It's not over for the banks yet...

[nulla nulla]

I don't have a problem with you disagreeing with my reasoning. The bottom line is that the Australina banks, in my opinion, especially CBA, WBC and NAB are well positioned to ride out the economic crisis and will ultimatly prove to be sound investments at these levels.

 

[noirua]

Are banks worldwide now about to suffer the second wave problems on better quality mortgages than sub-prime? The next blow is similar to the Alt-A disaster building up in the States, where previous lenders were thought to be unaffected by the contagion.

The collapse of Scotland's largest building Society, The Dunfermiline, once again means the UK takes on more debt, this time it's A$3.5 billion.

Spain is bailing out its bank, Caja Castilla of Spain, which will cost the Spanish tax payer AU$18 billion. This is the first major recent Bank collapse in Spain, and is due to the badly hit housing sector. Strong banks, such as, Santander and BBVA are now in the spotlight.

Aussie Banks are often trumpeted as all sound, just the same as Spain's were, and time will tell?

On an interesting note: Tesco, the UK supermarket, is also to become a new bank. They will open 30 Banks in major branches by the end of the year.
Woolworths and Coles may follow the lead in Australia, and put pressure on the majors, maybe.

 

[glads262]

I see a positive for the Aus banks being the stimulus payments. Most dual income households with a mortgage will get about $1900. This is enough to cover the mortgage for 1-2 months?? Mortgage payments have already dropped in half. If a dual income household were to lose one income (ie higher unemployment which is coming) then they SHOULD have a buffer in lower mortgage payments, plus $2000 in the bank to help out for the first 6 months or so.
After that, hope the economy picks up and they find a job. (there are plenty of jobs out there - just not where people are trained - ie you see the unions whinge when 1000 people in manufacturing get retrenched saying they will never find another job - maybe not in manufacturing but try looking elsewhere?)

The major downside for Aus banks is the commercial property market. This has yet to hit the fan, and Aus banks have already said they are overexposed - this is why Ruddbank is being setup because they will not lend further to commercial property. If these properties start to collapse - probably due to Industry super fund selling - then there will be trouble.

Industry super funds are overexposed to unlisted commercial property. This is why they have outperformed over the past year.

 

[sinner]

Hi guys,

I thought this chart was very apt for the thread title.

SKF (UltraShort Financials) has not been this low since Sept '08.

Will be watching tonights NYSE session very closely to see if this instrument will close above or below resistance.

 

[Uncle Festivus]

Time to materialise profits perhaps? Even the dreaded S word - short?

Sydney - According to Restructuring Works, a business specialising in corporate restructuring, its fourth quarterly Business Stress Report reveals that the cost of insolvencies to Australian Banks rose dramatically in the June quarter. The rise was a surprise as it had appeared that the cost of insolvencies had peaked last December but instead they have resumed their upward trend.
Key findings from the report:


The latest Business Stress Report revealed a significant increase in the cost of insolvencies with the following key findings:

• The cost of All Bank New Asset Impairment Charges, which equates to bad debts, by Australian Banks in the quarter to June 2009 was $10.8 billion which is the highest ever recorded. The total for the year to June 2009 has increased to $32.2 billion. That compares to an average of around $4.4 billion per year for the years 1995 to 2008.
• The number of appointments of Receivers and the like by Australian Banks has increased to 1,320 for the year to July 2009 which is almost triple the average of 468 from the previous five years.
• The number of companies entering some form of insolvency administration has topped the 10,000 mark for the first time - in the year to July 2009 the number was 10,038. However, the number per month has been relatively stable in the 800s since the peak in March 2009.
• The new numbers reflect what happened to insolvency numbers after the 1987 Stock Market crash at which time the number and cost of bad debts did not peak for 4 years.

http://www.getthewordout.com.au/20091001100

/news-room/cost-of-insolvencies-tops-32-billion-for-australian-banks.htm

 

[Uncle Festivus]

And a nice chart to go with it....... not that it's anything to worry about

 

[gfresh]

Nice backward looking data...While it may be the most recently available collated data, things have changed little since then in terms of local corporate default, and it takes time for things to work through the system.

While I'm sure the overseas banks still have plenty to worry about.. the Aussie ones still are sitting fairly well on the recession that never happened.

Sanderson commented: “There are currently two factors at play. Firstly, it simply takes a long time for either the directors of a company in financial trouble to deal with the issues or for creditors to lose patience and take legal action. Secondly, the key driver of insolvency numbers in small and medium size companies is the ATO but in the past 6 months the ATO has actively encouraged repayment arrangements with businesses rather than pursuing insolvency proceedings. Many of the companies being given some latitude will still ultimately fail.”

Sanderson concluded: “Putting the above together, I think we are likely to see a change in the mix of companies facing insolvency. We’ve seen the big companies with large debts hit the wall. Going forward we are likely to see an increase in the number of companies facing insolvency but they will be small and medium sized companies with correspondingly smaller debts.”

 

[Uncle Festivus]

While I'm sure the overseas banks still have plenty to worry about.. the Aussie ones still are sitting fairly well on the recession that never happened.

Then why is their impairment charges now $32BILLION??

The total for the year to June 2009 has increased to $32.2 billion. That compares to an average of around $4.4 billion per year for the years 1995 to 2008.

 

[Uncle Festivus]

Nice backward looking data...While it may be the most recently available collated data, things have changed little since then in terms of local corporate default, and it takes time for things to work through the system.

Backward looking? So we have a doubling of individual provisions from $9.4B to $17.7B in just 12 months? You learn something every day.

There are two broad types of provision, both of which have risen since the onset of the financial turmoil. The first is ‘individual’ provisions that are established when a bank identifies a specific loan as being ‘impaired’, in that it is unlikely to be repaid in full and the value of collateral is not expected to be enough to cover the outstanding amount. The second type is ‘collective’ provisions that are held against currently unidentified losses on portfolios of loans with similar risk characteristics, and against a general deterioration in the loan book.

For the four major banks, total provisions stood at $17.7 billion as at their latest reporting dates (end March 2009 for three of these banks and end June for the other), compared to $9.4 billion a year earlier (Graph A1). Around half of the increase was in individual provisions, which rose to $5.8 billion as at the latest half year.

Source:RBA report Financial Stability Review September 2009

 

[HighRyder]

Haha, interesting stuff in this thread..

 

[GumbyLearner]

Rollover the Movie 1981 & GFC compilation mix

 

[Julia]

I don't get it, banks get massive help but it doesn't stop them to make massive profit, possibly to repay the debt

What massive help have the banks had?
As far as I know, they have in fact been paying the government for the privilege of the guarantee. None of our banks have been bailed out by the taxpayer.

 

[Gamblor]

What massive help have the banks had?
As far as I know, they have in fact been paying the government for the privilege of the guarantee. None of our banks have been bailed out by the taxpayer.

That's right - the government guarantee stopped the run on them so they never needed the tax payer. I'd say that was quite helpfull for them.

 

[nioka]

What massive help have the banks had?

The big 4 banks had the government guarantee that the building societies and small banks did not receive. This gave the big 4 an advantage over the others when it came to obtaining funds by allowing them to offer cheaper rates and still attract deposits. Probably worth billions. It also allowed them to buy out or close down opposition in the home mortgage department. These benefits will continue for years to come.

 

[Agentm]

The big 4 banks had the government guarantee that the building societies and small banks did not receive. This gave the big 4 an advantage over the others when it came to obtaining funds by allowing them to offer cheaper rates and still attract deposits. Probably worth billions. It also allowed them to buy out or close down opposition in the home mortgage department. These benefits will continue for years to come.

correct

i am a little surprised julia doesn't understand the one sided affair that the big 4 have on the opposition

this may help julia

http://www.smh.com.au/business/bulkedup-banks-forget-the-little-guy-20090817-emng.html

 

[Julia]

The big 4 banks had the government guarantee that the building societies and small banks did not receive. This gave the big 4 an advantage over the others when it came to obtaining funds by allowing them to offer cheaper rates and still attract deposits. Probably worth billions. It also allowed them to buy out or close down opposition in the home mortgage department. These benefits will continue for years to come.

All banks, not just the big four, all building societies and credit unions received the government guarantee. The big four did get a lower rate of payment to the government.

During this period I have been shopping around for TD rates and there was no appreciable difference between those offered by the big four and the smaller banks.

So it's quite wrong to suggest the smaller banks and building societies were not beneficiaries of the government guarantee.

 

[Julia]

correct

No, it is not correct. See my reply to Nioka.

i am a little surprised julia doesn't understand the one sided affair that the big 4 have on the opposition

The only advantage they have had is that the % they pay the government is slightly less than the smaller institutions. That is very different from saying the government guarantee was only available to the big four.

this may help julia

I have skimmed through Mr Mayne's article but don't see how it relates to the government guarantee in particular. It certainly doesn't support your contention that only the big four received the government guarantee.

 

[Uncle Festivus]

The big 4 banks had the government guarantee that the building societies and small banks did not receive. This gave the big 4 an advantage over the others when it came to obtaining funds by allowing them to offer cheaper rates and still attract deposits. Probably worth billions. It also allowed them to buy out or close down opposition in the home mortgage department. These benefits will continue for years to come.

They have also taken on a larger portfolio of first timers which may haunt them in a year to come?

Julia is correct about the guarantee - the only diff was the monopolistic 4 got a better rate.