Day 512: 'A poor joke'
Counting the days since the banking royal commission was established.
Good afternoon, and welcome to day 512.
Today in summary: CBA’s customer remediation bill has hit A$2 billion; IOOF still wants to buy ANZ’s OnePath superannuation business, but the deal needs APRA approval under new super laws; and new capital raising laws for credit unions and building societies will help them better compete against the big banks.
-- Alex
@AlexESampson
Current banker panic level: 🤑🤑🤑
Please don’t keep The Inquisition to yourself. Forward this email to your colleagues and encourage them to sign up for free here.
Commonwealth Bank's third quarter results have revealed weighty remuneration costs. The bank has set aside an extra A$714 million for paying back customers for poor or non-existent service and products, bringing total refunds to more than A$2.1 billion. The additional $714m pre-tax in customer remediation included $334m in “aligned advice” remediation, $72m in other wealth customer refunds and $152m of banking customer refunds. The total remediation for advice has now reached $534m, including $374m in customer refunds and $160m in program costs.
The bank said it had completed the implementation of “half a dozen or so” of the banking royal commission’s recommendations, and was “on-track” with the rest, and that an update would be given at its full-year results announcement in August. When asked during an audio webcast how much of the $156m allocated for “other program costs” related to the royal commission recommendations, CEO Matt Comyn replied that the bank did not “break out” costs for Hayne’s recommendations separately.
Comyn said:
“We’ve got 400 people working on the customer remediation program and we’ve got a number of other people working on resolving projects and issues around that.”
The Australian | SMH | AFR
IOOF still wants to buy ANZ’s OnePath superannuation business, but the divestment will need APRA approval under recent amendments to the Superannuation Industry (Supervisions) Act 1993. The deal, worth A$975 million, was struck in 2017. ANZ — which was one of the first banks to put the wheels in motion for divestment of its vertically integrated wealth and insurance arms — said the bank and IOOF continued to work co-operatively on the transaction.
In December 2018 APRA took action against IOOF entities, directors and executives for “failing to act in the best interests of superannuation members” — a move which chopped almost A$1 billion off IOOF's market capitalisation in a single day. On April 12 this year IOOF was hit with a shareholder class action alleging the embattled wealth company misled shareholders, causing them to pay an inflated price for the company's shares. IOOF today posted an ASX update saying if any of the outstanding conditions to complete the acquisition were not satisfied by October 17 this year, the deal may not go ahead.
AFR | The Australian | SMH
New laws designed to make it easier for credit unions and building societies to raise capital will help them compete against the big banks. The Treasury Laws Amendment (Mutual Reforms) Act, that came into force last month, allows mutuals to raise money by issuing a special restricted class of shares, known as a “mutual capital instrument”. It also contains a new definition of a mutual and allows mutuals to do more without facing being stripped of their special status.
🔥🔥🔥
Today’s burn prize: Australian Taxpayers’ Alliance Director Satya Marar
“By guaranteeing most of an intended "buffer" against a fall in property values, the government is essentially using public funds to guarantee that no crash will occur. What could possibly go wrong?”
Marar is unconvinced the new bipartisan policy for first home buyers is as light touch as Prime Minister Morrison has been arguing.
The Commentariat
The Australian’s senior columnist John Durie writes that Morrison’s “last-minute” A$500 million “Mickey Mouse proposal” to encourage first-home buyers is a “a poor joke”.
“For starters the home loan market is $1.8 trillion, so a $500 million guarantee scheme will impact 0.27% of the market. If the banks have to be responsible lenders, who in the government will provide responsible guarantees? And if the idea is to take the brakes off bank lending, then let’s get the Australian Prudential Regulation Authority involved on a sector-wide basis.”
Australia’s obsession with fiscal austerity is madness, writes Alan Kohler in The Australian. Kohler argues that whoever wins the election will have to do an about face on fiscal policy and emulate Trump’s Keynesianism.
“Obviously, there are many things behind the fact that the US economy is growing at almost twice the rate of Australia’s, but it’s worth noting that one of them is not monetary policy. It will look pretty silly to still be marching onwards to glorious surplus when the economy is heading towards recession with the Reserve Bank stamping ineffectively on the accelerator.”
This is an introductory service while we’re building a comprehensive daily paid online publication, coming soon.
We’re not here to offer opinion, simply to cut through the noise, and help you make sense of the emerging policy and market trends you need to be across. We call it pure intel. You can read more about us here.