January 2008 - Borrowers seek safety of fixed rates
Sydney Morning Herald
Borrowers are rushing to fix their home loans to try to escape the impact of
rate rises but it may be too late. The latest data shows that there were 65,831
home loans taken out in November, an increase of 4 per cent from the previous
month. 24 per cent of these were fixed for two or more years, double the average
rate of the past 15 years. However banks have been increasing their fixed rates
so that on average they cost 0.4 percentage points more than a variable rate
loan, meaning that two 0.25 per cent increases would be required before
borrowers saved any money. General manager of InfoChoice, Denis Orrock, said
that many borrowers would choose a fixed rate even if it meant paying more just
so they had some certainty on their repayment levels for the next few years.
17 January 2008 - Consumer confidence takes a battering
The Australian Financial Review
Consumer confidence is retreating in the face of rising interest rates, high
petrol prices and concerns over a US recession. The latest Westpac-Melbourne
Institute index of consumer confidence has hit its lowest point in a year after
falling 8.3 per cent this month. The index has dropped by 5.9 per cent over the
last year with the biggest fall of 20 per cent recorded in expectations about
economic conditions.
17 January 2008 - Margin call rates shoot up
The Australian Financial Review
The incidence of margin calls is increasing as the stock market continues to
fall. Macquarie Margin Lending said that they made 72 calls yesterday but
expects this to increase to 300 today. Leveraged Equities reports that it made
282 margin calls yesterday, topping their record of 131 last Tuesday and well
above the 20 to 50 calls a day before that. CommSec and Colonial Geared
Investments, which have around 80,000 margin loans between them, made nearly 500
calls yesterday.
17 January 2008 - ABA defends banks' right to secrecy
The Australian Financial Review
Through the Australian Bankers Association, lenders have defended their decision
to not fully disclose the reasons for raising interest rates outside any move in
the official cash rate by the Reserve Bank of Australia. The ABA issued a
statement saying that "disclosing price methodologies could lead to allegations
of price signalling and anti-competitive conduct, such as price fixing". Shadow
treasurer Malcolm Turnbull had called on the government to force the banks to
give a detailed explanation for the rate rises but the ABA said that banks had
already given sufficient reason by pointing to an increase in funding costs of
around 0.30 percentage points.
17 January 2008 - Credit unions can't escape rate pressures
The Australian
While credit unions are not directly exposed to higher funding costs for their
mortgages, they have to lift rates to remain competitive in the deposit market.
Banks are lifting their deposit rates to attract cheaper funding for their
mortgages than they can on wholesale markets. This is having a knock-on effect
for credit unions that rely on deposits to fund their lending activities. The
Australian Central Credit Union yesterday announced an increase in its variable
rate mortgage of 17 basis points. Managing director Peter Evers said that just
like the banks, some mutual organisations are under growing cost pressures which
have to be passed on to consumers.
16 January 2008 - Citigroup posts record loss
The Australian
US bank Citigroup has posted a net loss of $9.83 billion for the fourth quarter
after writing off $US18.1 billion in sub-prime losses and being hit with a $4.1
billion increase in credit costs. Revenue totalled $US7.2 billion which is an
astounding 70 per cent lower than the $23.83 billion recorded a year earlier.
The bank has announced that it will cut its quarterly dividend from US54 cents
to US32 cents per share and is believed to be considering slashing more than
20,000 jobs.
16 January 2008 - Australians are a fickle bunch
The Australian
A survey has found that Australian consumers won't hesitate to switch service
providers if they are not getting what they want. As part of a global study
conducted by consulting group Accenture 67 per cent of Australian respondents
said that they had switched providers due to poor service some time in the last
year. The survey found that banks and internet service providers were thought to
have the best service overall, while satellite TV providers and life insurers
were judged the worst. Even so, only 6 per cent rated the service provided by
banks as "excellent", while 54 per cent said that it was "good" and one third
said that it was only "fair".
16 January 2008 - Government makes display of fiscal responsibility
The Australian Financial Review
The federal government has promised deeper spending cuts than it had originally
planned in an effort to ease pressure on inflation and therefore interest rates.
Prime Minister Kevin Rudd and Treasurer Wayne Swan took the unusual step of
meeting with senior officials at the Reserve Bank of Australia and Treasury
secretary Ken Henry yesterday to advise them of the progress the government is
making on identifying savings. The move drew criticism from the Opposition
Leader Brendan Nelson who warned the government against "fiddling" with the
independence of the central bank. However Mr Swan said that it was important
that the policy of fiscal restraint promised by the government was demonstrated
to the RBA before it meets again to review rates in February.
16 January 2008 - Property trusts give no returns
The Australian Financial Review
Property funds have recorded their worst annual performance in over 25 years
with the S&P/ASX 300 Listed Property Trusts Index down 8.4 per cent during 2007.
The best performing funds posted a zero return with the remainder reporting
losses of up to 19 per cent. Managing director of Perennial Real Estate
Investments, Stephen Hayes, said that while the depressed values may be looking
attractive to investors there was no good news expected in the first half of
2008 but that the second half of the year could be more promising.
16 January 2008 - Index up but on the back of few stocks
Sydney Morning Herald
While the S&P/ASX 200 Index showed that the Australian stockmarket rose by 12
per cent over 2007, just five stocks accounted for over three-quarters of the
increase. The key stock that contributed most to the index's 670 point rise
were: BHP Billiton (261 points); Rio Tinto (86 points); Commonwealth Bank (64
points); Woolworths (63 points); and CSL (41 points). With another five stocks
making up the remainder of the increase investors need to choose their portfolio
very carefully.
16 January 2008 - US consumers brace for recession
Sydney Morning Herald
More signs that the US economy is tipping into recession have emerged with the
New York Times reporting that consumer spending has slowed dramatically. While
the report carried only anecdotal evidence department stores confirmed that
their sales are slowing quickly. American Express said that growth spending by
its 52 million cardholders had slowed from 13 per cent to 10 per cent, the first
reduction in the growth rate since the recession in 2001. A poll published on
Sunday found that only 19 per cent of Americans believe that the country is
going in the right direction while an overwhelming 75 per cent think it is on
the wrong track. Consumer spending accounts for 70 per cent of the US economy.
15 January 2008 - Job market booming but resources ease
Herald Sun
Demand for workers remains very strong with the number of job advertisements
increasing by 7.1 per cent in December. The latest survey of print and internet
job ads conducted by the ANZ Bank shows that there are 31 per cent more than
there were a year ago. There are signs that the boom in the resources sector has
started to slow with growth of only 1.2 per cent in Western Australia, while in
NSW ads were up 7.7 per cent. The only state to record a fall was Queensland
where job ads dropped by 0.9 per cent.
15 January 2008 - Inflation warning signs
The West Australian
The TD Securities-Melbourne Institute inflation gauge shows prices increasing by
3.7 per cent through 2007, rising 0.6 percentage points in December alone. The
figure is the highest annual measure since December 2006 and the fourth highest
in the history of the index. The news is expected to increase pressure on the
Reserve Bank of Australia to lift rates once again, but it will be watching for
official inflation figures which will be released on January 23.
15 January 2008 - ANZ and Commonwealth increase ATM fees
The Australian Financial Review
Despite agreeing to scrap ATM interchange fees within a year, the ANZ and
Commonwealth banks have both announced increases to the fees. The fee that ANZ
charges its customers each time they use an ATM belonging to another bank has
gone from $1.50 for withdrawals and $1.25 for balance enquiries to $2 for each.
CBA charges $1.50 for both withdrawals and balance enquiries but will also
increase the fees for both to $2. The moves mean that all five of the nation's
largest banks charge $2 for any foreign ATM transaction. The banks have an
agreement with the Reserve Bank of Australia to remove interchange fees and
instead charge the customers of other banks directly, disclosing the fee at the
time of withdrawal and allowing cancellation of the transaction without charge
if the fee is too high.
15 January 2008 - CFD player picks up broker
The Australian Financial Review
Contracts for difference specialist CMC Markets has purchased online broker
Andrew West Stockbrokers. The $20 million plus acquisition will give CMC access
to the 28,000 active clients and 100,000 occasional traders serviced by Andrew
West. The managing director of CMC Markets, David Trew, said that the move will
give their CFD clients access to more services while transforming Andrew West
into a big league player in the broking market. Founder of the broking firm
Andrew West has said that he and his senior staff will remain with the company.
15 January 2008 - Dismal start to the year for super returns
The Australian Financial Review
The average superannuation fund return is estimated to be 8.6 per cent for 2007
according to research by SuperRatings. While this is the lowest rate of return
since 2003, the five-year compound average return is 11.7 per cent per year,
compared with the 6 to 7 per cent that most funds aim to deliver. With the
sharemarket falling for the sixth consecutive day yesterday the manager of the
$13 billion Cbus super fund, Sandy Grant, has said that, if the market continues
in its current form, anyone expecting double-digit returns this year is being
"incredibly optimistic".
15 January 2008 - NAB rewrites indigenous loan rules
Sydney Morning Herald
The National Australia Bank has had to change the way it lends to people in
remote indigenous communities after the Australian Securities and Investments
Commission found that many borrowers did not understand the arrangements and
could not repay the loans. ASIC looked at a random selection of 25 loans and
found that in many cases the borrower did not know the terms and conditions and
were unable to service the debt. ASIC said that the bank would now "tailor its
lending practices in recognition of the special needs and circumstances of
borrowers in regional and remote indigenous communities". The Commonwealth Bank
already revised its lending practices in 2006 after finding that some borrowers
were overcommitted as a result of the bank's lending criteria.
14 January 2008 - US concerns weigh heavily on markets
The Australian
The Australian sharemarket is expected to fall further today, following the lead
of heavy falls on Wall Street on Friday. The US Treasury Secretary Henry Paulson
had warned that growth in US economy had slowed "rather materially" at the end
of last year, causing the Dow Jones Industrial Average to shed 2 per cent of its
value. Investors are anxious that there could be more bad news as the US profit
reporting season gets into gear this week. American Express has already posted
its first quarter results which were below market expectations, while warning
that it could see signs of a weakening economy.
14 January 2008 - Investigation into home loan switching fees
The Australian
The federal Treasurer Wayne Swan has said that he will investigate ways to
protect borrowers from harsh fees when refinancing their home loans. The move
comes after Westpac raised its variable home loan rates by 0.20 per cent, the
last of the country's five largest banks to increase rates without any lift in
the official cash rate by the Reserve Bank of Australia. Mr Swan said that some
of the increases by the big banks are not justified and that borrowers should be
voting with their feet and switching to cheaper loan options. He has asked
Treasury for a report on the banking sector and will meet with industry leaders
to discuss ways to make the market more competitive.
14 January 2008 - Bonds could be the star performers this year
The Australian Financial Review
Analysts are predicting that the bond market could outperform shares this year,
as long as the Reserve Bank of Australia's tightening cycle ends in the middle
of the year. The head of fixed interest at Perennial Investment Partners, Glenn
Feben, said that historically the best time to invest in bonds is at or near the
peak of cash rates. "We think we are close to this point," he said. The markets
are currently only predicting one more interest rate rise over the coming year,
a scenario which Feben says would create the conditions for bonds to outperform
shares for the first time in years.
14 January 2008 - Competition for deposit dollars hots up
The Australian Financial Review
So far it has been lenders who rely on wholesale markets that have had to
increase their rates, but there is increasing pressure on others such as credit
unions to follow suit. While deposit-taking institutions have had some
insulation from the cost pressures faced by banks and non-bank lenders so far,
competition for deposits is increasing with rates being pushed higher in an
attempt to gain market share. Bendigo Bank sources much of its funding for loans
from retail deposits but on Friday announced that its standard variable home
loan rate would increase by 0.15 percentage points. The chief executive at
Austral Credit Union, David Edwards, said that competition in the deposit market
is driving rates up and it is expected to announce an increase in its variable
rate loan today.
14 January 2008 - NAB says UK market OK
Daily Telegraph
The share price for National Australia Bank has lost almost $10 or 21 per cent
from its $45 peak in November. Causing the slide is a belief that its British
operations will be hit by a deteriorating housing market but the head of the UK
operations, Lynne Peacock, said that the bank is better placed to weather any
downturn than its competitors. Ms Peacock said that while conditions in the
market were tougher now, house price growth will merely moderate rather than
crashing as forecast by some commentators. She said that the bank does not write
sub-prime loans and that the average loan-to-value ratio for new loans in 2007
was around 60 per cent.
14 January 2008 - Landlords targeted by tax office
The Australian Financial Review
The Australian Tax Office has warned landlords that it will be paying close
attention to rental deductions this year. The ATO says that it is easy to make
mistakes such as not correctly apportioning costs, claiming incorrect expenses
or confusing repairs with capital improvements. On average last year, taxpayers
who had over-claimed on property expenses were forced to pay back $1,044 during
audits. CPA Australia senior tax counsel, Garry Addison, said that taxpayers who
work out deductions themselves would have to be lucky to get it right as the
rules are not straightforward.
11 January 2008 - RBA faces tough rates decision
Infochoice.com.au
The strong chance of a February rise in official interest rates for Australian
borrowers has lessened somewhat in the new year amid the growing threat of
recession in the US and the fact that rates are already edging up for home
borrowers here anyway. But an Australian economy going from strength to
strength, however, means the chances of a rate hike next month haven't gone away
- the Reserve Bank (RBA) will take no prisoners in the fight against inflation.
The RBA has a real challenge on its hands in early 2008, having to weigh the
robust Australian economic conditions against the strengthening signs of
significant slowdown in the US, which would in turn trigger a worldwide slowing
including Australia. At the same time, interest rates are already on the rise
here without any action by the RBA as lenders edge up their rates in response to
the rising cost of credit from the US sub-prime fallout.
Other lenders can be expected to follow NAB, ANZ and CBA and push up variable
home loan rates in the coming months. But the magnitude of these rises is likely
to be similar to what we've seen already - around 0.10 and up to 0.20 in some
cases. This will be spread over some months as smaller non-bank lenders move in
response to their own wholesale funders' moves.
This fragmented and marginal lift in rates may not be enough for the RBA which
would want to lift rates in increments of 0.25 percentage points, perhaps sooner
rather than later. The latest economic data underline how strong the economy
remains. Retail trade in November rose 0.8 per cent seasonally adjusted, a
strong result going into Christmas and showing that consumers were not to phased
by the last rate rise. The quarterly official job vacancy figures suggest no let
up yet in the extraordinary rate of job creation. Even building approvals showed
a strong result in November despite the rate rise, jumping 9 per cent, led by a
surge in the apartment segment.
The question for the RBA though is what the Australian economy is going to look
like in six to nine months time. Will a rate hike now seem like one rise too far
later, or will any international downturn be muted (especially if China
continues to boom) allowing the Australian economy to keep on humming?
11 January 2008 - St George home loan rates up
InfoChoice.com.au
From 15 January customers of St George Bank with variable rate home loans will
pay an extra 0.20 percentage points. Both new and existing customers will now be
paying 8.77% per annum for a standard variable rate loan. Chief Financial
Officer at the bank, Michael Cameron, defended the move by pointing out that its
cost of funds had increased by more than 0.30 percentage points and, until now,
the bank had been absorbing the increased cost. The move leaves Westpac as the
only one of the country's five largest lenders not to have moved rates yet but
is expected to follow suit very soon.
11 January 2008 - Bankruptcy rates climbing
Herald Sun
The numbers of personal bankruptcies in the quarter to December 2007 were up by
3 per cent on the previous quarter and 6.6 per cent higher than the same quarter
in 2006. However the numbers of debt agreements fell 3.9 per cent, driven by
falls of 55 per cent in South Australia, 22 per cent in Queensland and 16 per
cent in Tasmania. In both NSW and WA the use of debt agreements increased by 9
per cent. A director of debt administrator Fox Symes, Deborah Southon, said that
the company has never had such a high volume of calls and that they were
struggling to deal with it.
11 January 2008 - Government to claw back trade deficit
The Age
The Australian Bureau of Statistics reports that the trade deficit for November
was $2.25 billion seasonally adjusted, the sixth highest deficit on record.
Following on from the largest ever deficit of $2.9 billion in October, the
result has contributed to making the last three months of the Howard government
the worst trade performance in Australia's history. Trade Minister Simon Crean
said that after 68 consecutive months of trade deficits the government would
conduct a review of all trade-related policies to work out how to get back into
the black.
11 January 2008 - Unions target bank lending practices
The Australian Financial Review
With the ratio of debt to household income at 159.6 per cent for the September
quarter and 11.7 per cent of household income committed to interest payments,
the Finance Sector Union is tackling the big banks over what it sees as
aggressive lending practices. The union is planning a campaign along the lines
of the successful 'Your Rights at Work' campaign conducted by the ACTU last year
and will highlight the link between staff pay levels and how much debt they can
get customer to take on. The acting chief of the Australian Bankers Association,
Ian Gilbert, said that banks are already bound by a code of practice that
requires lenders to conduct a credit assessment to determine a customer's
ability to repay a loan, and that they must also act diligently and prudently
when issuing loans.
11 January 2008 - Banks still offer good returns
The Australian Financial Review
While concerns about the exposure of Australian banks to problems in the US have
been circulating over the past few days, analysts say that the banking sector is
a safe place to invest in 2008. That's not to say there are no risks from
increasing bad debts and slower credit growth, but these are likely to only have
a 1 or 2 per cent impact on earnings. Research from Macquarie Equities forecasts
that while overall earnings growth may drop back to single figures this year
growth across the sector is likely to be around 10 per cent. This compares
favourably with growth expectations in the resources sector of 6.6 per cent and
only 2.3 per cent for listed property trusts. With the exception of the
Commonwealth Bank, shares in the major banks fell yesterday with NAB losing 27
cents to $35.32, Westpac down 36 cents to $26.60 and ANZ 24 cents lower to
$26.11.
11 January 2008 - Merrill and Citi seek funds injection
The Australian
Merrill Lynch and Citigroup, two of the world's largest banks, are approaching
foreign investors to raise a total of $US13 billion. The news comes as the two
banks are expected to announce up to $US25 billion in additional losses form
exposure to mortgage-related investments. Foreign governments have already
invested a total of around $US27 billion in Merrill, Citigroup, UBS and Morgan
Stanley. Analysts have estimated that globally the credit crisis has cost $US700
billion and losses could end up as high as $1 trillion.
11 January 2008 - Takeover tax on the chopping block
The Australian Financial Review
The federal government has said that it will review changes to tax consolidation
rules introduced last year and analysts say they should be scrapped. The
Assistant Treasurer, Chris Bowen, said that the introduction of the rules had
"caused significant disruption to the operation of Australia's capital markets
and has effectively prevented any scrip-for-scrip transactions". Mr Bowen went
on to say that there had been insufficient consultation on the changes and that
Treasury would seek input from the private sector on how to resolve the
situation. The review is expected to be completed by mid-February.
10 January 2008 - Spending spree may have hidden cost
Daily Telegraph
Strong retail spending figures in November have increased the likelihood of the
Reserve Bank lifting interest rates when it meets again in the first week of
February. Sales grew by 0.8 per cent in the month compared with expectations of
0.5 per cent growth according to figures released by the Australian Bureau of
Statistics yesterday. The spending spree continued with a total of $36.5 billion
going through the registers in the six weeks to Christmas Eve, up 7 per cent on
the same period last year said the Australian Retailers Association. Analysts
have warned that if consumers don't show any evidence of tightening their belts
the RBA will have no choice but to raise rates further, regardless of any
additional increases imposed by lenders to cover their funding costs.
10 January 2008 - Rates up at our biggest bank
The Australian
Australia's largest bank has increased its variable mortgage rate by 0.10
percentage points. The Commonwealth Bank has become the latest lender to decide
that it can no longer absorb higher funding costs, a spokesman saying that the
bank had delayed lifting its rates for five months to see if conditions
improved. The CBA has escaped the level of criticism fired by Treasurer Wayne
Swan at the ANZ which lifted its rates by 0.20 percentage points. Mr Swan said
that while there is no doubt that the increased cost of borrowing on
international markets has impacted local banks, excessive increases will be
judged harshly by Australian families and the government. With NAB having
already increased its variable mortgage rates by 0.12 percentage points Westpac
is the only one of the four major banks to not have moved its rates yet, however
is expected to follow suit.
10 January 2008 - Banks stand to lose $1 billion
The Australian
The major banks could be facing losses totalling almost $1 billion through their
investment in US home lender CountryWide which seems to be close to collapse. A
syndicate of 40 banks from around the world threw the lender a $13 billion
lifeline last year which included $300 million from both CBA and NAB, $150
million from ANZ and $100 million from Westpac. Shares in America's largest
mortgage lender fell by 30 per cent on Tuesday night after rumours emerged that
it was seeking bankruptcy protection, although it has since denied that it is
close to going broke.
10 January 2008 - Staff getting harder to find
The Australian Financial Review
The job market continues to get tougher for employers with the 182,000 vacant
positions reported in November 13.5 per cent higher than for the previous year
and 5.6 per cent more than the previous quarter. The latest data from the
Australian Bureau of Statistics shows that vacancy rates are escalating in the
retail, customer service, hospitality, mining and financial services sectors.
Employers have been slow to adjust to the changed job market conditions
according to Jason Cartwright, general manager of client services at Link
Recruitment. He said that the result was a stalemate with many employers
refusing to increase salaries, instead enduring lengthy searches for employees.
Simultaneously businesses are fighting to retain staff with the average length
of time in a job now only two years.
10 January 2008 - Mobius default rate double its competitors
The Australian Financial Review
Mobius Financial Services, the lending arm of financial group Allco, is carrying
twice the level of arrears as its rivals. The latest figures from Standard &
Poor's show that almost 22 per cent of the loans issued by Mobius are in
arrears, compared with others in the sub-prime market such as 15.3 per cent at
Liberty and 12.2 per cent at Bluestone. Loans in technical default, or more than
three months overdue, are at 15.6 per cent for Mobius but only 9.5 per cent for
Liberty and 5.6 per cent at Bluestone. Mobius loans are sold through other
lenders under their own brand.
10 January 2008 - Merchants fight interchange fees
The Australian Financial Review
Credit card merchants in Australia are lobbying for the Reserve Bank of
Australia to follow European regulators in removing interchange fees. The
Australian Merchant Payment Forum chairman, Russell Zimmerman, said that every
central bank and regulatory body that had reviewed interchange practices had
found that the fees are inflated or unnecessary and cost Australian consumers $1
billion every year. However the banks and card schemes have questioned whether
retailers pass on any savings coming from interchange fee cuts and instead some
companies engage in profiteering through excessive surcharging.
9 January 2008 - Indian banks hurt their customers, literally
The Australian
Consumer lending is driving increased consumption but some banks in India have
come under fire for their unusual debt recovery techniques. One man was sitting
listening to the radio in the car of a friend when he was dragged from the seat
and beaten before the assailant sped off in the vehicle. The attacker was
working on behalf of one of India's major banks, ICIC Bank, which has since been
fined for its role in the assault. In another recent case a manager at HDFC Bank
and two recovery agents have been charged with criminal intimidation, extortion
and "outraging the modesty" of a woman. The banks have claimed that they were
not aware of the tactics being employed by their recovery agencies but have
agreed that they need to be more careful to not over-extend the ability of their
customers to meet loan repayments.
9 January 2008 - Second stockmarket correction this year
Daily Telegraph
The stock market has recorded its second technical correction in six months
after losing a total of $44 billion over the last two days. A correction is a
fall of 10 per cent or more and the S&P/ASX 200 index is down 10.3 per cent from
its November high of 6828.7. Resource stocks were hit hardest due to weaker
commodity prices in overnight trading on Monday but the banking sector was
generally higher with the exception of NAB which fell 29 cents to $36.01.
9 January 2008 - Super returns stall
Sydney Morning Herald
After three years of positive returns from all asset classes Australians should
brace themselves for mixed results in 2008. With the local sharemarket
experiencing its second technical correction in the last six months SuperRatings
managing director, Jeff Bresnahan, said that balanced superannuation funds had
returned less than 2 per cent so far this financial year and that there was a
"significant chance" that the funds would dip into negative territory. As an
indicator of expected super returns, the Mercer Pooled Fund Survey showed a
median return of 6 per cent for the year to December, compared with an average
of 11.8 per cent for the preceding five years.
9 January 2008 - APRA vigilant on liquidity issues
The Australian Financial Review
The Australian Prudential Regulatory Authority will expand the review of bank's
liquidity guidelines that it started last May to ensure that they are well
positioned to withstand any severe financial market downturns. After meeting
with the Federal Treasurer and officials from the Reserve Bank of Australia
yesterday the APRA chairman, John Laker said that the main challenge for 2008
was to ensure that regulated institutions remained focused on negotiating a
difficult period. APRA has been in regular contact with deposit-taking
institutions since the credit crisis began to ensure that they have sufficient
liquidity and funding sources to meet the needs of their customers. However Dr
Laker said that local banks generally had very strong balance sheets so the main
risk was the credit crunch intensifying to the point that global markets shut
down.
9 January 2008 - First glimmer of a housing recovery?
The Australian Financial Review
Approvals for the construction of new dwellings across the nation jumped by 8.9
per cent in November. The surprisingly strong result was helped by a massive
increase in NSW home approvals of 67 per cent while apartment approvals were up
172 per cent. While some are speculating that the good figures could herald the
start of a recovery in housing construction, economists have warned that rate
rises could delay any real improvement until later in the year. The jump in
volatile apartment approvals is likely to be at least partially reversed in
December's figures, however the more stable detached home figures are also
looking positive.
9 January 2008 - Card issuers try to find their niche
The Australian Financial Review
As competition in the credit card market intensifies, some banks are teaming up
with smaller lenders and retailers to capitalise on well-known brands. HSBC
issues branded cards with retailers such as Bing Lee and Bang and Olufsen, while
GE Money provides cards through Myer and Harvey Norman. Westpac backed Virgin
Money's low-rate card which, since it was introduced in 2003, has attracted
around 800,000 customers for a 6 per cent market share. Virgin will have to find
a new partner for its credit card after Westpac said that it would terminate the
agreement from May this year. There are currently around 250 different cards on
offer in Australia.
8 January 2008 - Aussie stocks battered
The Australian
Over $35 billion was wiped from the Australian sharemarket yesterday following
Friday's poor employment figures out of the US which fed concerns that it could
slip into recession. The S&P/ASX 200 Index was down 2.3 per cent with all but
seven of the top 200 companies losing value. The largest falls were experienced
by property groups, companies with heavy exposure to the US and those thought to
be most at risk from credit markets.
8 January 2008 - Fuel and rates worry business
The Australian Financial Review
Businesses are concerned about high petrol prices and rising interest rates
according to a survey conducted by Dunn & Bradstreet. While 27 per cent
nominated interest rates as their main concern and 22 per cent said that it was
fuel costs, 63 per cent of the business executives interviewed said that their
business would be adversely impacted by higher rates and petrol prices.
Inflationary pressures are expected to remain high with 59 per cent of the
respondents saying that they planned to increase prices. The indexes used to
gauge expected sales and profits both fell but are still higher than they were a
year ago.
8 January 2008 - Growing threat for social site users
The Australian Financial Review
Users of social networking sites such as Facebook and MySpace need to take extra
care as 'malware' is becoming more common. Malware is a program that is
downloaded onto a user's computer and can be as simple as making annoying ads
pop up in your browser or, more worryingly, record key stokes to obtain credit
card details and passwords. All it takes is clicking on a banner ad to download
the software and it will not be stopped by the usual virus protection programs.
While the social networking sites act quickly to remove any dangerous ads, in
one case last year the Korean MSN site infected millions of computers before the
threat was identified.
8 January 2008 - Treasurer to query ANZ rate move
Sydney Morning Herald
The federal treasurer, Wayne Swan, has expressed concern over the ANZ Bank's
move to increase its variable mortgage rate by 0.20 percentage points yesterday.
Mr Swan said that he will seek advice on why the increase was so large from
regulatory bodies today including the Reserve Bank of Australia, the Australian
Prudential Regulatory Authority and Treasury. "I would also point out that any
excessive rises will not be viewed favourably by the Government or Australian
families who can vote with their feet in a competitive banking environment," he
said.
8 January 2008 - Difficult days for margin lenders
The Australian Financial Review
It's not just mortgages that are feeling the pressure of higher interest rates
with many lenders increasing their margin loan rates by more than the cash rate.
Investors who use margin loans to buy into stocks or managed funds are facing
variable rates of up to 9.85 per cent. Lenders who have increased their rates
over and above movements in the official cash rate include Macquarie, ANZ, NAB,
St George, Equity Margins and Westpac-owned BT Financial Group. After hitting a
three-year high of 201 margin calls a day in the September quarter the December
quarter is also expected to show a high level of margin calls due to increased
market volatility.
8 January 2008 - Gold worth its weight
Sydney Morning Herald
The price of gold has risen by 42 per cent since the problems in the US credit
markets started in August. With central banks taking the interventionist
approach of injecting money into the banking system whenever needed, investors
are concerned that currencies are being devalued. Last week prices reached
$US869 an ounce which is the highest it's been since the start of 1980 when
inflation was at 14 per cent in the US. Precious metals chief at UBS, John Reade,
said they think that gold is overvalued by around $US150 but that situation
could go on for a long time and could even reach four figure prices before
dropping again.
7 January 2008 - ANZ lifts SVR to 8.77 per cent
Infochoice.com.au
ANZ has joined NAB in increasing the rate on its Standard Variable Rate home
loan by 0.20 per cent to 8.77 per cent making it the highest rate on offer by
the big four. NAB had previously increased their rate to 8.69 per cent. ANZ in a
statement to the Australian Stock Exchange pointed to the US sub-prime fall out
and resulting pressures on funding costs that had until now been absorbed by the
bank, it has however committed to passing on future reductions in wholesale
rates to customers when they occur.
7 January 2008 - New record for Christmas spending
Daily Telegraph
Australians spent a record $36.5 billion in the six weeks leading up to
Christmas. According to the Australian Retailers Association this was $1 billion
more than had been expected and was 7.5 per cent more than for the same period
last year. A similar increase is expected for the post-Christmas sale period
which runs until the middle of this month, boosting total spend to $6.2 billion.
7 January 2008 - Double whammy for first home buyers
The Australian Financial Review
Rising interest rates and steep increases in rents over the next year are
expected to conspire to make it even harder for first-time buyers to achieve
their dream of home ownership. According to the Real Estate Institute of
Australia in the September quarter rents for two bedroom apartments grew at an
annualised rate of 20.8 per cent in Perth, 12.5 per cent in Melbourne, 11.5 per
cent in Brisbane and 9.7 per cent in Sydney. Official building approval figures
for November are not due out until tomorrow but are expected to only show a
small improvement. Higher interest rates, from both increases in the official
Reserve Bank cash rate and attempts by banks to recoup higher funding costs, are
expected to put the brakes on any recovery.
7 January 2008 - Banks ready to raise home loan rates
The Australian Financial Review
The ANZ Bank has increased its fixed home loan rates by 0.25 percentage points
effective from today and executives are expected to meet today to consider how
much to increase its variable rate. Last week the NAB became the first major
bank to increase its standard variable home loan rate outside of any increase in
the official rate by the Reserve Bank, while spokesmen from Westpac and the
Commonwealth Bank have said that their interest rates are under review. The 0.12
percentage point increase from NAB will only partially recover higher funding
costs, increasing pressure on the other big banks who may have been hoping for
one of their rivals to pave the way for a round of 0.25 percentage point
increases.
7 January 2008 - Suncorp confident of share price
The Australian Financial Review
Suncorp's chief executive, John Mulcahy, says that they will be able to close
the share price gap with rivals by the end of 2008. With banking now accounting
for only one quarter of the group's earnings, the financial services group's
share price is compared with other major players in the insurance industry.
Suncorp trades on a forward multiple of 10.5 times earnings compared with 12.2
times for Insurance Australia Group and 14 times for QBE. Mr Mulcahy said that
the discount would be expected as they are still in the process of integrating
the $7.9 billion purchase of Promina in March last year. "I think we would be
able to demonstrate by this time next year that we have great outcomes from the
integration. I would expect the market to recognise that," he said.
7 January 2008 - Most choose industry or self-managed super
The Australian Financial Review
The biggest winners from the introduction of the superannuation choice
legislation have been industry funds and self-managed super funds (SMSFs). While
some thought that industry funds would struggle to compete under the new regime
their market share has increased from 15.7 per cent in June 2005 to 17.3 per
cent now, while SMSFs have gone from a 22.7 per cent share to 25.2 per cent.
This has been at the cost of corporate funds where there are 70 per cent fewer
funds now than when choice started, and public sector funds which have gone from
a market share of 16.9 per cent to 15.3 per cent.
7 January 2008 - US job figures lead market down
Sydney Morning Herald
The latest jobs figures out of the US have added further fuel to concerns that
the world's largest economy is slipping into recession. Only 18,000 new jobs
were created in December, significantly less than the 115,000 added in November
and well below market expectations. The news caused the largest fall in five
months for Standard & Poor's 500 Index, down 4.5 per cent to 1411.63. The local
sharemarket is expected to follow suit today with the futures market on Friday
night losing 2.2 per cent.
4 January 2008 - NAB hikes variable home loan rates
The Australian Financial Review
NAB is the first bank to lift its rates outside of any movement in the cash rate
by the Reserve Bank of Australia. Continued pressure on funding costs due to the
global credit shortage have forced NAB to increase its standard variable rate
home loan by 12 points to 8.69 per cent. The bank will also increase its
variable rate business loans by 0.15 of a percentage point effective from
Monday. The ANZ Bank has also signalled that it may have to follow suit and is
believed to be considering listing its variable home loan rate by as much as
0.30 percentage points before the end of January. While the RBA has been widely
tipped to increase rates again when it meets in February, the move by the banks
now may be enough to persuade it to delay any rise.
4 January 2008 - US economy gives market the jitters
The Australian Financial Review
Sharemarkets fell yesterday amid building concerns about the health of the US
economy. The worst result in five years for the manufacturing sector raised the
prospect that the weakness in the housing market may be spreading to the broader
economy. The ISM manufacturing index fell from 50.8 in November to 47.7 in
December with anything below 50 points indicating contraction. On Wall Street
the Dow Jones Industrial Average experienced its sharpest decline since 1983,
falling 220.86 points or 1.7 per cent. Locally the S&P/ASX 200 Index followed
the trend by losing 62.5 points to 6290.7.
4 January 2008 - Petrol prices hit record highs
The Australian
The price for a litre of petrol in Sydney and Melbourne spiked to almost $1.50
yesterday and could go higher if the recent record prices for oil continue. The
government and the Australian Competition and Consumer Commission have both
warned petrol companies not to use the higher oil prices as excuse to boost
their profits. The government gave the ACCC responsibility for monitoring petrol
prices late last year and is ready to start investigating any unusual price
movements. Chairman of the commission, Graeme Samuel, said that oil prices were
only up by 3 per cent and that it usually took a week or more for crude oil
price changes to be reflected at the bowser.
4 January 2008 - Shareholders fight for their rights
The Australian
Class actions by shareholders look set to become more common as investors seek
to assert their rights. As the ramifications of the US sub-prime crisis continue
to ripple through the world economy litigation funders are preparing themselves
for a busy year. The process has already started in the US where 198 class
actions were filed during 2007 which is double the level of the previous year.
Already the two largest law firms handling class actions in Australia, Maurice
Blackburn and Slater & Gordon, have commenced a claim against troubled property
group Centro for masking a $450 million funding gap by "incorrectly" classifying
$1.09 billion of debt in its mid-year accounts.
4 January 2008 - Credit squeeze may hit regional bank profits
Daily Telegraph
Concerns about the level of reliance that regional banks have on wholesale
credit markets saw Suncorp shares dip to a 12 month low of $16.54 yesterday but
recovered slightly to close at $16.64. Analysts at Citigroup said last month
that the increased cost of credit could cut Suncorp's profit more than the $10
million to $15 million flagged by the bank in November. Deutsche Bank analysts
said that regional banks generally would have to increase interest rates to
protect their profit forecasts and estimated that Bank of Queensland earnings
could be down by 11.4 per cent if funding costs were up by 20 basis points.
4 January 2008 - Investors lose on structured products
The Australian Financial Review
Products marketed to investors as conservative investments that would protect
against market volatility are facing losses. Products offered by Macquarie Bank,
Deutsche Bank and Lehman Brothers Australia are all currently worthy less than
their face value. The structured products are usually made up of a diverse range
of investments including equities, bonds and other loans. Macquarie Bank's
Generator Income Trust invests in collateralised debt obligations (CDO's, or
bundles of loans) was trading at $75 yesterday compared with its $100 face
value. Investors in another Macquarie product, ALPS 5, will not receive any
interest for the life of their investment and, while their capital is protected,
cannot retrieve their investment until 2013.
3 January 2008 - Oil hits record $100 a barrel
Reuters
A combination of African violence, tight energy stockpiles and a weaker US
dollar have contributed to a surge in the price of oil as speculative buying
sent fears of inflation through Wall Street placing a further shadow over the
economic outlook in the United States. US Crude traded at $100 a barrel before
closing the session at $99.62, dangerously close to breaching the all time high
(inflation-adjusted) of $101.70 achieved in April 1980 immediately after the
Iranian revolution. Analysts concede that oil may rise further as demand
threatens to outstrip supply and concerns build over stockpile levels. The price
of crude oil jumped 57 per cent in 2007 and has tripled since 2000 as demand
from China and other developing countries continues to increase.
3 January 2008 - Promotional push for Eftpos
The Australian Financial Review
The major banks along with the Australian Payments Clearing Association are
working together to create a new commercial entity to promote use of the Eftpos
system. Australian consumers already make around 110 million purchases worth
$7.5 billion every month making it the most widely used system of its type in
the world. The push to promote Eftpos comes as the system faces increased
competition from MasterCard, Visa and prepaid debit cards. While Eftpos cards
cannot be used online or overseas part of the system's appeal is the low rate of
fraud as well as being low cost.
3 January 2008 - Greening your house pays off
Herald Sun
A survey has found that many home owners will invest in measures to make their
houses more environmentally friendly in 2008. In the poll, conducted by
realestate.com.au, 70 per cent of respondents intend to install energy saving
lights during the year while 61 per cent want to set up grey-water systems.
House values can be improved by as much as $10,000 if green-friendly garden
systems are in place. A survey conducted by the Real Estate Institute of
Victoria last year found that 93 per cent of Australians considered
environmental issues when buying a house.
3 January 2008 - Shares higher on blog rumours
Daily Telegraph
Bargain hunters helped to push the sharemarket slightly higher yesterday with
the All Ordinaries gaining 13.2 points to 6434.2. However chief equities
economist at CommSec, Craig James, said that much of the action seemed to be
fuelled by internet blog rumours rather than any hard market information. Shares
in Telstra finished 5 cents higher at $4.74 after reports of high demand for its
messaging services over Christmas.
3 January 2008 - Merchants win smartcard reprieve
The Australian Financial Review
Visa has extended the period allowed for merchants to upgrade their smartcard
payments technology to 30 September 2009. The upgrades will reduce the risk of
fraud and some retailers who comply could receive discounts of up to 25 per cent
on their interchange fees. The Australian Merchant Payments Forum chairman,
Russell Zimmerman, has said that the extension was appreciated as the extra time
would help offset set-up costs which can be expensive, particularly for
merchants that owned their own terminals.
3 January 2008 - Bluestone slows lending volumes
The Australian Financial Review
Non-conforming home loans specialist Bluestone has cut its lending volumes from
between $100 million and $120 million per month to between $60 million and $80
million. Bluestone is confident that it has sufficient funds for near term
purposes after obtaining a one-year $500 million line of credit from an unnamed
major bank late last year. However one of its backers and founders, Barclays
Bank, is debating whether or not it should continue to provide funding to
non-conforming lenders generally and a warehouse deal that Bluestone has with
them is rolling over on a monthly basis.
2 January 2008 - Business borrowing booms
News.com.au
Borrowing by businesses increased by 2.9 per cent in November alone and is up
23.6 per cent over the preceding 12 months. The latest figures from the Reserve
Bank of Australia show that business borrowing accounted for $689 billion on the
nation's $1.74 trillion total outstanding credit. Growth in housing loans
remained steady at 0.8 per cent for the month while APRA figures showed that
total credit card debt hit $32.12 billion.
2 January 2008 - Consumers need to watch their rates
News.com.au
Borrowers should be wary of banks seeking to recover the higher cost of credit
due to the global credit crunch over coming months. Total personal lending and
credit card debt rose by 13.2 per cent over the past year to $151 billion. Some
credit card and fixed loan rates have already headed north and the big banks
issued warnings over the closing months of 2007 that there would be more to
come. Markets are also tipping that there is a strong possibility of an increase
in the official cash rate when the Reserve banks meets again at the beginning of
February. With Bendigo Bank's variable home loan rate already at 8.60 per cent
compared with a standard rate of 8.57 per cent it will pay for consumers to shop
around for the best rates.
2 January 2008 - Shake-up in top banking jobs continues
Sydney Morning Herald
The top jobs in retail banking are up for grabs following the resignation of
Westpac's Mike Pratt and Paul Fegan at St George moving into the chief
executive's position. Mike Pratt quit as head of Westpac's retail bank just
before Christmas after being overlooked when the bank was searching for a
replacement for David Morgan, instead choosing Gail Kelly from St George. Paul
Fegan won the top spot at St George and his successor as the head of retail
banking for the bank has not yet been named.
2 January 2008 - Tougher year ahead for investors
The Financial Review
While the Australian share market has posted double-digit returns for each of
the past four years, the outlook for 2008 is uncertain. Valuations currently
forecast that earnings growth will slow while the US economy is in danger of
sliding into recession and it is not known when global credit conditions will
start to ease. However, offsetting these negative influences are strong
corporate balance sheets and the expectation that Asian economies, particularly
China, will continue to drive demand for commodities. Analysts at Goldman Sachs
JB Were have forecast that the S&P/ASX 200 Index will be at 6800 by the end of
the year while Credit Suisse says that, providing downside risks don't
eventuate, the index could go as high as 7150 points.
2 January 2008 - Adelaide is boom town for property
The Financial Review
Adelaide has emerged as the star performer in the nation's property market over
2007 with an increase in the average house price of 23.6 per cent in the 12
months to November. After gains of over 40 per cent during 2006 the Perth market
was virtually stagnant last year with house prices dropping 0.8 per cent and
unit prices rising by 5.6 per cent. The RP Data/Rismark Hedonic Index shows that
the median house price across the country was up 12 per cent to $482,601 and
unit prices were up 32.1 per cent.
2 January 2008 - Gift cards boost sales period
The Financial Review
The increased use of gift cards has retailers hoping that the good pre-Christmas
sales figures will continue through-out the sales period. Myer has reported a 30
per cent increase in gift card sales and expects them to be used either in the
January sales or during the mid-year sale period as they are only valid for one
year. The retailer said that it has experienced record sales on both Boxing Day
and December 27 which has resulted in a record first week of sales with early
indications that the second week will be just as strong. The Australian
Retailers Association is predicting that consumers will spend 7 per cent more in
the pot-Christmas sales period this year than they did last year.
February 2008
27 February 2008 - Case builds for Allco class action
Class action litigators and analysts have said that shareholders may have a
case against Allco for its failure to disclose the full extent of its
liabilities. On Monday Allco announced that it may have to repay $3.5 billion in
loans before the end of this year out of its total borrowings of $6.5 billion,
but its annual report last year showed liabilities of only $200 million. The
finance group also delayed disclosing that $900 million in loans had become a
current liability which banks could call in with only 90 days notice. If the
Australian Securities Exchange and the Australian Securities and Investments
Commission determine that there has been a breach of disclosure rules this would
provide the basis for a class action.
Source: Sydney Morning Herald
27 February 2008 - Share trades by texting
Investors will be able to use their mobile phones to trade shares via SMS
with a new service introduced by online broker Bell Direct. In an Australian
first, clients will be identified by their mobile phone number as well as a pin
number. Each message will cost 55 cents and this will be used by Bell Direct to
create a real order in the same way that it would for a request received by
phone or the internet. Chief operating officer, Lee Muco, said that Bell sees
great potential for SMS trading as it is already very popular in Asia,
particularly in China where the trading method is used by 1.48 million
investors.
Source: The Australian
26 February 2008 - Allco punished for hidden debt
After many delays Allco has finally announced a net profit of $83.94 million
for the first half of the current financial year, a fall of 10 per cent. The
results also included the news that the group had understated its liabilities by
$2 billion in last year's annual report. This puts the value of the company at
$408 million, well below the $2 billion that was the trigger point for banks to
call in a $900 million debt. This would have to have been refinanced in
September anyway, but now banks could give the company only 90 days to repay the
loan. Chief executive David Clarke said that he wanted to rebuild the company
after repaying debts to a comfortable level, but this was not enough to stop the
share price plummeting 64 per cent to $1.11 on the day.
Source: Sydney Morning Herald
26 February 2008 - Westpac buys extra credit
Westpac has moved to ensure that it has enough liquidity for future lending
needs by packaging debt that it can sell to the Reserve Bank. The bank said that
it was preparing emergency funding in case costs in credit markets continue to
escalate. Last week Westpac bought $10.5 billion of bonds backed by its own
residential mortgages which will be able to sell on to the Reserve Bank in
exchange for cash. The bank is the first major financial institution to use this
avenue of funding but the RBA has bought over $1 billion of bonds backed by home
loans since the option was introduced in September last year.
Source: The Australian Financial Review
25 February 2008 - Allco must report this week
Bankers to Allco Finance Group have been in talks with the company over the
weekend assessing its books to see if a $250 million loan can be refinanced. The
banks will need to be satisfied that Allco's assets outweigh its liabilities but
it was still unclear last night whether the company's half-year results, delayed
twice in the last 10 days, would be ready for release today. Allco has until
Friday to publish its accounts, but company spokesman Ian Brown said that it was
more likely than not that the directors would sign off on the accounts by today.
Qantas chief executive Geoff Dixon told the ABC's Inside Business program
yesterday that the airline was not interested in buying the 47 aircraft owned by
Allco.
Source: Sydney Morning Herald
25 February 2008 - NAB warns of rate rise dangers
The Reserve Bank of Australia should be cautious about overusing the "blunt
instrument" of interest rates to curb inflation according to the National
Australia Bank's chief executive, John Stewart. While agreeing that global
inflation was a concern, Mr Stewart said that Australia is not one economy and
while NSW and Victoria are already hurting, further rate rises won't bother
places like WA which will keep going gangbusters. "You could easily
over-tighten," he said. Mr Stewart said that he wouldn't rule out further
increases in rates outside movements by the RBA as a way of restoring interest
margins, but given the affect on consumers it was probably unlikely.
Source: The Australian
22 February 2008 - ANZ says Aussie banks are safe
The chief executive at ANZ, Mike Smith, has hit out at markets for punishing
the bank's share price after it announced a $US200 million write-down on Monday,
saying that the loss was "immaterial". Mr Smith said that the Australian banking
system is stronger than in any other western country and has not been as
affected by global credit market problems. "It strikes me as extraordinary that
Australian banks, which in this environment are incredibly strong, are treated
with the same sort of discount as European and US banks, which are facing
serious financial trouble," he said.
Source: The Australian
22 February 2008 - Regulator keeps close eye on bad debts
The Australian Prudential Regulation Authority has warned banks to be
realistic about their bad debt provision levels. Chairman John Laker said that
he believes that the nation's banks are in sound condition, however has asked
institutions to provide detailed plans for how they intend to finance their
operations over the year. Addressing a senate estimates hearing, Dr Laker said
that the next 12 months would require very careful management and that, given
the level of uncertainty in the markets, there is very little margin for error.
The increased scrutiny of bad debt provisions comes only days after ANZ
announced a sharp increase in loans potentially at risk.
Source: The Australian
21 February 2008 - Amex the winner of DJs card
After a lengthy selection process retailer David Jones has chosen American
Express as its credit card partner. The existing receivables base of $400
million will be transferred to Amex in August and has said that it expects to
increase this to between $1.2 billion and $1.6 billion "over time". Head of
financial services at David Jones, Damian Eales, said that American Express had
been chosen because of its experience in managing co-branded cards. Customers
who already have a David Jones card will be able to continue using it but will
be offered the option of switching to the new card. The David Jones Amex card
will have an annual fee but also carries a rewards program where accrued points
can be used to purchase David Jones gift vouchers.
Source: The Australian
21 February 2008 - ANZ business customers may get better security
Following St George Bank's announcement that it will soon move to "two
factor" authentication to improve its internet banking security, the ANZ Bank
has now said that is piloting a new technology that will bring it into line with
its rivals. The bank has not yet said what form the technology would take but
that it will upgrade its internet banking system for business customers in the
first half of this year. It is not yet known when, or if, ANZ will off the
improved security to personal banking customers.
Source: The Australian Financial Review
21 February 2008 - Pressure builds on mortgage rates
Borrowers could face further rate increases outside of any official rates
rises with key funding costs continuing to rise. The three month bank bill swap
rate, considered a key factor by the banks when setting mortgage rates, has
risen to 7.81 per cent from 7.18 per cent at the beginning of this year. The
situation is expected to get worse with competition for funds increasing and
investors becoming less likely to buy into banks and other financial
institutions. The ANZ Bank's chief financial officer, Peter Marriott, said that
any future action on rates would be very dependent on what happens with the 90
day bank bill swap rate over the next couple of months.
Source: The Australian Financial Review
21 February 2008 - Problem loans at major banks revealed
The ANZ Bank has not yet declared the full extent of its exposure to Centro
Properties Group but it is believed to total around $1.2 billion. Of most
concern is $680 million in unsecured loans to the troubled property group that
has been revealed following a review of problem corporate loans on the books of
the major banks. NAB is believed to have the largest exposure with a total of
$1.75 billion in loans to troubled companies Centro, Countrywide, MFS and Allco,
although only $350 million of this is unsecured. The Commonwealth Bank is not
far behind with loans to Centro, Countrywide and Allco totalling $1.54 billion,
of which $160 million is unsecured, then ANZ with a total exposure of $1.38
billion to Centro and Countrywide.
Source: The Australian
13 February 2008 - Commonwealth reports profit jump
The Commonwealth Bank has announced an 8 per cent increase in its first half
profit to $2.371 billion, compared with $2.191 billion in the same period last
year. Volatility in global credit markets increased the bank's wholesale funding
costs by around $100 million during the six months and loan impairment
provisions were lifted by $138 million. The nation's largest mortgage lender
warned that wholesale funding costs remain above the 2007 level which, combined
with action by the RBA to fight inflation, would lead to further upward pressure
on interest rates.
Source: Sydney Morning Herald
12 February 2008 - Card rates scare off consumers
In many cases credit card rates have been raised by more than twice the level
of cash rate increases which is causing consumers to think twice before reaching
for the plastic. Applications for new cards in the second half of 2007 were 3.8
per cent lower than in the corresponding period in 2006 according to the Veda
Advantage Credit Demand Index. The Reserve Bank increased rates twice to push up
the cost of borrowing by 0.5 percentage points between July and the end of 2007,
however over the same time rates on some credit cards were increased by as much
as 0.78 percentage points.
Source: Sydney Morning Herald
12 February 2008 - Fortress fund tumbling down
The Macquarie Fortress Investments fund is close to collapse with the value
of its portfolio falling by a third in the last week. The drop triggered a
"margin call" with its asset backing falling to 35 cents per note, forcing the
fund to sell more of the loans that make up its core portfolio. The latest sale
has resulted in a $US25.5 million loss, but even that option may not be
available in the future. The director of Fortress, Peter Lucas, has said that in
the current market conditions selling the remaining portfolio would be unlikely
to achieve its market value and that a they probably would not be able to find a
buyer for a significant portion. Notes that were originally issued at $1 closed
at 11 cents yesterday.
Source: The Australian Financial Review
11 February 2008 - Opes Prime rides out margin call surge
Broking firm Opes Prime said that it has not seen any significant increase in
the level of margin calls to its clients during the share market plunge in
January and early February. Distancing itself from the problems experienced by
Tricom, Opes Prime said that it tends to lend against diverse portfolios of
shares so that if the price of one falls it can usually increase the loan
against other shares to make up the shortfall. Executive director, Julian Smith,
said that even at the peak of market volatility margin calls did not exceed 7
per cent of the company's clients; this has now dropped back to 2 per cent and
is decreasing quickly.
Source: The Australian Financial Review
11 February 2008 - Rentals remain scarce
Residential rental property vacancies are sitting at around 1 per cent in
most capital cities and industry analysts say that the situation is likely to
get worse as landlords pass on the cost of interest rate rises. In January the
vacancy rate in Sydney was just 1.2 per cent, the 18th consecutive month that
has been below 2 per cent, driving a 12.9 per cent increase in the rent for a
two-bedroom unit over the last year. Rents in Adelaide are up 11 per cent over
the last year and December saw vacancy rates drop below 1 per cent. Vacancies in
Perth have improved slightly from a low of 0.8 per cent a year ago to 1.9 per
cent for the December quarter.
Source: The Australian
8 February 2008 - Credit problems could persist all year
The National Australia Bank has warned that conditions in wholesale funding
markets have continued to deteriorate and predicts that the turmoil in global
financial markets could continue until the end of this year. At the company's
annual general meeting yesterday chairman Michael Chaney said that while credit
conditions had moderated early in January but borrowing costs had once again
come under pressure. Mr Chaney said that levels of bad debt were increasing but
still remained at low levels historically and that the bank remained on track to
achieve its full-year profit forecast.
Source: The Australian Financial Review
8 February 2008 - Suncorp turns to credit card experts
Suncorp has sold its credit card portfolio to Citibank, saying that it was a
non-core part of the business. The 100,000 or so cards with receivables or more
than $200 million will retain the Suncorp logo but will be operated by Citibank
as a "white-label" product. A Suncorp spokesman said that the bank would retain
ownership of its customers while gaining access to Citibank's expertise and
global rewards program. The bank is planning to expand its branch network over
the next three years with dozens of branches planned for fast growing areas of
Queensland.
Source: The Australian Financial Review
8 February 2008 - NAB boosts mortgage book
National Australia Bank has acquired around $1 billion worth of mortgages
originated by RHG at net asset value. NAB said that they are all prime
Australian mortgages which are covered by mortgage insurance. The bank will not
be responsible for any origination costs including broker commission payments.
Source: Infochoice.com.au
7 February 2008 - Moss departure makes markets mean
The chief executive of Macquarie Group, Allan Moss, has announced his
retirement and from May will be replaced by Nicholas Moore, currently its
investment banking chief. Mr Moss reassured investors that the he was leaving
the company in great shape and was handing it over to an outstanding successor
but markets were not convinced. Shares in Macquarie were cut by 9 per cent
yesterday, falling $6.06 to close at $61.10, but Macquarie blamed falls on Wall
Street for this which saw the local market down 3 per cent. Macquarie is
expected to announce another record profit of $1.8 billion in May, 23 per cent
more than last year.
Source: Sydney Morning Herald
7 February 2008 - Treasurer encourages loan switching
The Commonwealth Bank has said that it will increase its variable rate home
loans by 0.3 percentage points from tomorrow, more than the 0.25 percentage
point increase ordered by the Reserve Bank. The move has prompted the federal
treasurer, Wayne Swan to fast-track changes that will make it easier for
borrowers to switch home loans. Mr Swan will meet with the Council of Financial
Regulators tomorrow to finalise a plan that could see switching and exit fees,
which can cost borrowers up to $2,000, eliminated or reduced. CBA is the
nation's largest lender and its variable rate mortgage customers will now be
paying 8.97 per cent.
Source: The Australian
March 2008
31 March 2008 - ANZ to force Opes Prime sale
Creditors including ANZ are
looking to recover over $1 billion in debt from Opes Prime who was put into
receivership last Thursday. Merrill Lynch and ANZ which provided the debt will
be selling stock. It is understood that Merrill Lynch has already sold over $300
million of stock. According to a report Opes' clients are expected to lose
between $200-300 million. Stock held by individuals and super funds were used as
security for Opes' stock lending business. ANZ and Merrill Lynch have security
that ranks above clients, and ANZ have indicated that they view these clients as
"unsecured creditors" of the organisation.
Source: The Australian Financial
Review
31 March 2008 - Bank results beginning to sour
Four of the five major banks
close their books for their financial half year and banking analysts are
expecting to see further write downs. Analysts warn however these writedowns
could quickly turn into losses within 12 months. Half year profits are expected
to reflect relatively strong economic conditions however expectations are that
profits will slow quickly reflecting writedowns and the increased costs of
funding loans that they have not been able to entirely pass through to
borrowers. UBS believes that the major banks are currently exposed by
approximately $8.25 billion to the current string of high profile failures. UBS
believes that as much as $3.6 billion is unsecured and as a result may be
written off as soon as 2009.
Source: The Age
31 March 2008 - Bluestone buy out
Funded by BOS International,
Bluestone advised key relationships on Friday that Management had purchased
Bluestone. Alistair Jeffery who previously held 25% of the company is now the
majority shareholder. According to The Sheet other new owners of the company
include Bluestone CEO Peter McGuiness and Mike Dilworth CEO Bluestone Servicing.
Given the current liquidity squeeze Bluestone intends to expand its third party
servicing and "special servicing" models. Bluestone also intends expanding funds
management specialist Bluestone Capital Management.
Source: The Sheet
31 March 2008 - Crunch as banks trim loans
Banks and other lenders are
beginning to reduce loan to valuation ratios, reversing recent trends. According
to Martin North there is no appetite for high loan to valuation ratios among
lenders. Late last year Pepper home loans reduced maximum LVR's from 90% to 85%
and Bluestone reduced its maximum LVR from 95% to 90%. Major Banks have not
responded to this move with most banks having LVR's at either 80% or 85%. MGIC
mortgage insurance indicated that lenders were beginning to lower LVR's but
MGIC's mortgage insurance had not reduced its criteria. Analysis by JP Morgan
and Fujitsu suggest that there is clearly a lowering standard of underwriting
standards, and that reversing maximum LVR's is but one sign.
Source: The Australian Financial
Review
31 March 2008 - Unaffordable loans given to refugees
Commonwealth Bank has admitted
that it provided unaffordable loans to recent refugee arrivals. One example, a
Sudanese refugee in Melbourne was provided with a $20,000 loan although he spoke
no English, did not have a job and no concept of "finance". His wife, the
Guarantor of the loan also speaks limited English and has no assets. According
to the Consumer Action Law Centre the application form indicated that for a
family of eight expenses were calculated at $3.60 per person per day. It is
understood that the loans have been waived as a result of pressure from Consumer
groups.
Source: The Land
27 March 2008 - Banks may have to lift home loan rates further
Banks are still absorbing some of
the higher cost of funding their loan books despite increasing their rates by
more than official cash rate movements several times already. In a note to
clients, investment bank JP Morgan said that banks face a "substantial" earnings
risk on their home loan books and that, if the full increase in funding costs
had been passed to business borrowers, that had only happened recently. Since
the start of this year variable mortgages rate increases above RBA rate
increases have been 0.29 percentage points at NAB, 0.25 percentage points at the
Commonwealth Bank, 0.20 percentage points at Westpac and 0.30 percentage points
at both ANZ and St George. Analysts are speculating that Westpac will seek to
recover profit margins through further rate increases, but a spokesman yesterday
would not comment other than to say that pricing is always under review.
Source: The Australian
April 2008
16 April 2008 - Loan slump not taken personally
Figures released yesterday have indicated that personal finance was on the
rise in February, trending away from housing and commercial finance. Soaring
interest rates are said to have dampened housing and commercial loan
approvals, falling 5.9 per cent and 10.4 per cent, respectively. Personal
finance having recording its highest level of growth since June, up 0.9 per
cent to $7.4 billion, indicated clearly that consumers were lagging in slowing
their borrowing. Citibank's director of economic and market analysis, Shane
Lee said that while there was little evidence of a slowdown in consumer
spending to date, personal loan approvals will eventually fall.
Source: Sydney Morning Herald
15 April 2008 - ANZ head to chair Opes Prime review
Mike Smith, the chief executive of ANZ Bank will chair a comprehensive
review of ANZ's involvement with Opes Prime. The review is aimed at getting to
the bottom of ANZ's involvement, including whether any staff have potentially
broken any laws - currently four ANZ staff are on "gardening leave". Mike
Smith is quoted as saying that ANZ's image has taken quite a battering as
result of Opes Prime and he wishes to sort this one out as quickly as
possible. It is also understood that ANZ has taken a charge over $500 million
of assets with companies associated with Chimaera Capital.
Source: The Australian Financial Review
15 April 2008 - Broker commission rates revised
The global credit crunch is quickly spreading to Australia's mortgage
broking industry, fuelling speculation that banks will cut brokers'
commissions to offset higher wholesale funding costs. Westpac is the first of
the majors to move, slashing 20 basis points off its upfront commission to 0.5
per cent and 10 basis points off the trailing commission to 0.15 per cent.
This sparked an angry response from the big brokers, such as Aussie Home Loans
and listed company Mortgage Choice - whose share price plummeted 26.07 per
cent yesterday, 36.5c lower to $1.035. Both Commonwealth Bank and ANZ issued
statements that they currently had no plans to change broker commissions.
Source: The Australian
15 April 2008 - Plunging confidence suggests an end to rate rises
Plunging consumer confidence and negative economic results leads Craig
James, chief economist at Commsec to believe that the rounds of rates are at
an end. Aussie John Symonds believes the Reserve Bank has gone too far and
feels the RBA has been "too academic" about the rate rises, also suggesting
the RBA has played Nero while "Rome burned". Higher household expenditure
including record fuel prices has taken a sufficient amount of income out of
consumers' hands. Mr James has indicated that only a "shocker" inflation
number in April will make the RBA move rates further.
Source: The Australian
15 April 2008 - Bankwest zero on ATM fees
Bankwest's "Happy Banking" campaign has seen the launch of a second
transaction account with no transaction fees, no other ATM fees and no monthly
maintenance fees. Bankwest's chief executive retail, Ian Corfield said that no
one likes transaction fees and the Bankwest Zero transaction fee account
addresses this market. This account has unlimited transactions, internet and
phone banking, MasterCard debit card option, all for a minimum monthly deposit
of $2000.00.
Source: Infochoice.com.au
14 April 2008 - Aussies reluctant to put more into super
A recent ING survey has shown that while the majority of Australian are
sold on superannuation and the benefits of further contributions, many are
reluctant to do so. In the report only 39 per cent indicated that they would
use the upcoming July tax cut to fund extra super contributions. The ING
research indicated that super members were keen on additional super
contributions, however had seen little evidence in turning this to action.
Market volatility would not have helped, with the average 70 per cent rise in
funds over the last five years with funds expecting to post neutral, if not
negative returns this year.
Source: The Age
14 April 2008 - Bank of Queensland acquisitive
Bank of Queensland managing director David Liddy has indicated he is keen
to expand the bank via acquisitions of credit unions and building societies.
While indicating that he had a "full plate" Mr Liddy indicated that any
opportunity to expand the bank would certainly be investigated, but he
indicated that he was unlikely to revisit a merger with the now expanded
Bendigo and Adelaide Banks. Of further interest to the market is whether
French Bank, BRED Banque Populaire will increase its stake in BOQ to 20 per
cent (they currently hold approximately 5 per cent). Mr Liddy mentioned this
had not been indicated to him by the French Bank, but said that the bank liked
BOQ's strategy and business model.
Source: The Age
14 April 2008 - Hard to escape the troubled times
Chimaera Capital, a Melbourne based stock lender is apparently in trouble.
Operating with a similar business model to the recently failed Lift Capital
the market has been concerned for some weeks that this company may be next of
stock lenders to fail. Directors of the company have not been available for
comment, with the best response a "no comment" from Managing Director Ian
Pattison. It is unknown at this stage what possible effects this may have on
the market.
Source: The Australian
14 April 2008 - Margin lenders' reassure money is safe
The market's major margin lenders have reassured customers that their
assets are safe. Commsec and Leveraged Equities distanced themselves from the
failed stock lending players by indicating that they are true margin lenders
and as such the assets held by margin lending clients are held by the clients
themselves - similar to a mortgage. Eric Blewitt general manager of Leveraged
Equities (owned by Bendigo and Adelaide Bank) stressed that unless the client
was in default of the agreement there was no way that the lender could sell
your assets down. A Commonwealth Bank spokesperson said that in every instance
client holdings belong to the client and that shares are only used as
collateral against that client's loans.
Source: The Australian
14 April 2008 - Opes to squeeze listed groups
Share prices of many companies have recently felt the squeeze from stock
selling after the failure of Opes Prime. Many companies will also experience a
'double whammy' as stock lenders such as Merrill Lynch seek to recoup money
from the recently failed Lift Capital. Challenger Financial Services and
Australian Pharmaceutical Industries are just a few among over 40 listed
companies that are expected to fall further as loans are recouped through
stock sales. It is expected that many will have share price falls, as around
$700 million worth of stock will be liquidated. It is understood that Lift's
problems stemmed from margin loans to the MFS group and Allco Principals
Investments.
Source: The Australian
14 April 2008 - Rabo rates safety first
Rabobank has launched new advertising on the Australian public, citing
"safety first", using the tag line of "Australia's safest bank", while seeking
to gain more retail deposits by taking advantage of its higher credit rating
than Australia's high street banks. A promotional at call savings rate of 78
per cent is on offer until 31 July 2008, after which the rate will then fall
to its standard variable rate of 7.3 per cent.
Source: The Sheet
11 April 2008 - BOQ raises the bar
Bank of Queensland (BOQ) has delivered a 33% increase in first half
profits. BOQ while noting issues relating to the credit crunch, has achieved
well above average system growth in both mortgages and deposits. However the
margin BOQ is earning has narrowed with the higher costs of liquidity and
funding reducing the margin by 23 basis points over the period. Loan
impairment decreased marginally reflecting BOQ's lending book primarily being
residentially based. BOQ noted however increasing interest rates would begin
to affect some customers. Argo Investments executive of investment's Chris
Hall noted that the result was "solid".
Source: The Australian Financial Review
10 April 2008 - Another broker in peril
Sydney based Lift Capital has been named another potential broker who has
been attracting the attention of the regulators. Like Opes Prime, Lift Capital
provides margin loans through Merrill Lynch and in the client agreement allows
Lift Capital to repledge shares as security over and above clients using the
same shares to secure their own margin loans. The directors of Lift Capital
and Merrill Lynch have been unavailable for comment over the last few days.
Lift Capital also provides the opportunity to borrow for Self Managed
Superannuation Funds to fund growth.
Source: The Age
10 April 2008 - Consumer confidence takes a bite
Higher interest rates and rising fuel and food costs are putting a
significant amount of pressure on consumer spending, suggesting that the work
of the Reserve Bank of Australia and independent unofficial interest rate
increases are now taking effect. This month, the Westpac-Melbourne Institute
index of consumer confidence hit its lowest point since mid-1993, sliding 1.3
per cent to reach 87.4 points. Difficult times lie ahead for retailers as
household intentions to make major purchases have been increasingly dampened.
Westpac senior economist, Matthew Hassan said "consumer sentiment had been hit
hard by successive interest rate rises, sharemarket falls and rising living
costs". The average monthly fuel bill is estimated to have increased 12 per
cent over the year, now $196, as the national average price hovers in the
range of $1.40 a litre.
Source: The Australian Financial Review
10 April 2008 - Credit union mergers
Community CPS Credit Union has announced that it will merge with United
Credit Union. Community CPS currently operates in SA, NSW and the ACT, while
the merger provides a nice fit as United primarily operates in WA. The newly
formed entity will now have over 175,000 members and well in excess of $2
billion in assets. Its loan book will become the movement's fifth largest
book. The new entity will be headed by Kevin Benger currently CEO at Community
CPS.
Source: The Sheet
10 April 2008 - PMI Capital quarantine
The Sheet this morning reports that PMI has been forced to quarantine its
capital in an effort to keep its local credit rating as unaffected as possible
after the downgrading of its US parent. PMI Australia will enter an
undertaking with its US parent not to deliver a dividend to the US. PMI
Australia had its credit rating downgraded from AA to AA-, however S&P
indicated that PMI Australia was "on credit watch with negative implications".
PMI Australia has stated that it will "ring fence" its business from the US
operation and has entered an undertaking not to pay a dividend to its owner
and the US operation will not seek a dividend from PMI Australia.
9 April 2008 - Downturned demand for residential lending
The Sheet this morning reports that tighter access to funding has dampened
demand for residential lending. Australian Finance Group's (AFG) sales are
down 13 per cent from December 2007 and 24 per cent since September 2007. AFG
accounts for 10 per cent of all residential lending so their results are
startling. Mark Hewitt, general manager of sales and operations at AFG, said,
"If we are down the amount we are, how much are others down?" While the AFG
results are a start, the Australian Bureau of Statistics data will be required
to corroborate whether there has been a serious downturn in the market,
however this data will not be available for another two months.
Source: The Sheet
9 April 2008 - Opes Prime losses mount
In a meeting of creditors yesterday administrators indicated that 30 cents
in the dollar would be all that investors could expect to receive from the
failed stockbroker. Further investigations yesterday have indicated that
Riqueza, a British Virgin Island company, is now part of their investigations
with administrator John Lindholm suggesting this was the 'linchpin' in their
enquiries. In other related news the Federal Court was yesterday told that
Opes Prime Director Laurie Emini was involved in "systematic manipulation" of
the companies accounts. Finally, Mick Gatto the Melbourne underworld crime
figure flew to Singapore last night to recover funds from the failed company.
Mr Gatto was quoted at Melbourne airport indicating that they had had a good
tip off that a significant quantity of cash was being held in Singapore and he
intended to bring this cash back in "suitcases", preferably "many".
Source: The Australian Financial Review
9 April 2008 - Rates predicted to fall
NAB chief economist Alan Oster has predicted that there is 30 percent
chance of the Reserve Bank cutting rates before the end of the year. His
comments come on the back of latest economic news that indicates a fast drop
in economic growth. Oster believes that rates will fall from 7.25% now to 6%
in 2009. The NAB business report released yesterday indicated that business
spending is slowing quickly and business conditions have slowed to the levels
witnessed in 2002. Oster also forecasts that unemployment will increase from
4% to 5% over the coming year.
Source: News.com.au
8 April 2008 - First home accounts too complex
ING Direct has labelled the recently announced First Home Accounts as "too
complex and too narrow". Managing Director Eric Drok yesterday said that these
accounts were too complicated and had too narrow a focus. The result Mr Drok
said that there would be too few people to give this scheme any critical mass.
Mr Drok cited examples in other countries where savers can place money in tax
free accounts, where anyone could save up to a specified amount and not pay
any tax on the interest earned. Referring to the example in France the account
is tax free up to a balance of ?15,000 and that up to 60% of the French
population held such accounts.
Source: The Australian Financial Review
8 April 2008 - ING Direct keeps growing
Online bank ING Direct continues to grow despite having delivered 18%
growth in profit for 2007. ING had secured more than 100,000 new customers,
and grew its deposit base to reach $20.2 billion. Additionally ING Direct
claimed that is now ranked at "number six" in the home lending space. ING
Direct admitted that funding costs had increased, usually funding was 12 basis
points above the 90 Bank Bill rate, but had indicated that costs were now
"five times that".
Source: The Australian Financial Review
8 April 2008 - ANZ in $1 billion worth of bad debt
Sharemarket volatility combined with the collapse of Opes Prime has left
ANZ with the possibility of $1 billion in bad debts. ANZ shares fell 6.6% over
the course of Monday as the company increased its provisioning for bad debt by
$350 million. ANZ argued that the extra provisioning was "pre-emptive" and
simply reflective of the falling credit rating of some of the companies to
which they either lend or have taken security in. ANZ also revealed that it
had engaged takes of more than 5% in over 90 companies when the receivers were
appointed to Opes Prime.
Source: The Age
7 April 2008 - Lots to learn from Opes
Proceedings in the Federal Court last Friday began to uncover alleged
fraudulent actions by both Opes Prime directors and possibly even ANZ staff
Evidence currently before the Federal Court now alleges that ANZ staff, of
which a third staff member last week was placed on "gardening leave". The
whole episode now highlights how institutions can pledge shares that you "own"
to third parties. It is currently before the Federal Court that clients of
Opes have "beneficial ownership" of the stock and as such neither ANZ nor
Merrill Lynch have any claim that ranks higher than clients who both owned
stock that acted as security for margin loans.
Source: The Age
3 April 2008 - High house prices
According to an IMF report, Australian property is uncomfortably overpriced
and is at a high risk of a correction. This being news that most people
burdened with a mortgage do not want hear, the IMF has indicated that housing
prices are the fourth highest based on income and population growth. This
warning comes amid industry pressure to improve competition in the home
lending market that has been struck with the current liquidity crisis.
Industry bodies Mortgage and Finance Association of Australia have backed
calls for a government body to buy mortgage securities to ease the liquidity
problems.
Source: The Australian Financial Review
3 April 2008 - Opes Prime clients get half lucky
The administrator of the Opes Prime Group believe that investors will be
"lucky to see 50%" of their original investment. Reports from the liquidators
indicate that depending upon the decision of the Federal court seeking an
injunction by wealthy investors stopping ANZ and Merrill Lynch selling any
further shares, returns could vary significantly. It is understood that both
ANZ and Merrill Lynch are selling quantities of shares at a small market
discount to retrieve their debts. Theories are currently rife with rumours of
differing values, however investors will not have to wait much longer to hear
from liquidators Ferrier Hodgson, a meeting is due to be held next Tuesday.
1 April 2008 - Australian banks avoid sub-prime
The Australian banking sector
is among the few globally that have showed a positive return in 2007, having
had the second largest decline in total shareholder return (TSR) according to
a new report by Boston Consulting. With the fall in TSR of major US Banks
primarily as a result of the sub-prime credit squeeze the ranks of the largest
banks globally are now dominated by Chinese institutions. Three of the four
largest are now Chinese with the US giants, Citi, Bank of America and JPMorgan
Chase losing ground. Commonwealth Bank briefly entered the top banks globally
but by the end of 2007 had fallen out.
Source: The Australian
1 April 2008 - Rate rises on hold
The Reserve Bank has kept rates
on hold and according to financial markets there is only a 7% chance of rates
being increased in May, with some analysts believing there could be as many as
two rate falls over the coming twelve months. The ANZ Bank diverges from this
view and sees rates being "on hold" for quite some period of time. The Reserve
Bank has seen early signs that demand is slowing, while industry groups have
also noticed a decline. Retailers are experiencing weakened sales and real
estate sales have also fallen.
Source: The Australian
1 April 2008 - Wheat farmers buoyed by news
US Department of Agriculture data on US grain has
supported Australian expectations of good wheat prices. Rabobank analyst Luke
Chandler said that assuming good rain for planting was received farmers had a
great incentive to go out and plant wheat for the coming season. Rabobank is
forecasting wheat prices to stay about US$7.00 bushel for the coming year. The
wheat price news comes on top of recent farmer surveys which found that farmer
confidence had rebounded strongly. According to Rabobank confidence had been
driven primarily by generally favourable seasonal conditions and strong
commodity prices.
Source: The Australian
1 April 2008 - Margin lending on the rise again
A number of lenders including
Macquarie and Leveraged Equities claim to have received a greater number of
applications in January than during previous bull runs. Many analysts view the
increase in interest as investors attempt to cash in on the market downturn
and while many blue chip stocks are at very low levels. Analysts such as
George Boubouras of UBS however warn that this strategy may not be wise given
volatility. Adelaide Bank's head of margin lending Eric Blewitt stressed that
margin lending is a long term strategy and investors need to be aware of the
potential risks involved with both margin lending and cash flow involved with
servicing loans.
Source: The Australian
Financial Review
1 April 2008 - Banks capture entire growth in lending market
According to The Sheet,
statistics recently issued by the Australian Prudential Regulatory Authority (APRA)
have indicated that banks have captured almost 100% of the growth in
residential lending in the last six months, reflecting the growing dominance
banks have within this market. In associated news, APRA and Reserve Bank of
Australia (RBA) statistics indicated that the Commonwealth Bank, Bank of
Queensland, ING and Suncorp all grew their market share above the 4.8% average
across the RBA aggregates. NAB reported below average growth as did Adelaide
Bank who only grew lending by 3.1%. Macquarie while currently running down
their mortgage book through their PUMA securitisation program reduced total
lending by 0.3%.
Source: The Sheet
1 April 2008 - Broker backs ASX competitor
Credit Suisse has taken a
shareholding in AXE ECN. AXE ECN is currently awaiting government approval on
whether it will be able to break the ASX's virtual monopoly on share trading
in Australia. Other shareholders in AXE ECN include NZX, Citigroup, Commsec,
Goldman Sachs JBWere, Macquarie Bank and Merrill Lynch. AXE ECN will initially
be targeting "crossing" of large stock lines between brokers, and will then
offer a full trading platform for all ASX listed securities. The ASX while not
wanting to dismiss the idea completely has claimed that rival exchanges have
the potential to affect bid/offer spread as well as lower market liquidity.
Source: The Australian
Financial Review
1 April 2008 - Opes accused of hiding losses
Investigations have begun into
the alleged fraud by Opes Prime Head Laurie Emini. Yesterday a court heard
that Mr Emini is alleged to have told staff to alter share trading accounts so
wealthy clients would not be affected by margin calls. The Federal court was
told by receivers that between December 2007 and February 2008, they had
discovered Mr Emini was topping up wealthy clients' accounts, in an attempt to
stem the possible share price falls from creditors seeking to limit their
exposure to nine companies. It is understood these companies include Hedley
Leisure and Gaming, API and Challenger.
Source: The Australian Financial
Review
1 April 2008 - St George raises mortgage rates
St George has lifted its
standard variable mortgage rate to pole position. St George raised rates by
another 10 basis points taking it to 9.47%. Many financial analysts are
surprised by the move as it takes it well outside the competitive bracket of
the other major banks. Last week Westpac raised its rates bringing them in
line with the other majors. Westpac's standard variable home loan rate is
9.37.
Source: The Australian
May 2008
June 2008
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