May 14, 2025 • 19 mins
Australia’s finance industry is beset by a raft of compliance lapses, from data reporting breaches to trader misbehaviour. Macquarie was targeted yet again this week in a civil action filed by the Australian Securities & Investment Commission.
This week, Chris Bourke asks Bloomberg finance editor Adam Haigh: What’s going wrong with some of our biggest banks, and how did they fare in the latest reporting season?
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Episode Transcript
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Speaker 1 (00:02):
I understand that I'm account by I'm the face of owns,
that I am the chief executive, and so I imagined
you know. Yes. Now, the point here is we have
to work through and actually undercover what happened, why and
how make sure it never happens again.
Speaker 2 (00:15):
Responsibilities of gatekeepers, responsibilities of such significant and successful organizations
in markets like quarry, and responsibilities for reporting so that
we can understand what's going on in markets in terms
of integrity and where the risk is. These are really important.
Speaker 3 (00:34):
Another big Australian bank has found itself in trouble with
the regulator again. What's going on at our biggest financial
institutions and how much should investors care? Hello, I'm Chris
Burke and welcome to the Bloomberg Australia Podcast. This week,
we've just wrapped up the latest earnings season for our
biggest banks, where they gave us a glimpse under the
(00:54):
hood of their business at a pretty precarious time for
both the local and global economy. That's been somewhat overshadowed
by an announcement that Macquarie Groups securities business is being
sued by the Australian Securities and Investments Commission, and let's
not forget the ongoing travails at A and Z Bank,
whose new boss started this weekend and has a fair
(01:15):
bit to contend with. To unpack all of this, I'm
joined by Bloomberg's Sydney based finance editor Adam Haig. Adam.
Welcome to the podcast. Hi, Chris, Great to be with you,
so Adam. On Wednesday morning, our biggest bank, CPA was
proudly boasting of an increase to its quarterly cash profit,
but it's the thunder was pretty much stolen by mcquarie,
(01:36):
with news of a civil action by Essex. Tell us
what we know about that so far.
Speaker 4 (01:41):
What we know, Chris, is that essentially mcquarie have had
problems with the way that they've been reporting some trades
in their securities business, and this really focuses on short
selling trade. But really this is not about the trades themselves.
This is about how the bank reports these trades. And
what Asaka is saying is that over a period from
(02:01):
December two thousand and nine all the way through to
February twenty twenty four, so you know, more than fourteen years,
there were problems and irregularities with the way this data
was reported, which they have to report this to the regulator.
So what we're seeing really is is a quite significant
issue here around the process, around the technology that's being
(02:22):
used to report this. And indeed it is a big
deal because you know, it spans such a large amount
of time, and it also is happening at a firm
that really prides itself on risk management and prides itself
on really being you know, one of the best in
the world at making sure what it does and the
(02:43):
trading flow is the best of the best. So it
was quite a big shock. And this isn't the first
time that ASEK have been targeting Macquarie in recent times.
Speaker 3 (02:53):
Yeah, that's a good point. I guess that's the bigger
picture here. In the past year or so, there's been
a few consus what else, what else has the regular
to been targeting Mcquarie for?
Speaker 4 (03:05):
Yeah, so one of the other things, and this was
just came to like kind of more recently. The bit
the start of May was around issues in mcquarie's commodities
futures business. So this was around derivatives and futures trading
and problems that they had there. So in that instance,
(03:25):
there isn't a civil action. There's no lawsuit. What they've
done there is just basically said, listen, you need to
review what's happening here, you need to put a remediation
plan in place, and you need to do a number
of things to show us over time that things are
getting better there. So that's clearly an interesting case but
quite different to this one. But it does add to
(03:46):
a couple of others as well. So really, you know,
over time and over the last twelve months or so,
there have been a number of these that are building
now to a little bit more of a crescendo, and
you know, it does speak to a wider concern about
how these issues are kind of have happening at Macquarie.
Speaker 3 (04:07):
Yeah, and of course let's not forget about A n Z,
which has also been on the spotlight lately. That's been
a bit more focused on bad bad behavior including alcohol
and substance abuse, which as we know, lead to a
lot of pressure on CEO now departity CEO is Shane
Elliott to clean up the culture there. What's the current
(04:28):
status of regular directions against A and Z at the moment, Well.
Speaker 4 (04:32):
A and Z is still facing Chris a number of
different probes and one of the main ones is this
probe that they're facing into these allegations of market manipulation
over the sale of government bonds in Australia and AZ's
role as a risk manager during that sale process. Most
(04:52):
of this came to light, you know, almost a year
ago now, but really the back end of last year
and the back end of Shane Elliott's career was really
almost defined by by by some of these issues and
and and the asset probe on the one hand, but
also another investigation that was being underdone by by OPRA,
(05:13):
the banking regulator, and problems that they saw which ultimately
meant that, you know, the bank is having to hold
more capital in in in reserve and it is putting
some strain on the bank's reputation. And so these probes
we still don't know, they haven't concluded, we don't know
(05:34):
how they're going to unfold, but they are you know,
still going on and of course with the new CEO
coming in, it's going to be a huge focus of
his to try and you know, steer some of the
reputational repair work over at a end. Z.
Speaker 3 (05:52):
Yes, you are of course referring to nunumatos Portuguese banker,
first job in Australia. I believe it is he the
right person for the job.
Speaker 2 (06:04):
What is it?
Speaker 3 (06:04):
What does it? What is it about his background that
makes some a suitable troubleshooter which our colleagues wrote last
week and that Bloomberg profile.
Speaker 4 (06:13):
Yes, I mean he does have a lot of experience
Chris in many other markets, and I think that's really
what people are excited about the potential for him to
really take action here. And a lot of that focused
on his America's experience with with HSBC. You know, he
was there in a time when there was a lot
(06:34):
of problems around what HSBC had been doing with drug
cartels in its Mexican business, and he steered the ship
through that and there was you know, an agreement between
the US and HSBC around that. So he does have
form in terms of, you know, being able to manage
(06:56):
reputations of very leading institutional bank names. And then he
also ended up running HSBC's wealth and personal banking on
a global scale, so clearly bring something to A and
Z both on that global reach, but also that sense
of having been through some reputational repair work in the past,
(07:17):
and that does put him in good stead to kind
of clean up some of these problems that have hampered
Elliott's legacy and A and Z more broadly.
Speaker 3 (07:27):
Yeah, he's got some tough challenges there and we wish
him the best of luck. We've also seen regulated actions
against A six recently, also some super funds for things
around the risk management and delays to things like death
benefits and insurance claims. Are our biggest financial institutions getting
a bit sloppy or are we just really well regulated?
Speaker 4 (07:51):
Well, I think it's very clear Chris, that ASSIC and
regulators more broadly are really going after some of this
malpractice in a big way. And I think Joe Longo,
the chair of ASSEIC, has been very kind of public
(08:12):
around that in recent times, and he's very much, you know,
showing how he is able to do that with with
an increased level of activity, not just with civil suits themselves,
but also you know, actions and remediation plans that are
going on. So interesting that you mentioned as well, what's
(08:33):
happening with the local exchange here ASX, which is the
main kind of derivative stock exchange and does a lot
of handles a lot of FX settlement and things like that.
So really big player in the market in many in
many ways the market the market leader in Australia, and
they've been under fire as well for a for a
(08:54):
kind of a series of technological upgrades that that the
company is trying to do over another number of years
and problems there and so so so Longo and Assek
are trying to really look at the broad financial landscape
in Australia and say, listen, where are we just not
quite performing as well as we should do, and really
(09:16):
just trying to get these organizations to tighten up with
the with the resources that it has. And people do often,
you know, Levy that kind of criticism against ask They say,
you know, it's it's it's a bit under resourced. It
struggles some times to to take big swings at problems
that are existing in financial markets. And and maybe there's
(09:38):
a there's a reason to believe that actually in recent
months they are increasing their their appetite to go after
some of the really more serious problems that are happening
in the markets here.
Speaker 3 (09:48):
Yeah, and these problems that they are uncovering. How much
How much are investors paying attention to these things? Have
they had any impact on share prices? Or are they
likely to down the line.
Speaker 4 (10:03):
Well, I think Chris, that you know, any any kind
of issues around compliance and risk management are always taken
very seriously by by investors. And indeed, you know, the
mcquarie chair last week was very clear Glenn Stevens, who's
a former RBA governor. Of course, it is very clear
to point out some of the issues that Mcquarie had
(10:25):
had and what they were doing to remedy those situations.
So I do think that you know, investors take this
very seriously, But whether or not it actually shows up
in share prices is somewhat of a moot point because
I think if you look back to A and Z
(10:45):
and initially when news broke of some of the allegations
around the potential market manipulation there, investors actually didn't at
first seem too interested in what was going on in
terms of the impact that that might have on property bits,
profitability and reputation and whether it's our share prices. But
I think you know one bank that has stood out,
(11:07):
and that is CBA, Commonwealth Bank of Australia, the biggest bank,
and you know that hasn't really been in the firing
line with some of these actions. So you know, there
is maybe some credence to the to the idea that
if you're not in the headlines with some of these things,
then investors will be prepared to reward it.
Speaker 3 (11:28):
Okay, when we come back, it's a wrap for the
big bank's latest reporting season. What did we learn? Welcome
back to the Bloomberg Australia Podcast. You're here with me,
Chris Burke. I'm talking to Adam Haigu, our Sydney based
finance editor, about the state of our biggest banks as
(11:50):
we wrap up the industry's latest earning season. So, Adam,
as I said earlier, we've just had Commonwealth Bank, the
country's largest lender, give us the quarterly trading update on Wednesday,
the last of our banks to report their latest numbers
over the past week or so. Was there anything in
the CBAS that made you think, yep, this bank deserves
to be trading at almost one hundred and seventy bucks
(12:12):
a share, no doubt about it.
Speaker 4 (12:14):
Well, I think the big positive Chris to come from
the CBA announcement is just kind of almost like a
vindication of CEO mat Commons strategy to try and go
after market share in business lending. So this is lending
to companies rather than the focus on its mortgage business,
which is still the main player in in Australia. But
(12:36):
really what it's done recently is to try and tilt
that strategy more towards trying to go after business lending,
and you could see that in the numbers. You could
see how that had been growing far quicker than the
broader markets being growing in that segment, and that has
been one element of why that stock price has been
doing so well, because there is more growth there and
(12:58):
they're seeing more continued growth there and they are in
home lending, and so it is somewhat of vindication of
that strategy. But I think more broadly it was a
you know, it was a reasoningly positive update. And interestingly
they didn't really see a huge amount of uptick in arrears,
so in problem loans, both in home loans but also
(13:20):
broadly in the consumer space, so it didn't kind of
signal any big worry about areas ticking up across the economy.
Speaker 3 (13:28):
Yeah, obviously we also heard there WESTPEC and said m
m acquarie report. Was there any kind of general theme
running through those reports that you picked up on?
Speaker 4 (13:42):
Well, the main thematic threading them all together, Chris, I
think really is just the pressure that continues in both
the key business areas for all the domestic banks, so
that's home lending, that margins continue to be under pressure there,
Competition is very fierce. The rb have started to reduce
interest rates in Australia and although the outlook is somewhat
(14:04):
cloudy for what interest rates will do from here, there's
a general consensus and markets are pricing this that rates
will be lower by the end of the year than
where they are today. And what does that mean for
bank's ability to make money on home loans. Well, it's
continued pressure and so that you know, it gets tougher
from here, and that's really been the messaging from the
(14:25):
CEOs there and that's what you're seeing in the numbers.
So you're seeing that on the home loan side, and also,
as we've been talking about, on the business lending side.
You know, there are winners in the sense that CBA
seems to be taking market share there and getting rewarded
for it, but they even acknowledge that there's still pressure
in that business. So I think that they're the main
(14:48):
themes really that this is actually a pretty tough environment
for bank profitability at the moment, right, and it's only
going to get harder as the year goes on.
Speaker 3 (14:56):
So did you get a sense from the commentary and
those reports about how they're feeling about the outlook, you know,
especially as you say, with the interest rate cycle turning,
are they are they more optimistical or less?
Speaker 2 (15:08):
Well?
Speaker 4 (15:08):
I think really what they all seem to suggest, and
the common theme was that maybe Australia has a little
bit more resilient relative to a global economy that's in
a pretty tough place. So they all wanted to kind
of point to the idea that, yes, there's a lot
of uncertainty out there, there's the changing nature of global
trade flows that everyone's very aware of, but actually Australia's
(15:32):
place within that global context seems okay, seems actually not
too bad at all, And in which case that does
offer a little kind of glimmer of hope for banks
being able to operate in that environment, because it's an
economy that's going to you know, outperform relatively well globally speaking,
and so you know, maybe profitability can hold up to
(15:55):
a degree and you know, for shareholders might not be
too bad.
Speaker 3 (16:01):
A place to be, and let's not forget these these
banks have gone gang busters over the past five years
or so. I think if you've held CBA, well most
of us probably have or do in our super fund,
that's been a gain of I think something like almost
one hundred and eighty percent over the past five years.
(16:24):
And the others have haven't done too badly either. What
are analysts saying about this about the future here? Can
they really sustain the kind of momentum that we've been
seeing in recent years.
Speaker 4 (16:35):
Well, I think if you look at kind of the
analyst commentary, there are some analysts, so for example, you know,
Thomas Strong at City Group after the CBA result on Wednesday,
was pretty clear that that there is enough here to
kind of maintain some level of growth and upside to
(16:56):
the share price at CBA from here. So there is
that camp. But then you know, there are more negative
analysts on the other side that are just saying, listen,
especially with banks like CBA that have had such a
good run up in prices, continue to pay these decent dividends,
and we should maybe just readjust a little bit our
(17:17):
expectations of how much they'll be able to do this
In the coming kind of six or twelve months, especially
as rates overall come down. You know, the economy is
in an okay place, but it's certainly not too bright
obviously if they're having to reduce interst rates over at
the RBA. So this idea of just just maybe realign
(17:37):
your expectations and don't expect, you know, too much upside
from here.
Speaker 3 (17:42):
Yeah, And I guess as we were saying that these
banks do feature heavily in many of our investments and
there our super funds, we should be it should be
seen as a fairly positive thing that regulators are keeping
track of what they're doing. And also these banks in
some cases are self reporting these problems to the regulator.
(18:04):
I guess we should point that out as well.
Speaker 4 (18:06):
I think that's important to remember, right, you want an
environment where the regulator is working very closely with banks.
They're sharing a lot of information, especially when things go wrong,
They're working to improve things. They're always looking to try
and update processes to make them better. You know, when
these things fall under the radar and don't get picked
up by regulators, it's almost more of a concern. So yeah,
(18:30):
so I think there's there's credence in that idea that
you know, at least these things are out in the
open and people are making changes. Ultimately, you know, the
bosses of these companies want to run them as well
as possible, and you know risk management and reputation is
of course top of the list in terms of what
(18:51):
they're trying to achieve.
Speaker 3 (18:53):
Thank you, Adam Haig, and thank you for listening to
the Bloomberg Australia podcast. I'm Chris Burke. This episode was
recorded on the traditional lands of the Wurundry and Gadigal people.
It was produced by Paul Allen and edited by Ainsley
Chandler and Rebecca Jones. Don't forget to follow and review
the show wherever you get your podcasts, and sign up
to Bloomberg's free daily newsletter, Australia Briefing. Go to Bloomberg
(19:16):
dot com to subscribe.
I understand that I'm account by I'm the face of owns,
that I am the chief executive, and so I imagined
you know. Yes. Now, the point here is we have
to work through and actually undercover what happened, why and
how make sure it never happens again.
Speaker 2 (00:15):
Responsibilities of gatekeepers, responsibilities of such significant and successful organizations
in markets like quarry, and responsibilities for reporting so that
we can understand what's going on in markets in terms
of integrity and where the risk is. These are really important.
Speaker 3 (00:34):
Another big Australian bank has found itself in trouble with
the regulator again. What's going on at our biggest financial
institutions and how much should investors care? Hello, I'm Chris
Burke and welcome to the Bloomberg Australia Podcast. This week,
we've just wrapped up the latest earnings season for our
biggest banks, where they gave us a glimpse under the
(00:54):
hood of their business at a pretty precarious time for
both the local and global economy. That's been somewhat overshadowed
by an announcement that Macquarie Groups securities business is being
sued by the Australian Securities and Investments Commission, and let's
not forget the ongoing travails at A and Z Bank,
whose new boss started this weekend and has a fair
(01:15):
bit to contend with. To unpack all of this, I'm
joined by Bloomberg's Sydney based finance editor Adam Haig. Adam.
Welcome to the podcast. Hi, Chris, Great to be with you,
so Adam. On Wednesday morning, our biggest bank, CPA was
proudly boasting of an increase to its quarterly cash profit,
but it's the thunder was pretty much stolen by mcquarie,
(01:36):
with news of a civil action by Essex. Tell us
what we know about that so far.
Speaker 4 (01:41):
What we know, Chris, is that essentially mcquarie have had
problems with the way that they've been reporting some trades
in their securities business, and this really focuses on short
selling trade. But really this is not about the trades themselves.
This is about how the bank reports these trades. And
what Asaka is saying is that over a period from
(02:01):
December two thousand and nine all the way through to
February twenty twenty four, so you know, more than fourteen years,
there were problems and irregularities with the way this data
was reported, which they have to report this to the regulator.
So what we're seeing really is is a quite significant
issue here around the process, around the technology that's being
(02:22):
used to report this. And indeed it is a big
deal because you know, it spans such a large amount
of time, and it also is happening at a firm
that really prides itself on risk management and prides itself
on really being you know, one of the best in
the world at making sure what it does and the
(02:43):
trading flow is the best of the best. So it
was quite a big shock. And this isn't the first
time that ASEK have been targeting Macquarie in recent times.
Speaker 3 (02:53):
Yeah, that's a good point. I guess that's the bigger
picture here. In the past year or so, there's been
a few consus what else, what else has the regular
to been targeting Mcquarie for?
Speaker 4 (03:05):
Yeah, so one of the other things, and this was
just came to like kind of more recently. The bit
the start of May was around issues in mcquarie's commodities
futures business. So this was around derivatives and futures trading
and problems that they had there. So in that instance,
(03:25):
there isn't a civil action. There's no lawsuit. What they've
done there is just basically said, listen, you need to
review what's happening here, you need to put a remediation
plan in place, and you need to do a number
of things to show us over time that things are
getting better there. So that's clearly an interesting case but
quite different to this one. But it does add to
(03:46):
a couple of others as well. So really, you know,
over time and over the last twelve months or so,
there have been a number of these that are building
now to a little bit more of a crescendo, and
you know, it does speak to a wider concern about
how these issues are kind of have happening at Macquarie.
Speaker 3 (04:07):
Yeah, and of course let's not forget about A n Z,
which has also been on the spotlight lately. That's been
a bit more focused on bad bad behavior including alcohol
and substance abuse, which as we know, lead to a
lot of pressure on CEO now departity CEO is Shane
Elliott to clean up the culture there. What's the current
(04:28):
status of regular directions against A and Z at the moment, Well.
Speaker 4 (04:32):
A and Z is still facing Chris a number of
different probes and one of the main ones is this
probe that they're facing into these allegations of market manipulation
over the sale of government bonds in Australia and AZ's
role as a risk manager during that sale process. Most
(04:52):
of this came to light, you know, almost a year
ago now, but really the back end of last year
and the back end of Shane Elliott's career was really
almost defined by by by some of these issues and
and and the asset probe on the one hand, but
also another investigation that was being underdone by by OPRA,
(05:13):
the banking regulator, and problems that they saw which ultimately
meant that, you know, the bank is having to hold
more capital in in in reserve and it is putting
some strain on the bank's reputation. And so these probes
we still don't know, they haven't concluded, we don't know
(05:34):
how they're going to unfold, but they are you know,
still going on and of course with the new CEO
coming in, it's going to be a huge focus of
his to try and you know, steer some of the
reputational repair work over at a end. Z.
Speaker 3 (05:52):
Yes, you are of course referring to nunumatos Portuguese banker,
first job in Australia. I believe it is he the
right person for the job.
Speaker 2 (06:04):
What is it?
Speaker 3 (06:04):
What does it? What is it about his background that
makes some a suitable troubleshooter which our colleagues wrote last
week and that Bloomberg profile.
Speaker 4 (06:13):
Yes, I mean he does have a lot of experience
Chris in many other markets, and I think that's really
what people are excited about the potential for him to
really take action here. And a lot of that focused
on his America's experience with with HSBC. You know, he
was there in a time when there was a lot
(06:34):
of problems around what HSBC had been doing with drug
cartels in its Mexican business, and he steered the ship
through that and there was you know, an agreement between
the US and HSBC around that. So he does have
form in terms of, you know, being able to manage
(06:56):
reputations of very leading institutional bank names. And then he
also ended up running HSBC's wealth and personal banking on
a global scale, so clearly bring something to A and
Z both on that global reach, but also that sense
of having been through some reputational repair work in the past,
(07:17):
and that does put him in good stead to kind
of clean up some of these problems that have hampered
Elliott's legacy and A and Z more broadly.
Speaker 3 (07:27):
Yeah, he's got some tough challenges there and we wish
him the best of luck. We've also seen regulated actions
against A six recently, also some super funds for things
around the risk management and delays to things like death
benefits and insurance claims. Are our biggest financial institutions getting
a bit sloppy or are we just really well regulated?
Speaker 4 (07:51):
Well, I think it's very clear Chris, that ASSIC and
regulators more broadly are really going after some of this
malpractice in a big way. And I think Joe Longo,
the chair of ASSEIC, has been very kind of public
(08:12):
around that in recent times, and he's very much, you know,
showing how he is able to do that with with
an increased level of activity, not just with civil suits themselves,
but also you know, actions and remediation plans that are
going on. So interesting that you mentioned as well, what's
(08:33):
happening with the local exchange here ASX, which is the
main kind of derivative stock exchange and does a lot
of handles a lot of FX settlement and things like that.
So really big player in the market in many in
many ways the market the market leader in Australia, and
they've been under fire as well for a for a
(08:54):
kind of a series of technological upgrades that that the
company is trying to do over another number of years
and problems there and so so so Longo and Assek
are trying to really look at the broad financial landscape
in Australia and say, listen, where are we just not
quite performing as well as we should do, and really
(09:16):
just trying to get these organizations to tighten up with
the with the resources that it has. And people do often,
you know, Levy that kind of criticism against ask They say,
you know, it's it's it's a bit under resourced. It
struggles some times to to take big swings at problems
that are existing in financial markets. And and maybe there's
(09:38):
a there's a reason to believe that actually in recent
months they are increasing their their appetite to go after
some of the really more serious problems that are happening
in the markets here.
Speaker 3 (09:48):
Yeah, and these problems that they are uncovering. How much
How much are investors paying attention to these things? Have
they had any impact on share prices? Or are they
likely to down the line.
Speaker 4 (10:03):
Well, I think Chris, that you know, any any kind
of issues around compliance and risk management are always taken
very seriously by by investors. And indeed, you know, the
mcquarie chair last week was very clear Glenn Stevens, who's
a former RBA governor. Of course, it is very clear
to point out some of the issues that Mcquarie had
(10:25):
had and what they were doing to remedy those situations.
So I do think that you know, investors take this
very seriously, But whether or not it actually shows up
in share prices is somewhat of a moot point because
I think if you look back to A and Z
(10:45):
and initially when news broke of some of the allegations
around the potential market manipulation there, investors actually didn't at
first seem too interested in what was going on in
terms of the impact that that might have on property bits,
profitability and reputation and whether it's our share prices. But
I think you know one bank that has stood out,
(11:07):
and that is CBA, Commonwealth Bank of Australia, the biggest bank,
and you know that hasn't really been in the firing
line with some of these actions. So you know, there
is maybe some credence to the to the idea that
if you're not in the headlines with some of these things,
then investors will be prepared to reward it.
Speaker 3 (11:28):
Okay, when we come back, it's a wrap for the
big bank's latest reporting season. What did we learn? Welcome
back to the Bloomberg Australia Podcast. You're here with me,
Chris Burke. I'm talking to Adam Haigu, our Sydney based
finance editor, about the state of our biggest banks as
(11:50):
we wrap up the industry's latest earning season. So, Adam,
as I said earlier, we've just had Commonwealth Bank, the
country's largest lender, give us the quarterly trading update on Wednesday,
the last of our banks to report their latest numbers
over the past week or so. Was there anything in
the CBAS that made you think, yep, this bank deserves
to be trading at almost one hundred and seventy bucks
(12:12):
a share, no doubt about it.
Speaker 4 (12:14):
Well, I think the big positive Chris to come from
the CBA announcement is just kind of almost like a
vindication of CEO mat Commons strategy to try and go
after market share in business lending. So this is lending
to companies rather than the focus on its mortgage business,
which is still the main player in in Australia. But
(12:36):
really what it's done recently is to try and tilt
that strategy more towards trying to go after business lending,
and you could see that in the numbers. You could
see how that had been growing far quicker than the
broader markets being growing in that segment, and that has
been one element of why that stock price has been
doing so well, because there is more growth there and
(12:58):
they're seeing more continued growth there and they are in
home lending, and so it is somewhat of vindication of
that strategy. But I think more broadly it was a
you know, it was a reasoningly positive update. And interestingly
they didn't really see a huge amount of uptick in arrears,
so in problem loans, both in home loans but also
(13:20):
broadly in the consumer space, so it didn't kind of
signal any big worry about areas ticking up across the economy.
Speaker 3 (13:28):
Yeah, obviously we also heard there WESTPEC and said m
m acquarie report. Was there any kind of general theme
running through those reports that you picked up on?
Speaker 4 (13:42):
Well, the main thematic threading them all together, Chris, I
think really is just the pressure that continues in both
the key business areas for all the domestic banks, so
that's home lending, that margins continue to be under pressure there,
Competition is very fierce. The rb have started to reduce
interest rates in Australia and although the outlook is somewhat
(14:04):
cloudy for what interest rates will do from here, there's
a general consensus and markets are pricing this that rates
will be lower by the end of the year than
where they are today. And what does that mean for
bank's ability to make money on home loans. Well, it's
continued pressure and so that you know, it gets tougher
from here, and that's really been the messaging from the
(14:25):
CEOs there and that's what you're seeing in the numbers.
So you're seeing that on the home loan side, and also,
as we've been talking about, on the business lending side.
You know, there are winners in the sense that CBA
seems to be taking market share there and getting rewarded
for it, but they even acknowledge that there's still pressure
in that business. So I think that they're the main
(14:48):
themes really that this is actually a pretty tough environment
for bank profitability at the moment, right, and it's only
going to get harder as the year goes on.
Speaker 3 (14:56):
So did you get a sense from the commentary and
those reports about how they're feeling about the outlook, you know,
especially as you say, with the interest rate cycle turning,
are they are they more optimistical or less?
Speaker 2 (15:08):
Well?
Speaker 4 (15:08):
I think really what they all seem to suggest, and
the common theme was that maybe Australia has a little
bit more resilient relative to a global economy that's in
a pretty tough place. So they all wanted to kind
of point to the idea that, yes, there's a lot
of uncertainty out there, there's the changing nature of global
trade flows that everyone's very aware of, but actually Australia's
(15:32):
place within that global context seems okay, seems actually not
too bad at all, And in which case that does
offer a little kind of glimmer of hope for banks
being able to operate in that environment, because it's an
economy that's going to you know, outperform relatively well globally speaking,
and so you know, maybe profitability can hold up to
(15:55):
a degree and you know, for shareholders might not be
too bad.
Speaker 3 (16:01):
A place to be, and let's not forget these these
banks have gone gang busters over the past five years
or so. I think if you've held CBA, well most
of us probably have or do in our super fund,
that's been a gain of I think something like almost
one hundred and eighty percent over the past five years.
(16:24):
And the others have haven't done too badly either. What
are analysts saying about this about the future here? Can
they really sustain the kind of momentum that we've been
seeing in recent years.
Speaker 4 (16:35):
Well, I think if you look at kind of the
analyst commentary, there are some analysts, so for example, you know,
Thomas Strong at City Group after the CBA result on Wednesday,
was pretty clear that that there is enough here to
kind of maintain some level of growth and upside to
(16:56):
the share price at CBA from here. So there is
that camp. But then you know, there are more negative
analysts on the other side that are just saying, listen,
especially with banks like CBA that have had such a
good run up in prices, continue to pay these decent dividends,
and we should maybe just readjust a little bit our
(17:17):
expectations of how much they'll be able to do this
In the coming kind of six or twelve months, especially
as rates overall come down. You know, the economy is
in an okay place, but it's certainly not too bright
obviously if they're having to reduce interst rates over at
the RBA. So this idea of just just maybe realign
(17:37):
your expectations and don't expect, you know, too much upside
from here.
Speaker 3 (17:42):
Yeah, And I guess as we were saying that these
banks do feature heavily in many of our investments and
there our super funds, we should be it should be
seen as a fairly positive thing that regulators are keeping
track of what they're doing. And also these banks in
some cases are self reporting these problems to the regulator.
(18:04):
I guess we should point that out as well.
Speaker 4 (18:06):
I think that's important to remember, right, you want an
environment where the regulator is working very closely with banks.
They're sharing a lot of information, especially when things go wrong,
They're working to improve things. They're always looking to try
and update processes to make them better. You know, when
these things fall under the radar and don't get picked
up by regulators, it's almost more of a concern. So yeah,
(18:30):
so I think there's there's credence in that idea that
you know, at least these things are out in the
open and people are making changes. Ultimately, you know, the
bosses of these companies want to run them as well
as possible, and you know risk management and reputation is
of course top of the list in terms of what
(18:51):
they're trying to achieve.
Speaker 3 (18:53):
Thank you, Adam Haig, and thank you for listening to
the Bloomberg Australia podcast. I'm Chris Burke. This episode was
recorded on the traditional lands of the Wurundry and Gadigal people.
It was produced by Paul Allen and edited by Ainsley
Chandler and Rebecca Jones. Don't forget to follow and review
the show wherever you get your podcasts, and sign up
to Bloomberg's free daily newsletter, Australia Briefing. Go to Bloomberg
(19:16):
dot com to subscribe.
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