Day 501: 'No quick fix'
Counting the days since the banking royal commission was established.
Good afternoon, and welcome to day 501.
Today in summary: AMP avoids a second strike; NAB – like its mates – is haemorrhaging money into remediation; and APRA says income protection insurance is a bad product.
-- Alex
@AlexESampson
Current banker panic level: 😅😲🧐
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AMP has avoided a spill of its board after 89% of shareholders voted in favour of the embattled wealth manager's remuneration report, sparing it a second strike. AMP chairman David Murray was re-elected and shareholders approved the appointment of John Fraser, John O'Sullivan and Andrea Slattery to the AMP board. John Patrick Moorhead was appointed chief financial officer. Shares fell today after AMP reported net cash outflows of A$1.8 billion in the first quarter on 2018-19, as it paid to remediate mistakes and misconduct.
Murray said:
“There is no quick fix but with the right leadership, capability, systems and customer focus, we intend to turn this business around.”
NAB’s half-year result today revealed the bank, like others, is haemorrhaging money into remediation. The bank announced it would soon have 500 people working on customer remediation and had sunk A$1.1 billion into making amends for bad behaviour and repaying money it shouldn’t have made.
Australia’s fourth largest bank – which has already lost CEO Andrew Thorburn and will say goodbye to chair Ken Henry in the wake of the royal commission – has also decided to ditch executive bonuses worth A$5.5 million and cut directors' fees by 20%. Interim chief Phil Chronican said the bank was responding to three key themes of the current climate – the royal commission final report, its APRA self-assessment and “significant regulatory actions”.
AFR | The Australian | SMH
APRA has called on the life insurance industry to “urgently” address concerns about the sustainability of income protection insurance. The insurance, which provides replacement income to policyholders when they are unable to work due to illness or injury, has been flagged for scrutiny by the prudential regulator due to its “ongoing poor performance”.
APRA said:
“The industry has collectively lost A$2.5 billion through this product offering over the past five years, with no signs of improvement.”
APRA issued a series of requirements for life companies to address, including shortcomings with insurers’ strategy and risk governance, pricing and product design, as well as inadequate data and resourcing dedicated to dealing with income protection.
ING today released its first-quarter 2019 results and revealed the Dutch-owned bank took several steps in blockchain and distributed ledger technology to improve its offering. Total regulatory costs rose to €515 million (A$822 million) in the first quarter, a steep hike from €266 million (A$424 million) in the fourth quarter of 2018, which included the annual Dutch bank tax. Australia, Spain and Poland were the main contributors to the net core lending growth.
🔥🔥🔥
Today’s burn prize: Opposition leader Bill Shorten
“The function of superannuation is to make sure that people have money for their retirement. It's not about making multimillionaires.”
Shorten last night defended Labor’s superannuation polices to Leigh Sales on ABC 7.30 after Sales called them “controversial”.
Sales burned Shorten right back:
“Paul Keating and others set up superannuation so it would entice people to save for their retirement so they would be less of a burden on government across all demographics. Why are you making it less enticing for any Australian given that that's the whole point of it?”
The Commentariat
SMH companies, markets and economy commentator Elizabeth Knight writes that ANZ's share price gain has baffled markets. Knight says ANZ’s underlying performance is nothing to get excited about.
“The best that can be said is that it was roughly in line with analysts' expectations, the worst is that it confirmed the Australian retail lending market was very soft and won’t be improving anytime soon.”
There are a series of “important messages” for investors and about the state of banking and the broader economy in yesterday’s ANZ half-year result, Terry McCrann writes in the Herald Sun. McCrann argues there is little sign of speculated “disruption” from non-banks and big banks have been able to “broadly absorb” Hayne’s shake up.
“The first, most important, and overall message is that after the battering the banks have taken over the past year — in particular, the collapse in the property market and the bruising from the Hayne Royal Commission — this bank was still making a very solid profit and the banking business was just fine.”
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