Director - Research, Consulting and Advisory, BondAdviser

Nicholas Yaxley

Director - Research, Consulting and Advisory

Australian bonds & fixed income research

BondAdviser

BondAdviser is the central reference point for intelligent information on Australian fixed income markets. We help you make informed decisions by providing unbiased research, transparent pricing data, analytics, portfolio tools and education.

BondAdviser has the broadest coverage of retail-accessible ASX-listed and over-the-counter Australian bonds and fixed income securities. We make it easy for you to review and compare investments before you place an order with your broker or dealer.

Credit

Over the past year the Australian banking sector has remained under intense public scrutiny from the regulatory bodies (ASIC, APRA, RBA), the Australian government and the media for issues ranging from increased regulatory oversight requirements, poor employee behaviour and questions surrounding the validity of specific financial products sold to consumers.Although the Australian financial system remains healthy overall, loan books have started to show signs of deterioration. This has been most evident in the consumer and business lending portfolios exposed to mining-related industries and the New Zealand dairy sector.In response to regulatory pressures, Australian banks have tightened lending standards and taken other steps to increase collateral requirements for higher-density residential projects and commercial property developments, and reduced their exposures to resource-related businesses. These developments have contributed to a slower overall credit growth rate that in turn will lead to lower profitability unless the banks start to rebuild margins by raising loan rates out of step with the RBA cash rate.Although the major banks raised an additional ~A$17.6 billion of equity during late 2015, this has not resulted in a major improvement in APRA capital ratios during 2016 as this was a response to the new risk weighting for Australian residential mortgages (that came into effect from 1st July 2016). As a result, we expect the major banks will continue to accumulate capital at APRA’s direction.Australian banks have also increased their ability to deal with liquidity shocks with the introduction of the Liquidity Coverage Ratio (LCR) and planning for the Net Stable Funding Ratio (NSFR) requirement from 2018. Access to long-term debt funding has been favourable for Australian banks this year, and they have used this opportunity to raise more capital from debt markets than in recent years, often at longer tenors and across the capital structure.

Over the past year the Australian banking sector has remained under intense public scrutiny from the regulatory bodies (ASIC, APRA, RBA), the Australian government and the media for issues ranging from increased regulatory oversight requirements, poor employee behaviour and questions surrounding the validity of specific financial products sold to consumers.Although the Australian financial system remains healthy overall, loan books have started to show signs of deterioration. This has been most evident in the consumer and business lending portfolios exposed to mining-related industries and the New Zealand dairy sector.In response to regulatory pressures, Australian banks have tightened lending standards and taken other steps to increase collateral requirements for higher-density residential projects and commercial property developments, and reduced their exposures to resource-related businesses. These developments have contributed to a slower overall credit growth rate that in turn will lead to lower profitability unless the banks start to rebuild margins by raising loan rates out of step with the RBA cash rate.Although the major banks raised an additional ~A$17.6 billion of equity during late 2015, this has not resulted in a major improvement in APRA capital ratios during 2016 as this was a response to the new risk weighting for Australian residential mortgages (that came into effect from 1st July 2016). As a result, we expect the major banks will continue to accumulate capital at APRA’s direction.Australian banks have also increased their ability to deal with liquidity shocks with the introduction of the Liquidity Coverage Ratio (LCR) and planning for the Net Stable Funding Ratio (NSFR) requirement from 2018. Access to long-term debt funding has been favourable for Australian banks this year, and they have used this opportunity to raise more capital from debt markets than in recent years, often at longer tenors and across the capital structure.

Australian Banking: A Debt Investor's Guide

Commonwealth Bank of Australia

Australian Banking: A Debt Investor's Guide