Australian Major Banks Have $15b to $28b Excess Capital says Morgan Stanley

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    Beginning with CBA earnings results in August, Australia’s…


    Helmholtz Watson

    For the week Commonwealth Bank backed away from record highs, dropping 2.1 per cent to $103.69. Westpac, NAB, and ANZ were lower.

    Helmholtz Watson

    CBA raises mortgage assessment rate
    By Clancy Yeates

    The Commonwealth Bank is raising the interest rate it uses to assesses new loan applications, as banks face scrutiny from regulators over the booming home loan market.

    CBA, the country’s biggest bank, will lift its assessment rate from 5.1 per cent to 5.25 per cent, a move that is likely to pare back the maximum amount some customers can borrow.
    Commonwealth Bank will lift its assessment rate from 5.1 per cent to 5.25 per cent, a move that is likely to pare back the maximum amount some customers can borrow.

    Commonwealth Bank will lift its assessment rate from 5.1 per cent to 5.25 per cent, a move that is likely to pare back the maximum amount some customers can borrow.Credit:Peter Braig

    Even though banks are promoting interest rates of less than 2 per cent, lenders must use higher rates when they are deciding whether a new borrower can afford a loan.

    CBA said its decision took into account “the external environment and our regulatory commitments.“

    “As part of our regular monitoring and review of our policies and services, we have made the decision to review our serviceability floor rate to ensure we continue to lend responsibly in the current low rate environment,” CBA said.

    While the move will crimp some customers’ borrowing capacity, the bank said the “vast majority” of customers would be unaffected by the change.

    RateCity said CBA would now have the highest assessment rate of the big four.

    Research director at RateCity, Sally Tindall, said the move would help ensure customers could afford their repayments when interest rates rose.

    “While this change could limit the amount some customers can borrow, it’s designed to save them from mortgage stress in years to come,” Ms Tindall said

    Helmholtz Watson

    NAB settles US bank bill swap rate class action complaint

    The National Australia Bank has agreed to settle a class action complaint related to bank bill swap rates in the US.

    The class action – launched in 2016 and naming NAB and multiple other financial institutions as defendants – was dismissed on jurisdictional grounds, but there remained a possibility that the dismissal could be reversed and the claims against NAB reinstated.

    NAB said today’s settlement was without admission of liability, and remains subject to negotiation and the execution of complete settlement terms and court approval.

    The terms of the settlement remain confidential.

    NAB had previously raised provisions in respect of this matter and the financial impact of the
    settlement is not substantial.

    Helmholtz Watson

    KKR to acquire majority stake in ANZ education technology company

    KKR (NYSE:KKR) agrees to acquire a majority stake in Australian and New Zealand education technology company Education Perfect (EP) through its strategy that’s focused on advancing the United Nation’s Sustainable Goals.

    Terms of the transaction weren’t disclosed.

    KKR will make the investment from its Global Impact Fund, a strategy focused on investing in market-leading companies whose business contributes toward the UN’s Sustainable Goals initiative.

    EP’s business contributes toward SDG 4 (Quality Eduation) by providing accessible, affordable, and high-quality education around the world, KKR said in a statement.

    Private equity firm Five V Capital, which invested in EP in 2017, will remain a shareholder along with EP’s management team and co-founders Craig and Shane Smith.

    “Digital transformation in K-12 education is at an early stage compared to other industries, and EP is well-positioned to drive this on a larger, global scale,” said George Aitken, a director at KKR.


    Westpac chairman says economy ‘robust,’ eyes capital return

    Westpac chairman John McFarlane has signalled his confidence in the economy and re-affirmed that the bank is likely to consider returning excess capital to shareholders.

    In a letter to shareholders today, Mr McFarlane said the bank was making headway in improving its financial performance, as reflected in its improvement in profits, which were revealed in May.
    Westpac chairman John McFarlane.

    “The economic environment appears robust, and things do appear generally to be looking up, subject of course to the pandemic,” Mr McFarlane wrote.

    All of the major banks are holding billions in excess capital, and Mr McFarlane said it would receive further capital from selling non-core businesses.

    “Our excess capital and franking credit position should enable the board, at the appropriate time, to consider a return of capital to shareholders,” he said.

    Westpac shares were up 0.4 per cent at $25.93 at 2pm AEST, lagging a 0.6 per cent rise for the broader ASX.


    CBA Boom Earnings:

    Commonwealth Bank a near 20% rise in full-year cash net profit to $8.65bn with a final dividend of $2 per share, bringing the full-year payout to shareholders to $3.50, up 17 per cent. In addition, CBA announced an off-market share buyback of up to $6bn.

    “It will basically reduce the amount of shares on issue by an estimated 3.5 per cent,” Mr Daghlian noted.

    CBA shares have climbed to record highs, eclipsing $109 in intraday trade, but some analysts have given lower price targets, including JP Morgan’s $92.

    CBA shares hit an all-time high of $109.03 in intraday trade before finishing 1.5 per cent firmer at $108.17.


    Australian Banks all rose on CBA Profit & Buyback news:

    ANZ lifted 1.2 per cent to $29.23,
    National Australia Bank rose 0.93 per cent to $27.22
    Westpac improved 0.74 per cent to $25.77.
    Commonwealth 1.5% firmer at $108.17.

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