Banking and Financial Services
Keep up-to-date with the latest banking and finance news, insights and information in the Australian Banking and Finance industry from financial advisors, experts and associations on Top4 News.
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Coalition weighs $27b GST on financial services

Coalition weighs $27b GST on financial services | Banking and Financial Services |

The Turnbull government is closely studying proposals to extend the GST to currently-exempt financial services in a move that could help pay for a cut to the 30 per cent company tax rate urged by big business.

As much as $27 billion could be raised from a 15 per cent goods and services tax if it applied to banks and financial services, according to estimates based on Parliamentary Budget Office research.

The move comes as the head of the Coalition's federal economics committee challenged business to step up and "make the case" for an expanded GST rather than merely demand extra revenue flow first to company tax cuts.

"If business want their share, they're going to have to get out and articulate where it comes from and where the distribution takes place," Dan Tehan told The Australian Financial Review

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Big banks cut 1475 jobs to maintain profits

Big banks cut 1475 jobs to maintain profits | Banking and Financial Services |

After two years of adding jobs, Australia's largest banks are joining global competitors and trimming staff as earnings falter following six consecutive years of record profits.

The four-largest lenders and Macquarie Group cut a combined 1475 jobs in their respective half yearly periods to reduce costs as increased competition and regulation eat into their profitability. The job reductions are the most since the lenders shed 3300 roles in the second half of 2012, according to regulatory filings.

Banks worldwide are cutting positions amid a multi-year slowdown in trading revenue and increased compliance costs. Deutsche Bank, Standard Chartered and Credit Suisse Group have announced they will slash almost 50,000 staff.

While Australian lenders bucked the global trend and added jobs from late 2013 to the start of this year as mortgage demand soared, they are now facing a slowdown in profit growth as capital requirements increase, forcing them to reverse course and join their global rivals.

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Banks grapple with violence

Banks grapple with violence | Banking and Financial Services |

Disturbing gaps are emerging between what Australian financial institutions say they are doing to counter family violence and economic abuse and the actual experience of Australian women who contact them to ask for help.

Last week, when a woman who has a violent restraining order against her former partner contacted Westpac to ask for help with joint loans, she was told the bank officer was unaware the bank had a domestic violence policy.

A week earlier National Australia Bank conceded there were gaps in its safety net after it referred the credit card debt of a woman with a violence restraining order against her former partner to a debt collection agency.

The NAB credit card misstep emerged just days after financial giant AMP revealed it was working with the Financial Services Council on an urgent review of the rules because it was powerless to cancel an insurance policy taken out by an abusive man on the life of his former partner.

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3 High Yielding Alternatives to the Big Four Banks

3 High Yielding Alternatives to the Big Four Banks | Banking and Financial Services |

Subdued economic conditions coupled with historically low interest rates will continue to fuel the search for income investments. However, it appears that recent developments may be shifting investor interest away from one of the best bets for high yield over the last several years – the Big Four Banks.

Slowing growth at the Big Four (meaning lower dividends) is the big concern. We have heard this story before and the banks have surprised, but there are mounting headwinds that could morph into a full-fledged perfect storm.

Shareholders have seen the value of their holdings diluted due to capital raises needed to meet higher regulatory capital requirements; there may be more to come. The most recent round of financial releases showed healthy profits for all of the Big Four, but the average ROE (Return on Equity) across all four dropped from 15.5% to 15%. Net Interest Margins (NIM) – a measure of a bank's cost of interest paid out on deposits and interest collected from loans – are falling. But as the following chart shows, NIM has been falling for almost five years while bank profits continue at record or near record levels.

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Housing sentiment may be turning, says Reserve Bank's Malcolm Edey

Housing sentiment may be turning, says Reserve Bank's Malcolm Edey | Banking and Financial Services |

Measures to cool down the Sydney and Melbourne property markets appear to be working, according to a speech given on Friday by Reserve Bank assistant governor Malcolm Edey.

Dr Edey, who was addressing the Australian Property Institute's Queensland Property Conference on the Gold Coast, said that measures last year to cool down overheated areas of the property market seemed to be working, but it was too early to be sure.

There was "tentative evidence that sentiment may now be turning in the housing markets in the two largest cities," said Mr Edey.  "But it is much too early to be definitive about that. What we can say is that the risks in that sector are now being more prudently managed than they were a year or so ago."

The Australian Prudential Regulation Authority announced a number of measures in December 2014 to strengthen mortgage standards and reduce the risk of speculative bubbles appearing in the nation's two biggest cities.

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Bank returns not a 'constant of the universe': RBA

Bank returns not a 'constant of the universe': RBA | Banking and Financial Services |

Reserve Bank governor Glenn Stevens has told bank shareholders they should not assume lenders are immune to the profit-sapping effects of tougher regulation, leaving open the prospect that future returns may fall further.

As Commonwealth Bank delivered a $2.4 billion first-quarter profit, the central bank also took aim at the major banks' sloppy record-keeping in their mortgage lending, saying this had complicated its understanding of the housing market.

After banks recorded slower profit growth and falling returns this year, Mr Stevens said bank shareholders might have to wear some of the costs of new regulations requiring banks to build up bigger capital buffers. 

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ASIC's Greg Medcraft says 'robo advice' can reduce fees and conflicts

ASIC's Greg Medcraft says 'robo advice' can reduce fees and conflicts | Banking and Financial Services |

Australian Securities and Investments Commission chairman Greg Medcraft says computer-generated financial advice, or "robo advice" could slash investment costs and eliminate conflicts of interest in the maligned financial planning industry. 

ASIC has established a "robo-advice taskforce", which is investigating the suitability of potential entrants, who use computer algorithms to match investors with suitable assets at a lower cost than human advisers.

ASIC wants to know how they intend to comply with best interest duties, how algorithms are developed and tested, and how the people running the start-ups are trained and compensated. 

In a speech to a Finsia lunch in Sydney on Thursday, Mr Medcraft said ASIC believed digital financial advice was going to grow rapidly, which required the regulator to put strategies in place to ensure it understood the risks so customers could have trust in the market. 

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Homeowners pin hopes on Reserve Bank

Homeowners pin hopes on Reserve Bank | Banking and Financial Services |

THE Reserve Bank of Australia boss has downplayed mortgage rate hikes by the big four banks, but says any move in the cash rate in the near future would be down.

RBA governor Glenn Stevens said benign inflation and Australia’s cooling property market were no impediment to cutting interest rates.

“Were a change to monetary policy to be required in the near term, it would almost certainly be an easing, not a tightening,” he told the

Melbourne Institute 2015 Economic and Social Outlook Conference.

The RBA left interest rates on hold on Tuesday at a record low 2.0 per cent, despite expectations it would cut rates to bolster economic growth.

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Smaller banks cash in on home mortgage rates

Smaller banks cash in on home mortgage rates | Banking and Financial Services |

Smaller lenders – which write 20 per cent of mortgages – have opted to improve profit instead of market share by following the majors' rate hikes in varying degrees, citing capital imposts still well above the big banks.

Regional lender, Bank of Queensland, with roughly $35 billion in loans, and the country's biggest credit union, CUA, with about $11 billion, completed much of the rate change announcements for banks on Wednesday.

BoQ said it would raise all its rates for new and existing loans by 0.18 per cent on November 20 in line with most other lenders.

Its standard variable rate will rise to 5.74 per cent for owner occupiers and 6.03 per cent for investors. Its discount Clear Path rate rises to 4.6 per cent.

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Profit prize of $800m awaits successful mortgage market ‘disrupter’

Profit prize of $800m awaits successful mortgage market ‘disrupter’ | Banking and Financial Services |

There’s an $800 million profit prize should a new player achieve the difficult task of replicating the success of supermarket discounter Aldi in the $1.5 trillion mortgage market, according to analysts.

As the dust settles on the major banks’ results season, experts are increasingly mulling whether conditions are as good as they get and how vulnerable the industry is to the horde of new “fintech” disrupters and larger players with plenty of capital to deploy.

Westpac chief Brian Hartzer was yesterday grilled on whether the banks were setting themselves up for similar pain being felt by Woolworths, once one of the most profitable supermarkets globally, by propping up margins for the benefit of shareholders in a move that allowed Coles and Aldi to enter the market and steal customers with better prices.

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MoneyPlace second Aussie P2P lender for mums and dads

MoneyPlace second Aussie P2P lender for mums and dads | Banking and Financial Services |

Melbourne start-up MoneyPlace became the second Australian peer-to-peer lender to open its virtual doors to mum and dad investors on Monday.

The company, led by former NAB banker Stuart Stoyan and backed by Westpac's former head of retail banking Rob Coombe, provides a platform for investors to make personal loans.

Borrowers can get loans of between $5000 and $35,000 for terms of three to five years directly from individual lenders via MoneyPlace at rates starting at 8.99 per cent. It claims investors can earn returns from 7.8 per cent.

After two years building MoneyPlace, including a 13-month approval process with the corporate regulator, it "matched" its first loan last week.

MoneyPlace will initially only take investments from so called "sophisticated investors" who have net assets of $2.5 million or aggregated gross income for each of the last two financial years of at least $250,000 a year.

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Macquarie tops list of Australia's largest fund managers, enters world's top 50

Macquarie tops list of Australia's largest fund managers, enters world's top 50 | Banking and Financial Services |

Macquarie Group has emerged as the fastest growing among the top 500 global asset managers over five years, breaking into the top 50 list of the world's biggest funds, according to asset consultants Towers Watson.

The Sydney headquartered financial services firm's transition from investment bank to asset manager has seen it grow assets under management by more than 250 per cent since 2010, when measured in Australian dollar terms, and 200 per cent in US dollar terms, according to the annual survey of the top 500 fund managers.

Macquarie jumped 66 places over five years to break the top 50, with $US370 billion ($518 billion) of funds under management.

Commonwealth Bank, which owns Colonial First State, is the 100th largest fund manager in the world according to the survey, with $US156 billion at the end of 2014.  

The growth in Macquarie's assets is a further demonstration of its transition away from investment banking style earnings, which accounted for about 60 per cent of the group's earnings, to less than 25 per cent today.

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SME owners warned of major housing risk

SME owners warned of major housing risk | Banking and Financial Services |

The end of the housing boom could mean major risks for SME owners with an overdraft linked to property, according to finance specialists FactorOne.

FactorOne has urged small business owners to break the link between their property and their business or risk disaster, as the housing boom shows signs of fading.

With Sydney auction clearance rates falling (from well over 80 per cent to 60 per cent in recent weeks) and most Australian banks increasing home loan rates, many official and business observers are saying that the current boom in property prices is at an end.

For Sydney SME owners, the 40 per cent increase in property prices in the past three years has provided a funding boost where their overdraft is linked to their property.

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Banks cash in as $2.5b added to bottom line after interest rate rises

Banks cash in as $2.5b added to bottom line after interest rate rises | Banking and Financial Services |

Banks are estimated to have added $2.5 billion to their bottom lines from interest rate rises in July and October-November after the Reserve Bank cut the cash rate to 2 per cent. 

Regional banks are likely to be the biggest beneficiaries because mortgages are larger contributors to their earnings.

Deutsche Bank, Morgan Stanley and JPMorgan analysts say its 0.18 percentage point rise – to start on November 20 – will add between 3.8 per cent and 7.2 per cent to its cash profit for 2016-17 to $402 million, $404 million and $420 million, respectively.

Morgan Stanley goes further back to add the July hike to rates on its investor loan book. This takes the bank's cumulative rises to 0.52 percentage points on investor loans since May and 0.23 percentage points for owner-occupier mortgages when its November rises are added.

This takes the bottom line lift to 12.2 per cent, or about $48 million, and is already priced into the broker's estimate.

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Westpac to ramp up mortgage growth

Westpac to ramp up mortgage growth | Banking and Financial Services |

The head of Westpac's flagship consumer bank, George Frazis, has unveiled plans to ramp up the lending giant's growth in mortgages as it also puts transaction banking at the centre of its strategy to sign up 850,000 new retail customers, targeting young adults, migrants and women.

In his first interview since being appointed chief executive of a new division that includes the consumer banks of Westpac and St George, Mr Frazis has laid out plans for significant growth in both home loans and transaction accounts.

The expansion is part of Westpac chief executive Brian Hartzer's goal of toppling Commonwealth Bank as the country's best-performing consumer bank, through a focus on customer service and efficiency.

As Westpac took a harder line on costs, Mr Frazis said the number

of branches and staff within the division was likely to fall.

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Klaus Bartosch's change-org campaign on credit card surcharges goes to Canberra

Klaus Bartosch's change-org campaign on credit card surcharges goes to Canberra | Banking and Financial Services |

Queensland businessman Klaus Bartosch was scheduled to front the Senate credit card inquiry on Monday to reiterate his charge that the government's planned ban on excessive card surcharges will in fact encourage every business to charge a fee.

In his opening argument to the Senate committee, Bartosch takes aim at Qantas, Jetstar and Virgin Australia, which are also to appear before the inquiry. He argues that booking fees from $7.70 to $30 are too high.

Citing figures compiled by Choice in his comments for delivery to the Senate, Bartosch said that a Visa or MasterCard payment costs airlines about 0.81 per cent per transaction but he said said Jetstar, for one, was charging a $17 round trip booking fee on an $87 airfare. On a $185.90 airfare on Virgin, he said the airline was charging a roundtrip fee of $15.40.

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ASIC says whistleblowers need compo

ASIC says whistleblowers need compo | Banking and Financial Services |

Lifetime compensation would be offered to whistleblowers who risk their careers to expose company misconduct under a radical overhaul floated by the corporate watchdog.

Greg Medcraft, the chairman of the Australian Securities and Investments Commission, has backed offering money to whistleblowers in recognition of the risks they took and the damage that could be done to their career prospects.

"The biggest problem for a lot of whistleblowers who see poor things happening is that they go home to their spouse and say, 'I'm not happy about what I am seeing; I'm not happy about it,' and the spouse says to them, 'Well, we've got a mortgage. We've got children. You can't do anything about it.'," Mr Medcraft told a recent parliamentary hearing.

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Morgan Stanley shuns the banks, so where to for investors?

Morgan Stanley shuns the banks, so where to for investors? | Banking and Financial Services |

The risk of Australia falling into recession is growing and the housing market has peaked, so investors should steer clear of the banks and find companies that will outperform in that environment, Morgan Stanley says. 

The investment bank is bearish on the Australian economy, predicting gross domestic product growth to slow to just 1.9 per cent next year, down from 2 per cent it has tracked this year.

Morgan Stanley Wealth Management investment strategists Sze Chuah and Ewa Turek said the slowdown would be driven by the housing activity, which had peaked, and the continuing fall in investment in the resources sector. 

"In an environment where housing appears to have peaked, and recession risks are rising, investors should avoid building too much exposure to domestic cyclicals - namely the Banks, housing-related companies, and those reliant on household discretionary spending," they wrote in a strategy note. 

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The struggle big banks face

The struggle big banks face | Banking and Financial Services |

Wealth management still represents a growth area for the major banks, if only they can attract the right customers, according to new research released by Roy Morgan.

The research appears to counter analysis of the recent full-year financial results issued by the major banks, which pointed to lack-lustre returns from wealth management.

The research showed that the major banks were not actually gaining a significant "share of wallet" from their top quintile customers when it came to wealth management.

The analysis said that this low share of the wealth management wallet (including superannuation) among the top quintile customers was "proving to be a major drag on the major banks' overall share of wallet".

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Bank pays compo for harassing woman

Bank pays compo for harassing woman | Banking and Financial Services |

A BANK that unfairly harassed a customer over credit card debts has been ordered to pay $26,450 compensation.

The Financial Ombudsman Service decision erased the woman’s debts on two cards, ruling she was likely to have suffered “undue distress and anxiety”.

The bank repeatedly pursued her on her mobile phone for almost three years after she pleaded with it to stop contacting her that way because she was “extremely upset” about constant calls.

Industry standards were also violated when she was hounded 27 times through calls, text messages and solicitor's letters after she lodged a dispute with the watchdog late last year.

“It is an unusual case but a reminder to other financial service providers to ensure that their debt collection processes are working properly,” banking and finance lead ombudsman Philip Field said.  “The compensation is in recognition that she has been put through the wringer.

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RBA 'surprised' by banks' $50b home loan error

RBA 'surprised' by banks' $50b home loan error | Banking and Financial Services |

The Reserve Bank's deputy governor has scolded the banks over poor home loan data that is "complicating" its understanding of the housing market and clouding its ability to make and enact policy decisions.

In a strongly worded speech delivered at the Finsia regulators' panel in Sydney on Thursday, Philip Lowe said he was surprised and concerned over recent problems with the data relating to banks' owner-occupier and investor housing loans, a development he described as disappointing.

Increased regulator scrutiny has unearthed an additional $50 billion worth of property investor loans on the banks' books, Dr Lowe said.
This increased the total portion of investor loans on banks' books to 40 per cent, from 35 per cent.

More recently, the picture has been complicated by the banks' decision to charge higher rates for investor loans, prompting some customers to ask the banks to reclassify their loans as owner-occupier.

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GST on banks to hit new-home buyers

GST on banks to hit new-home buyers | Banking and Financial Services |

A 10 per cent tax to financial services could raise billions of extra dollars but it would be complex and risk double taxing new-home buyers, experts say.

Former KPMG tax partner Michael Evans suggested a "supplementary" tax on margin-based financial services in a paper commissioned by the South Australian government earlier this year.

The change would mean the margin of profit earned by banks on services such as home loans would be taxed at 10 per cent, which is the current rate of the goods and services tax.

"In the case of deposit-taking and lending, the taxable margin is the difference between the interest paid and the interest earned over a period," Mr Evans said.

For foreign exchange transactions and derivative trading, it would be the difference between sales and purchases over a period."

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Bendigo first to lift rates after RBA cash rate decision

Bendigo first to lift rates after RBA cash rate decision | Banking and Financial Services |

Bendigo and Adelaide Bank was the first bank to raise interest rates after the Reserve Bank of Australia left the cash rate on hold at 2 per cent on Tuesday, upping its residential variable rates between 0.12 and 0.15 percentage points.

Most smaller lenders have been waiting for the RBA's Melbourne Cup day decision before following the majors' lead on rate rises to ease squeezed profit margins, with many holding pricing decisions on Tuesday and Wednesday.

Sources say most smaller banks and credit unions will raise rates. If the RBA had lowered the cash rate on Tuesday, it was thought the majors would have passed on the whole 0.25 per centage cut and the smaller banks would have passed on a smaller cut to retain some profitability.  This is despite not facing the same capital rises on mortgages that the majors do from July 2016.

Bendigo raised its owner occupier standard variable rate by 0.12 per cent to 5.68 per cent and its investor rate by 0.15 per cent to 5.91 per cent.   The bank had already raised its investor rate in August by 0.2 per cent following pressure from shareholders when it said it would leave them on hold at its annual results briefing earlier that month. 

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Former BBY adviser in fight with St George Bank, PPB over missing $630,000

Former BBY adviser in fight with St George Bank, PPB over missing $630,000 | Banking and Financial Services |

An erroneous trade in Woolworths options in March, by now defunct broking firm BBY, has a former adviser of the firm desperately battling lender St George Bank and receivers PPB Advisory for the return of $630,000.

Almost six months after BBY's spectacular collapse, St George and PPB are still refusing to return the funds as they claim they can not prove who is legally entitled to them. That is despite evidence provided to them by former BBY adviser Darrell Seeto, whose junior trader executed the spurious trade, which shows the former personally deposited the money into BBY's operational account in April.

The buy and sell trade instructions were entered the wrong way around and were not picked up by the now defunct firm's checking processes. The trade did, however, trigger alarm bells at the ASX as it was within the bourse's Extreme Trading Range (ETR), under its operating rules. But it was not unwound as the error was reported roughly five minutes outside a 30-minute window for cancelling such transactions, according to documents sighted by Fairfax Media.

The events and the $630,000 loss are now caught up in the collapse of BBY, the first market participant to fail in more than three decades. The error shines a light on the failure of BBY's checking processes ahead of trades being lodged, and the lengths the firm went to, to force the adviser to wear the loss and negotiate with counterparty, Liquid Capital, to have the funds returned.

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The 'golden era' is over for Australian banks

The 'golden era' is over for Australian banks | Banking and Financial Services |

Australia’s big four banks just posted a record $30 billion in combined cash profit, a rise of 5.4%.

While that’s a healthy return in the current business environment, analysts believe there are hard decisions ahead if the banks want to continue to get results like these and keep paying strong dividends to maintain shareholder love.

“Slowing growth and declining returns are a clear signal that we’ve reached the end of the banks’ golden era,” says Tim Dring, a banking expert at EY.  Behind the headlines about record profits are some weaker numbers pointing to problems ahead.  Across the four banks, return on equity (ROE) is down to 15% from 15.5% and this is expected to deteriorate further once the latest round of capital raising, needed to meet stricter capital rules, flows through in the current financial year.

And net interest margins (NIM) — the different between interest income and the cost of providing loan money – are at a record low of 2.02%, down from 2.07% a year ago.

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