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Massive Australian Bank Profits - Are They Sustainable?
Topic Started: 15 May 2014, 11:47 PM (3,825 Views)
SittingOnDeFence
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With the news in the last few weeks of big banking profits:

CBA Profit
Westpac Profit
NAB Profit
ANZ Profit

Should we be worried about the details of the NAB Forex trader who was racking up huge wins with his buddy in the ABS? Or the recent 4 Corners about CommBank's financial advisers?

What will Victorian mortgage advisers do if they struggle to find borrowers looking to enter a property market where, as Dr. Andrew Wilson says, "... the local economy is an underperformer compared to the other capitals so that will be a drag on housing market activity and prices growth...."?

What will happen to banking share prices? Will they continue to lend responsibly?

Edited by SittingOnDeFence, 15 May 2014, 11:48 PM.
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goldbug
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The owners of the casino always make a profit.
Shadow was hopelessly wrong about the Gold Bull Market.
What else is he wrong about?
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peter fraser
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SittingOnDeFence
15 May 2014, 11:47 PM
With the news in the last few weeks of big banking profits:

CBA Profit
Westpac Profit
NAB Profit
ANZ Profit

Should we be worried about the details of the NAB Forex trader who was racking up huge wins with his buddy in the ABS? Or the recent 4 Corners about CommBank's financial advisers?

What will Victorian mortgage advisers do if they struggle to find borrowers looking to enter a property market where, as Dr. Andrew Wilson says, "... the local economy is an underperformer compared to the other capitals so that will be a drag on housing market activity and prices growth...."?

What will happen to banking share prices? Will they continue to lend responsibly?

Banks will lend responsibly, they have no choice anymore. APRA have audited the lenders policies and systems and once audited they can't go beyond their lending criteria without a very good reason. We have much tougher lending conditions than most people realise.

As for profits - certainly they will maintain their profits, but the rate of profit growth will be subdued. I would expect their share prices to soften but not collapse.
Edited by peter fraser, 16 May 2014, 08:29 AM.
Any expressed market opinion is my own and is not to be taken as financial advice
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John Frum
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SittingOnDeFence
15 May 2014, 11:47 PM
With the news in the last few weeks of big banking profits:

CBA Profit
Westpac Profit
NAB Profit
ANZ Profit

Should we be worried about the details of the NAB Forex trader who was racking up huge wins with his buddy in the ABS? Or the recent 4 Corners about CommBank's financial advisers?

What will Victorian mortgage advisers do if they struggle to find borrowers looking to enter a property market where, as Dr. Andrew Wilson says, "... the local economy is an underperformer compared to the other capitals so that will be a drag on housing market activity and prices growth...."?

What will happen to banking share prices? Will they continue to lend responsibly?

The game is rigged. Enjoy the fat profits now but check with your super fund that you can make a quick shift to cash on signs that a systemic meltdown is about to occur. These will include:

* the introduction of a harsh, growth crippling budget,

* a notable absence of the once frequently posting bulls from property forums, and

* bear porn sites champing at the bit on news of chinese housing market over-supply.
peter fraser
16 May 2014, 08:27 AM
Banks will lend responsibly, they have no choice anymore. APRA have audited the lenders policies and systems and once audited they can't go beyond their lending criteria without a very good reason. We have much tougher lending conditions than most people realise.

As for profits - certainly they will maintain their profits, but the rate of profit growth will be subdued. I would expect their share prices to soften but not collapse.
Phew, thanks Pete! Soothing words from an industry professional - it's like a breath of fresh air.
Edited by John Frum, 16 May 2014, 08:44 AM.
"It were not best that we should all think alike; it is difference of opinion that makes horse races." - Mark Twain on why he avoids discussing house prices over at MacroBusiness.
"Buy land, they're not making any more of it." - Georgist Land Tax proponent Mark Twain laughing in his grave at humourless idiots like skamy that continually use this quip to justify housing bubbles.
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peter fraser
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John Frum
16 May 2014, 08:34 AM
Phew, thanks Pete! Soothing words from an industry professional - it's like a breath of fresh air.
Yep you can sleep easy tonight John.
Any expressed market opinion is my own and is not to be taken as financial advice
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SittingOnDeFence
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The reason I ask is because I was looking at Ireland's banks - have a read of this and listen to the phone recordings (all on youtube)

Anglo Tapes

Basically, it's a load of phone conversations between bankers in Anglo Irish Bank that were released last year. Some of the conversations are amazing, 1 of them basically predicts the next 5 years (i.e. the Irish Gov will take over the bank and guarantee the other banks to prevent a collapse, then the ECB, IMF and EU will back the Irish Gov, then they'll exit the bailout in about 5 years time)

What's notable is the fact that they were making record profits and preaching responsible lending, and in the tapes these execs discuss meetings with financial regulators and the government, when behind the scenes they were pulling a fast one! What's to say that Aussie Banks aren't doing the same?

What the CBA financial planning story revealed is that banks don't care as long as the money is coming in - can you honestly see a bank turning around and saying "no, we've made enough money this year, time to cut back on risky loans"?
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peter fraser
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SittingOnDeFence
16 May 2014, 11:34 AM
The reason I ask is because I was looking at Ireland's banks - have a read of this and listen to the phone recordings (all on youtube)

Anglo Tapes

Basically, it's a load of phone conversations between bankers in Anglo Irish Bank that were released last year. Some of the conversations are amazing, 1 of them basically predicts the next 5 years (i.e. the Irish Gov will take over the bank and guarantee the other banks to prevent a collapse, then the ECB, IMF and EU will back the Irish Gov, then they'll exit the bailout in about 5 years time)

What's notable is the fact that they were making record profits and preaching responsible lending, and in the tapes these execs discuss meetings with financial regulators and the government, when behind the scenes they were pulling a fast one! What's to say that Aussie Banks aren't doing the same?

What the CBA financial planning story revealed is that banks don't care as long as the money is coming in - can you honestly see a bank turning around and saying "no, we've made enough money this year, time to cut back on risky loans"?
Ireland is a currency user - the Irish Government needs Euros to do anything. The government had to go into debt in Euros to salvage their banking system. That puts a huge financial burden on the people until they can sell the banks back to the public.

If the same situation occurred in Australia our government would go into debt in AUD so the debt does not have to be funded in some other nations currency. That makes all the difference.

Our government can finance a purchase in money that they can raise easily and then later sell the banks back to the market for a profit.

Two entirely different system. When you think of Ireland think of a state like South Australia, not like a country.
Any expressed market opinion is my own and is not to be taken as financial advice
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goldbug
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peter fraser
16 May 2014, 08:27 AM
Banks will lend responsibly, they have no choice anymore. APRA have audited the lenders policies and systems and once audited they Blah Blah Blah...
Don't take this twaddle of peter's seriously anyone. APRA is funded by the banks themselves and that's like the REIQ or any other mob that is funded by the industry under it, it does the bidding of said industry and is not as many believe independant. Peter is a debt peddler himself so he is part of the banking system and defends it, albiet he is down on the bottom rung and independant to a degree.

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Lets not forget that APRA is funded by the very industry that it regulates. Sort of like putting the fox in charge of the hen house. You just have to look at the profiles of the Directors and senior management they all come from banking and insurance backgrounds.


A rigged system where the big corporate banks are protected by layers of governing bodies they in fact control. APRA, the RBA, they all are in the pockets of the banks. You only have to observe the jobs they came from before entering office and the seats on the big boards they command after leaving office.
Shadow was hopelessly wrong about the Gold Bull Market.
What else is he wrong about?
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peter fraser
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goldbug
16 May 2014, 03:21 PM
Don't take this twaddle of peter's seriously anyone. APRA is funded by the banks themselves and that's like the REIQ or any other mob that is funded by the industry under it, it does the bidding of said industry and is not as many believe independant. Peter is a debt peddler himself so he is part of the banking system and defends it, albiet he is down on the bottom rung and independant to a degree.

A rigged system where the big corporate banks are protected by layers of governing bodies they in fact control. APRA, the RBA, they all are in the pockets of the banks. You only have to observe the jobs they came from before entering office and the seats on the big boards they command after leaving office.
"The Australian Prudential Regulation Authority (APRA) is the prudential regulator of the Australian financial services industry. It oversees banks, credit unions, building societies, general insurance and reinsurance companies, life insurance, friendly societies, and most of the superannuation industry. APRA is funded largely by the industries that it supervises. It was established on 1 July 1998. APRA currently supervises institutions holding $4.5 trillion in assets for Australian depositors, policyholders and superannuation fund members."

The funding for APRA may be derived from the industry but no industry members exercise control over it. Hence the use of gov within the domain name.

The set up is NOTHING like the REIQ where funding members exercise control over the REIQ.

There are three government regulators who oversee banking - the RBA who are responsible for the money supply and rate settings, ASIC who issue licences to industry professionals, and APRA who set the standards for prudent lending and financial management of funds etc.

You could add one more - The Commonwealth Police who investigate fraud such as we saw with the ABS data scandal lately.
Edited by peter fraser, 16 May 2014, 04:38 PM.
Any expressed market opinion is my own and is not to be taken as financial advice
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zaph
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goldbug
16 May 2014, 03:21 PM
Don't take this twaddle of peter's seriously anyone. APRA is funded by the banks themselves and that's like the REIQ or any other mob that is funded by the industry under it, it does the bidding of said industry and is not as many believe independant. Peter is a debt peddler himself so he is part of the banking system and defends it, albiet he is down on the bottom rung and independant to a degree.




A rigged system where the big corporate banks are protected by layers of governing bodies they in fact control. APRA, the RBA, they all are in the pockets of the banks. You only have to observe the jobs they came from before entering office and the seats on the big boards they command after leaving office.
That new tin foil hats doing a good job. Where did you buy it? Or did you make it yourself?
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