ANZ raises rates!

Zero Hedge, just released:
Is This The Canary Of Australia's Collapsing Housing Coalmine?

http://www.zerohedge.com/news/canary-australias-collapsing-housing-coalmine
When thinking of Australia, one traditionally imagines a country that is nothing but a secondary derivative of China's trade surplus, and an unpegged currency that allows for more trading flexibility than the Yuan. As a result, recurring calls warning of a housing weakness in the country are often ignored as there always appears enough liquidity to mask the issue just long enough. That may all soon be changing. Earlier today, insurance company Genworth Financial pulled the IPO of its Australian unit, sending its shares plunging by over 20% and its default risk soaring. Unfortunately for GNW, and soon for the entire Australian financial sector, instead of merely blaming market conditions, in the IPO, which was supposed to take public up to 40% of the company's Australian mortgage business, and has instead been delayed to 2013, GNW laid out a far more nuanced, and detailed explanation of what is happening. Alas, it also may be the canary in the coalmine that has been so long overdue in yet another regional, bubblelicious housing market.

Morgan Stanley's David MacGown explains:

Genworth announced that it will delay the IPO of up to 40% of its Australian mortgage business to 2013 from a previously targeted 2Q12 transaction. Recent news reports hinted that weak equity market conditions could delay the unit's IPO, but GNW's rationale was more problematic: the company cited deteriorating market conditions in the Aussie mortgage market. Specifically, the company noted "elevated loss experience in Australia as lenders accelerated the processing of later-stage delinquencies from prior years through to foreclosure and claim at a higher rate and severity than expected, particularly in coastal areas of Queensland that experienced natural catastrophes and regional economic slowdowns and among certain groups of small business owners and self-employed borrowers."
If anyone is desperately looking for a clue that things may be about to go, er, downer underer in Austrlia, it doesn't get any clearer than this. And if China is indeed facing a hard landing, or whetever the CCP wants to telegraph to the world in its first and foremost desire to avoid popular discontent, this may just be the straw that breaks the camel's back.

More:

Unlike the troubled US MI business, GNW's Canadian and Australian businesses have been consistently profitable, with the Australian business producing run rate quarterly earnings averaging about $50 million per quarter over the last two years. GNW now expects the Aussie MI business to report a "modest" first quarter loss.
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<snip>

Yet for those who are worried the only move here in GNW is up, the trade may well be to start getting increasingly cautious on other Australian equities such as QBE, ANZ, NAB, WBC and CBA. Because, to mix metaphors, when the light is shone, there is never just one canary. And central-planner can only delay mean reversion for so long...
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jparrie said:
villiagegate said:
They're doing it because of the rise in wholesale funding costs.
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What rise in funding costs? if you are going to print BS, at least quote your sources.
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How about the fact that 5yr bank bond spreads have gone from about 100bps over 5yr government bonds to 225bps in the past year.

I trade bank bonds, and talk to large investors every day - and the opinion is unanimous.. they will keep going wider as the confidence in the property market dries up. So if mortgages are perceived to be riskier, banks will have to raise their mortgage rates.
 
I hate to rain on the parade, but Australia doesn't even have fractional reserve banking.

We have capital reserve banking.

All those sensational US centric videos don't apply.
 
mmm....shiney! said:
villiagegate said:
mmm....shiney! said:
Not likely to happen nowadays. banks have legislative protection, they have merged limiting competition meaning they are now too big to fail, and all they have to do is implement a "technical" glitch into their computer systems and it won't matter how long the queue is outside the doors - you won't get your money.

Unfortunately, the bank run is a thing of the past. Big AD? :D
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There were runs here during the GFC.
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Really? I didn't notice any. Then the Fed Gov stepped in and guaranteed deposits to prevent a run.
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http://www.amazon.com/Shitstorm-Inside-Labors-Darkest-Days/dp/0522857299
 
villiagegate said:
I hate to rain on the parade, but Australia doesn't even have fractional reserve banking.

We have capital reserve banking.

All those sensational US centric videos don't apply.
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As far as I know it isn't FRB anymore (ie, there is no fractional reserves anymore), but the credit expansion works fundamentally the same way as FRB except it probably allows for greater credit expansion than FRB does.
 
JulieW said:
Does anyone know an islamic bank in Australia? Usury is against their religion.
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See: www.mcca.com.au

For those interested, the Ijarah Muntahia Bittamleek structure is an Islamic equivalent of a Western hire purchase agreement and it can be used to purchase residential real estate.

Personally, I love the "no bullshit" factor - the financier ( the bank) owns the house until you finish paying for it. Western banks like to pretend that you own the house but we all know who really owns it when you've got a mortgage.

Seriously, if you believe the Western financial system is fucked, start making inquiries about Sharia finance. And forget everything you think you know about "Sharia law" because it covers a lot more than just burqas.
 
hyperinflation said:
jparrie said:
villiagegate said:
They're doing it because of the rise in wholesale funding costs.
Click to expand...

What rise in funding costs? if you are going to print BS, at least quote your sources.
Click to expand...

How about the fact that 5yr bank bond spreads have gone from about 100bps over 5yr government bonds to 225bps in the past year.

I trade bank bonds, and talk to large investors every day - and the opinion is unanimous.. they will keep going wider as the confidence in the property market dries up. So if mortgages are perceived to be riskier, banks will have to raise their mortgage rates.
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Is that the best you can do? "My mates said so"

Even the RBA this week said, "bank funding costs had dropped ''significantly'' since the start of the year" and "Long-term debt was 50 basis points cheaper, helping ''alleviate the pressure of higher funding costs in coming months.''"

So I call BS, they are just protecting their profits. Who wants to bet that their profits will go down this year? No-one? What a surprise.
 
mmm....shiney! said:
Didn't we used to own Which Bank? :rolleyes:
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He posted a link to an audio where the accusation was made that Australia was coerced into selling it.
 
I don't know what everyone is complaining about. The banks setting their own rates would be a step towards a free market. If you don't like the rates, join a credit union ;)
 
JulieW said:
I'd vote to nationalise any day of the week and hand the power to print currency to the government who could lend it out at 1% per annum for projects of national interest.

I would banish the likes of the self-indulgent pig that purchased a half a million dollar boardroom table for the ANZ to Alice Springs to clean the streets, and the responsible parties that ticked the authority as well .

Does anyone know an islamic bank in Australia? Usury is against their religion.
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Do you really think that politicians are going to do any better with the money though?
 
Dwayne said:
JulieW said:
I'd vote to nationalise any day of the week and hand the power to print currency to the government who could lend it out at 1% per annum for projects of national interest.

I would banish the likes of the self-indulgent pig that purchased a half a million dollar boardroom table for the ANZ to Alice Springs to clean the streets, and the responsible parties that ticked the authority as well .

Does anyone know an islamic bank in Australia? Usury is against their religion.
Click to expand...

Do you really think that politicians are going to do any better with the money though?
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Do better than ??

Currently all the interest on our 'deficit' (ie our deficit) goes to 'international investors' (!)
If the country created its own currency and lent its own currency to its citizens the citizens would gain the advantage.

It's a bit like the pokie machines.
In NSW most of the profits go to the local club that has a charter to support local sports etc. which they signed to get the pokies in the first place.
In Victoria most of the profits go to a company that was awarded the rights to install them and who pay lip service to local community support and spend more to lobby the government about changes to the Poker machine laws to increase their profits.

I have no problem with pokies - a tax on the stupid if you ask me, but I'm much happier when those stupid people get some of their losses back with cheap meals and new basketball uniforms.

I have the same view of banking. If the moneychangers are going to charge interest, better it returns to the community than disappears overseas to god knows where. We are talking billions and billions here. Enough to build superfast trains across the country. Get decent roads linking the capitals. Halt suburban sprawl and start putting in services. An endless list of things. Perhaps eliminate a few of those private public partnership projects. Like freeways that send a couple of billion profit overseas each year. Instead government works (there's a novel concept) could be reintroduced to the concept of government.
 
JulieW said:
Dwayne said:
JulieW said:
I'd vote to nationalise any day of the week and hand the power to print currency to the government who could lend it out at 1% per annum for projects of national interest.

I would banish the likes of the self-indulgent pig that purchased a half a million dollar boardroom table for the ANZ to Alice Springs to clean the streets, and the responsible parties that ticked the authority as well .

Does anyone know an islamic bank in Australia? Usury is against their religion.
Click to expand...

Do you really think that politicians are going to do any better with the money though?
Click to expand...

Do better than ??

Currently all the interest on our 'deficit' (ie our deficit) goes to 'international investors' (!)
If the country created its own currency and lent its own currency to its citizens the citizens would gain the advantage.

It's a bit like the pokie machines.
In NSW most of the profits go to the local club that has a charter to support local sports etc. which they signed to get the pokies in the first place.
In Victoria most of the profits go to a company that was awarded the rights to install them and who pay lip service to local community support and spend more to lobby the government about changes to the Poker machine laws to increase their profits.

I have no problem with pokies - a tax on the stupid if you ask me, but I'm much happier when those stupid people get some of their losses back with cheap meals and new basketball uniforms.

I have the same view of banking. If the moneychangers are going to charge interest, better it returns to the community than disappears overseas to god knows where. We are talking billions and billions here. Enough to build superfast trains across the country. Get decent roads linking the capitals. Halt suburban sprawl and start putting in services. An endless list of things. Perhaps eliminate a few of those private public partnership projects. Like freeways that send a couple of billion profit overseas each year. Instead government works (there's a novel concept) could be reintroduced to the concept of government.
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Except pokie machine manufacturers take very little risk with their investment - they sell the machine to the club and the cashflow is basically guaranteed.. whereas if a bank lends any entity money, they (and their shareholders - which includes everyone who has their super in a fund) take a risk that the money isn't paid back.. thats the whole point of interest - compensation for risk. As a bank shareholder, you do get paid for the risk your bank takes.. CBA dividends are currently at 9.14% (incl franking credits) - what you do with your dividend income is up to you.

Sure.. lending money at 1% to projects of 'national interest' is a noble idea... but
A) What qualifies? (given the endemic corruption among politicians, i could see a lot of this money being siphoned away to 'personal interests')
B) If the govt can't even borrow at 1% (currently Aus gov bonds yield 3.7% on avg), they would be running a loss.. Leadind to a Greek-like situation eventually.
C) If money is guaranteed to be availableble for 'national significance projects', where is the incentive for efficiency? (Just look at the east European commie economies of the 50s-80s)
D) If they just print money for infrastructure projects, the very soon we will be a Zimbabwe basket case... to quote Robet Mugabe: "If money can't be found for national projects.. We will print it!"
 
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