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Massive Australian Bank Profits - Are They Sustainable?
Topic Started: 15 May 2014, 11:47 PM (3,829 Views)
Kulganis
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Banks
18 May 2014, 08:11 PM
How can you attack the very institutions which pulled through the GFC better than most other businesses. The Banks created stability in a time of severe instability. They supported many businesses and house holds with freezes on interest payments or an easing of payments for a period of time (for those who really needed it and asked for it). They took unsecured risks by allowing overdrawn amounts to ensure businesses who didn't have cashflow could still operate.
And here I was, thinking it was the governmental guarantee on deposits and falling interest rates that created stability, now we're cheering on the banks for their incredible selflessness?

As far as I knew, banks have always (well, in my lifetime) allowed for hardship payment freezes. And they have always provided overdraw facilities to businesses and households (I remember having an overdraw facility on one of my personal accounts years ago [long before the GFC]).

I would agree with you if they had done anything that was totally different from what they had done in the past, but as far as I can tell, they didn't. So I don't.
Edited by Kulganis, 18 May 2014, 09:02 PM.
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SittingOnDeFence
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Explain how this is responsible lending?

RAMS 100% Loan


Edited by SittingOnDeFence, 18 May 2014, 09:08 PM.
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Ex BP Golly
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Drgonzo
18 May 2014, 07:46 PM
Of course it's risky, it's like having a portfolio of shares all invested in a particular type of mining stock or even a single industry.

If there is a downturn in the housing market, they're fucked and they fake everyone's super with them.

The sensible thing would be to have a diversified loan book.
+1
Banks
18 May 2014, 08:11 PM
The majority of people making negative comments come off as incredibly ignorant. Typical internet stuff.

How can you attack the very institutions which pulled through the GFC better than most other businesses. The Banks created stability in a time of severe instability. They supported many businesses and house holds with freezes on interest the housing market......
"Banks"?

Shouldnt that be "Banks Crappy P.R. Unit" :lol
Edited by Ex BP Golly, 18 May 2014, 09:20 PM.
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peter fraser
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Banks
18 May 2014, 08:11 PM
They took unsecured risks by allowing overdrawn amounts to ensure businesses who didn't have cashflow could still operate.
No they didn't, they were ducking for cover everywhere in the early years of the GFC, not that I can blame them. They were in self preservation mode.
SittingOnDeFence
18 May 2014, 09:08 PM
Explain how this is responsible lending?

RAMS 100% Loan


It's not 100% LVR lending, the banks take extra security via a supported guarantee. Usually the LVR is below 80%. Certainly all the ones that I have arranged were below 80% LVR.

Actually they will usually go to 105% of the purchase price for the right applicants.
Edited by peter fraser, 18 May 2014, 09:27 PM.
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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peter fraser
18 May 2014, 09:23 PM
No they didn't, they were ducking for cover everywhere in the early years of the GFC, not that I can blame them. They were in self preservation mode.

It's not 100% LVR lending, the banks take extra security via a supported guarantee. Usually the LVR is below 80%. Certainly all the ones that I have arranged were below 80% LVR.

Actually they will usually go to 105% of the purchase price for the right applicants.
Essentially, at the end of the day, if you can't even save a 5% deposit you shouldn't be buying a house

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Trojan
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SittingOnDeFence
18 May 2014, 09:08 PM
Explain how this is responsible lending?

RAMS 100% Loan


Do you think its responsible or irresponsible?
I put trolls and time wasters on my ignore list so if I don't respond to you, you are probably on it ....
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SittingOnDeFence
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Trojan
18 May 2014, 10:17 PM
Do you think its responsible or irresponsible?
It would depend on the circumstances I guess, i.e. the amount and the mortgage period, the monthly payments etc.

I'm not saying that property is going to drop by a huge amount because of these mortgages, but chances are, if you need a 100% mortgage then you probably aren't on big coin, and so the risk the bank is taking is bigger.

In the last couple of years, property wasn't a risk. In the last 3 months there's been an awful lot of talk about slightly higher unemployment figures. With Tony preaching belt tightening, public sector cutbacks and a return to surplus, it's hard to see consumer confidence escaping a hit. Add to that, the RBA probably not lowering interest rates, there's plenty of cause for concern.

So with all this, the Banks' recent announcement of bumper profits coinciding with a massive summer of property gains in 2013/14, what will happen to their share prices if there isn't a similar bumper summer in 2014/15? Will they decide to take a hit on mortgage sales in order to promote "responsible lending" or will they take more risks?
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Drgonzo
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SittingOnDeFence
18 May 2014, 09:08 PM
Explain how this is responsible lending?

RAMS 100% Loan


There is nothing wrong with a 100 loan provided the re is due diligence around a persons capacity to service the loan and employment stability etc.

It is no different to lending somebody 80 percent.

If either borrower loses their job, they're fucked.
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stinkbug
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Drgonzo
19 May 2014, 06:42 AM
There is nothing wrong with a 100 loan provided the re is due diligence around a persons capacity to service the loan and employment stability etc.

It is no different to lending somebody 80 percent.

If either borrower loses their job, they're fucked.
I've used 100% loans in the past. These properties are now sitting at about 60% LVR. Provided you have the cashflow, and alternate assets to back up the loan, I don't see the problem. If someone is relying oin their job to make payments they'll default regardless of LVR. Having an LVR lower than 80% just makes it easier to restructure your arrangement with the bank.
Edited by stinkbug, 19 May 2014, 07:20 AM.
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While it's true that those who win never quit, and those who quit never win, those who never win and never quit are idiots.

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Ex BP Golly
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SittingOnDeFence
18 May 2014, 10:07 PM
Essentially, at the end of the day, if you can't even save a 5% deposit you shouldn't be buying a house
Well mate, if we imply rents are savings, and we imply superannuation are savings too, then we can pretend that people acutely have the ability to save, even if they cannot produce a deposit.

The ability to think like this is one of the wonders of a university education!
WHAT WOULD EDDIE DO? MAAAATE!
Share a cot with Milton?
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