IFR Asia - 24.08.2019

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Westpac flags lower capital ratio

WESTPAC BANKING CORPORATION’s capital levels

are showing signs of strain as it reported

AûDROPûINûITSûCOMMONûEQUITYû4IERûûRATIOû

to 10.5%, the minimum level the big four

Australian banks must meet from January

1 2020.

Australia’s number four lender said in

ITSûTHIRD

QUARTERûCAPITALûFUNDINGûANDûCREDITû

QUALITYûUPDATEûLASTû-ONDAYûTHATûITSû#%4û

RATIOûFELLûBPûQUARTERûONûQUARTERûWHICHû

it attributed to the payment of an interim

dividend and a slight increase in risk-

weighted assets.

7ESTPACûSAIDûTHATûITûEXPECTSûITSû#%4û

ratio to deteriorate by a further 44bp

following the introduction of new

accounting rules and a new regulatory

REQUIREMENTûTHATûITûSETûASIDEûANûADDITIONALû

A$500m (US$339m) to address non-

lNANCIALûRISK

The Australian Prudential Regulation

Authority said last month that AUSTRALIA

AND NEW ZEALAND BANKING GROUP and NATIONAL

AUSTRALIA BANKûWOULDûALSOûBEûREQUIREDûTOûSETû

ASIDEûTHEûSAMEûAMOUNTûFORûANûINDElNITEû

period of time.

!02!ûANNOUNCEDûTHEûREQUIREMENTû

after it asked the banks to provide self-

assessment reports on their corporate

culture and governance. The move

stemmed from the Royal Commission

INQUIRYûWHICHûREVEALEDûWIDESPREADû

malpractice across the industry.

COMMONWEALTH BANK OF AUSTRALIA was

already hit last year with an additional

!BNûCAPITALûREQUIREMENTûFOLLOWINGû

a money-laundering scandal that

precipitated the Royal Commission

INQUIRY

4HEûDROPûINû7ESTPACSû#%4ûRATIOûHASû

sparked concerns among analysts it will

BEûFORCEDûTOûCUTûITSûlNALûDIVIDENDûTOû

meet the 2020 deadline APRA has set to

ensure that the country’s major banks are

hUNQUESTIONABLYûSTRONGv

The bank’s loan book is also showing

signs of strain as its 90-plus-day

DELINQUENCYûRATIOûFORû!USTRALIANûMORTGAGESû

EDGEDûUPûBPûQUARTERûONûQUARTERûTOûû

despite recent signs that the two-year

slump in property prices is beginning to

bottom out.

Both ANZ and NAB also said during

trading updates earlier this month that

THEIRûDELINQUENCYûRATIOSûFORûMORTGAGESû

increased with ANZ reporting a 9bp rise

QUARTERûONûQUARTERûTOûûANDû.!"û

recording a 6bp increase to 0.85%.

CBA, which operates on a different

lNANCIALûCALENDARûTOûTHEûOTHERûBIGûFOURû

lenders, said earlier this month that for

THEûFOURTHûQUARTERûENDINGû*UNEûûITSû

DELINQUENCYûRATIOûSTOODûATûûUPûBPû

from the end of Q3.

.!"ûALSOûmAGGEDûDURINGûITSûTRADINGû

update that it expects to incur further

costs related to the Royal Commission

during the second half, although it did not

provide guidance for the amount.

As of April 30, it has already booked

A$1.1bn in remediation costs linked to

THEû2OYALû#OMMISSIONûINQUIRYûINCLUDINGû

compensating customers that were

charged fees for advice they never

received.

NAB’s CET1 was 10.4%, unchanged at

June-end compared with three months

earlier. Meanwhile, ANZ’s CET1 ratio was

11.8%, up from 11.5% at March 31, while

CBA’s CET1 ratio stood at 10.7%, up from

ûATûTHEûENDûOFûTHEûPREVIOUSûQUARTER

THOMAS BLOTT

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IGNOREDû4HEû0"O#SûOFlCIALûLENDINGûRATEûHASû
remained unchanged since October 2015.
Under the new regime, the PBoC has
expanded the number of banks that will
SUBMITûTHEIRû,02ûQUOTATIONSûFROMûûTOûû
The new group now includes foreign banks,
digital banks and rural and city commercial
banks.
#HINASûBIGûlVEûSTATE
OWNEDûLENDERSû

• Agricultural Bank of China, Bank of
  China, Bank of Communications, China
  Construction Bank and Industrial and
  Commercial Bank of China – and several
  joint stock commercial banks were already
  included in the original group of 10.
  The PBoC will now calculate the LPR based
  ONûTHEûAVERAGEûQUOTATIONSûMINUSûTHEûHIGHESTû
  and lowest rates submitted by the banks.
  The National Interbank Funding Center, a
  subsidiary of the PBoC, will announce the
  LPR on the 20th of every month.
  The one-year LPR will be used for most
  mOATING
  RATEûLOANSû4HEû0"O#ûALSOûSAIDûITû
  WASûINTRODUCINGûAûlVE
  YEARûEQUIVALENT û
  which would serve as a reference rate for
  pricing long-term loans such as mortgages.
  The new one-year LPR was set at 4.25%
  last Tuesday, down 6bp. It was 10bp lower
  than the PBoC’s existing benchmark one-
  YEARûLENDINGûRATEû4HEûNEWûlVE
  YEARû,02û
  RATEûWASûSETûATû ûBELOWûTHEûlVE
  YEARû
  benchmark lending rate of 4.90%.
  7EIû,I ûSENIORû#HINAûECONOMISTûATû
  Standard Chartered, said that he expects
  THEû0"O#ûTOûCUTûTHEûRESERVEûREQUIREMENTû
  ratio and medium-term lending facility
  this year to reduce pressure on banks’ net
  interest margins following the changes.
  ,ASTû7EDNESDAY û3TAN#HARTûSAIDûITûHADû
  COMPLETEDûEIGHTûTRADEûlNANCEûLOANSûBASEDû
  on the new benchmark. The loans are for a
  total of Rmb31m (US$4.4m) for companies
  including Suning.com.
  THOMAS BLOTT

„ CLSA has bolstered

its debt team with

three new hires in

Hong Kong.

Ping Li has joined as

head of global debt

financing for Greater

China. She was most

recently based in

Shanghai with Credit

Suisse, according to

her LinkedIn profile.

Frederick Fu has also

been appointed head

of leveraged and

structured finance. He

spent the past decade

with China Citic

Bank, where he was

general manager for

structured finance.

Mengting Wang

has been named

head of corporate

risk solutions. She

was most recently a

director at Barclays.

„ Sean Walsh, co-

head of GOLDMAN

SACHS’s financing

group in Australia

and New Zealand,

is retiring after 15

years with the US

investment bank.

Walsh, who

previously served as

head of equity capital

markets for Australia

and New Zealand, is

due to step down in

the next few weeks.

No replacement has

been appointed.

Chris Champion,

who is also head of

debt capital markets

locally, has served

as co-head of the

financing group Down

Under alongside

Walsh since 2014.