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Main ForumAustralian January Bank Statistics Released

  • At the end of each month the RBA publishes the Banking Statistics from the previous month.

    Aside from the GFC inspired contraction, it is unusual to see a fall in total resident Bank assets. Total assets fell by $16 Billion, from $2,447 Billion to $2,430 Billion. The movement mirrors other indicators in the market, lower consumer confidence, lower retail sales, and the 1.6% fall reported in home prices reported by Bismark.

    A good sign of a more cautious consumer is that credit card balances fell by 2% in the month of January. Whilst there is normally a contraction in credit card balances, this fall is more pronounced.

    The usual suspects added to borrowings for the month, Owner Occupied home lender, Home Investment lending, and Government. Home lending, although increasing, has a declining growth rate. Commercial lending growth remains stuck in negative territory.

    Despite the rally in the sharemarket, margin lending facilities continue to decline (and with a 9.75% interest rate, it is no wonder).

    The RBA publishes total assets and total liabilities of the Banks which highlights the equity positions of the Banks, including equity ratios. When Banks report Capital (Equity) ratios, they are able to weight Home lending assets at less then their face value due to their perceived lower risk profile. Therefore Banks are reporting Capital ratios around 12%. On an un-weighted basis, the ratio has declined to 7.1%. The chart highlights that the Banks were desperate to re-capitalize as the GFC hit in 2008. They pushed their un-weighted Capital ratio from 5.7% to 8%. As bad debt charges rose, equity positions have leveled off and declined. Banks have been able to manage the slow growth environment by focusing on home lending assets, which carry lower risk weights, so as to be able to report higher capital ratios. It also highlights why annual Commercial lending remains negative and probably why the National Australia Bank is aggressively targeting the other Banks' home loan customers with enticing discounts.

    Bank profitability has been maintained by this shift in asset focus, cost cutting, reduction in bad debt write-offs, and expanding margins above official Reserve Bank interest rate rises.

    Banks are cashing in all their one-off profitability chips, but with zero growth in Bank resident assets over 2 years, a more cautious consumer, a new carbon tax, a new flood levy tax, fear of interest rate increases, a budget deficit that politically will need to be cut back, a lifetime best terms of trade that hasn't boosted the economy, you would be right to remain cautious.

    Michael Cornips

  • How good is that... a reduction in credit card debt for the average person. Go Aussies... you are getting the message.

    Home loans have traditionally been a lower risk bhet for the banks in Australia but banks now have up to 70% of their lending to home loans. It is now the biggest part of the banks asset base. And Australia has one of the highest house price to income ratios in the world, a home loan asset base that has been describes by some as a bobble. Housing prices Australia wide are dripping. Lending to home loans is no longer the low risk option for banks. Most of the Australian banks have all of their eggs in one basket.

    Michael's comment on being "cautious" is one term to use for bank shares. Run for the hills is another.

    The banks made a lot of money through the 2000's when credit was cheap. Credit is no longer cheap and banks will now struggle. This the reality as I see it. If you are an investor find where the money has migrated. I'll give you a hint: Au


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