Money CBA, Westpac, ANZ and NAB are in for 'tougher times': UBS report

00:57  12 may  2018
00:57  12 may  2018 Source:

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CBA , Westpac , ANZ and NAB are in for ' tougher times ': UBS report . ABC News. The Coalition's tax plan favours the rich and doesn't solve bracket creep for middle-income earners.

While the ASX200 has risen 5.1 per cent from its November low of 4997.9, Westpac is up 5.8 per cent from its November low, National Australia Bank 8.6 per cent, Commonwealth Bank 7.9 per cent and ANZ 10.6 per cent. Nab and Anz . Photo: Paul Rovere. Stephen reports on markets.

The big four banks have been downgraded with © Provided by ABC News The big four banks have been downgraded with "sell" and "neutral" ratings by UBS.

"Tougher times" are ahead for Australia's banking sector, according to UBS, with the spectre of the banking royal commission hanging over their shoulders, and their earnings likely to drop in the next few years.

The global investment bank described the first half results of the big four banks as "disappointing" in its report released on Friday.

It also remains "very cautious" in light of rising funding costs, and believes "the risk of a credit crunch is material".

Downgraded banks

Earnings per share (EPS) fell 3.7 per cent across the sector, dragged down by NAB's restructuring costs, in the order of $755 million, as it prepares to lay off 6,000 staff over three years due to technological disruption.

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How we Complement the Bank ’s Products and Services. ƒ What is different about insurance? Evolution of time (Create wealth) Event risk (Protect wealth). CBA ( reported ) CBA (with CS diversified) NAB Westpac ANZ . Value at Risk ($Mio AUD). 5.

Ms Carnell was responding to a recent report by the Eros Association , which found the vast An ANZ spokesman said, “Subject to passing our normal credit policies for retail customers, we don’t A Westpac spokeswoman said, “We assess all applications for loans and merchant facilities on a

Aside from a sharp slowdown in credit growth, UBS also said the banking sector faced rising costs of 6.6 per cent in the first half — once again pointing the finger at NAB's restructuring.

The higher costs were also due to CBA setting aside $575 million for compliance and potential penalties arising out ofits alleged breach of anti-money laundering (AML) laws.

That's in addition to the banks' net interest margins (NIM) —or the difference between the bank's borrowing costs and the rate it lends — being pulled down from tighter lending standards, as more customers migrate from interest-only to principle-and-interest loans.

"Across the sector we downgraded forecasts [for EPS] by 1, 4, and 6 per cent over the next three years," wrote Jonathan Mott and Rachel Bentvelzen, the authors of the UBS report.

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Margin expansion and strong contributions from markets & treasury income, showed positive trends and helped to deliver total earnings growth of 4%; outperforming both ANZ and NAB . WBC Shares Rise After Solid Profit Report .

CBA is the top-ranked Australian company at No.58 with a market value of 7.71 billion. Rivals Westpac (72), ANZ (84) and National Australia Bank (88) are also in the top 100, with telco giant Telstra the next highest-ranked Australian company at No.262.

"Risks to our forecasts remain skewed to the downside especially as credit conditions continue to tighten and the federal election approaches (likely April/May 2019)."

Despite downgrading every bank, UBS noted there were some positives in the first-half results. Namely, banking sector revenue growing by 1.7 per cent, and NIM rising by 2 basis points (+0.02pc).

To sell, or not to sell

In the year to date, there have been steep losses in the share market for CBA (-11.8pc), Westpac (-4.8pc), ANZ (-1.3pc) and NAB (-3.7pc).

UBS slapped Westpac and ANZ with "sell" ratings, while CBA and ANZ got off better with "neutral" ratings.

It noted Westpac's first-half results benefited from its total revenue per share gaining 2.5 per cent, driven by a mortgage repricing in June last year, which boosted NIM by 7 basis points (+0.07pc).

But UBS had doubts about the quality of Westpac's assets, first raised a fortnight ago.

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The “four pillars” policy prevents mergers or acquisitions between Westpac , ANZ , the Commonwealth Bank and National Australia Bank , and hampers foreign bank takeovers. CBA customers still outraged. ANZ customers left cashless. NAB staff took ‘cash bribes in envelopes’.

NAB and Westpac finished the day flat. UBS analyst Jonathan Mott noted that while a Royal Commission was likely to be expensive and " NAB have been the least impacted because they have sold thier life business, Westpac doesn't have a big one either, ANZ is selling theirs and CBA , given

This was in light of Westpac's poor home lending practices, in APRA's Targeted Review,revealed publicly at the royal commission.

NAB's first-half results were "subdued" on the other hand, with revenue per share down 0.3 per cent, and loan growth at just 1 per cent.

However, NAB's earnings per share plunged by a sharp 18.5 per cent, given its substantial restructuring costs.

"Messy" was how ANZ's first-half results were described — though its net profit surged 14 per cent to $3.3 billion.

"While ANZ's costs fell on an absolute basis, there were no efficiency gains on a per share basis."

UBS found CBA's first-half result to be "reasonable", with its net profit beating expectations, and revenue per share gaining 4.6 per cent.

But the revenue growth was eroded by CBA's $200 million provision for the royal commission legal costs, and $375 million for potential AML fines.

Of course, there is no guarantee that AUSTRAC will settle its case against the nation's biggest bank for that amount, or whether there will indeed be a settlement.

Australia's Westpac appoints new customer relations head .
Westpac has created a new group executive position to help the bank set high service standards and resolve customer issues. The role of group executive, customer and corporate relations, will be filled by Carolyn McCann, who joined Westpac in 2013 and currently serves as its general manager, corporate affairs and sustainability. Her appointment comes as Australia's financial sector battles to rebuild public trust following revelations of widespread misconduct at an independent inquiry.

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