FINANCIAL STABILITY REVIEW – MARCH 2007
List of tables
Table 1: Personal Credit
Table 2: Banks’ Business Lending
Table 3: Banks’ Annual Profit Results
Table 4: Australian-owned Banks’ Foreign Exposures
Table 5: Traded Market Risk
Table 6: Long-term Ratings of Australian Banks
Table 7: Financial Strength Ratings of Selected Large Insurers
Table 8: Assets under Management
Table 9: Financial Soundness Indicators for Australia
Table 10: Distribution of Loans
..................................................................................................................................  |
Article
Table 1: Leveraged Buyouts of Australian Companies
.................................................................................................................................. |
Table 1: Personal Credit
Per cent
| Component |
Share of total |
Year-ended growth |
|
|
|
|
Jan-07 |
Jan-07 |
Jan-06 |
|
| Fixed |
52.3 |
14.5 |
9.5 |
| Credit card |
27.0 |
13.1 |
11.8 |
| Non-credit card revolving |
20.7 |
7.1 |
8.1 |
| of which: secured by housing |
13.9 |
4.7 |
6.7 |
| Total |
100.0 |
12.5 |
9.7 |
| Memo: Margin loans (a) |
17.7 |
34.6 |
26.2 |
|
| (a) Margin loan data are for December 2006, and exclude loans over $10 million but include some margin loans to business. Margin loans feature in both revolving and fixed credit owing to differences in reporting across lenders. |
| Source: RBA |
.................................................................................................................................. |
Table 2: Banks’ Business Lending
December 2006, by loan size
Loan size |
Level |
Share of total |
Year-ended growth |
|
$b |
Per cent |
Per cent |
|
| Less than $500,000 |
89.9 |
18.6 |
-2.1 |
| $500 000 to $2 million |
83.3 |
17.2 |
16.5 |
| Greater than $2 million |
310.4 |
64.2 |
27.6 |
|
| Source: APRA |
|
.................................................................................................................................. |
Table 3: Banks’ Annual Profit Results(a)
2006, five largest banks, consolidated
|
Level |
Growth(b) |
Per cent of average |
|
$b |
Per cent |
assets |
|
| Income |
50.1 |
4.6 |
3.3 |
| Net interest income |
29.8 |
– |
2.0 |
| Net income from wealth management |
6.3 |
– |
0.4 |
| Other non-interest income |
14.0 |
– |
0.9 |
| Expenses |
|
|
| Operating expenses |
23.8 |
-3.3 |
1.6 |
| Bad and doubtful debts |
1.9 |
0.1 |
0.1 |
| Profit(c) |
|
|
|
| Net profit before tax |
24.4 |
14.1 |
1.6 |
| Net profit after tax |
17.0 |
12.4 |
1.1 |
|
| (a) Year to September for ANZ Banking Group, National Australia Bank, St George Bank and Westpac Banking Corporation; year to June for Commonwealth Bank of Australia |
| (b) Some items are not directly comparable due to the introduction of IFRS |
| (c) Before outside equity interests |
| Sources: Banks’ annual reports |
.................................................................................................................................. |
Table 4: Australian-owned Banks’ Foreign Exposures
December 2006, ultimate risk basis
|
Total |
of which: |
|
|
|
|
Level |
Share |
Cross-border |
Local |
|
$b |
Per cent |
$b |
$b |
|
| New Zealand |
201.5 |
46.0 |
5.8 |
195.7 |
| United Kingdom |
107.0 |
24.4 |
22.7 |
84.3 |
| United States |
43.6 |
10.0 |
28.2 |
15.4 |
| Other developed countries |
54.9 |
12.5 |
49.7 |
5.2 |
| Developing countries |
18.1 |
4.1 |
11.3 |
6.8 |
| Offshore centres(a) |
12.5 |
2.8 |
7.4 |
5.0 |
| Other |
0.4 |
0.1 |
0.4 |
0.1 |
| Total |
437.9 |
100.0 |
125.4 |
312.5 |
| Memo: Per cent of total assets |
28.5 |
|
8.2 |
20.3 |
|
| (a) Includes Hong Kong and Singapore |
| Source: APRA |
.................................................................................................................................. |
Table 5: Traded Market Risk
Four largest banks, annual average value-at-risk, per cent of shareholders’ funds(a)
|
2004 |
2005 |
2006(b) |
|
| Interest rate |
0.02 |
0.02 |
0.02 |
| Foreign exchange |
0.01 |
0.01 |
0.00 |
| Other(c) |
0.02 |
0.01 |
0.02 |
| Diversification benefit |
-0.01 |
-0.01 |
-0.01 |
| Total |
0.04 |
0.04 |
0.04 |
|
| (a) Value-at-risk is calculated using a 99 per cent confidence interval and one-day holding period. |
| (b) Shareholders’ funds in 2006 are reported under IFRS. |
| (c) Other market risks include commodity, equity, prepayment, volatility and credit-spread risk. |
| Sources: Banks’ annual reports |
.................................................................................................................................. |
Table 6: Long-term Ratings of Australian Banks(a)
As at 22 March 2007
|
Current |
Last change |
|
|
|
|
|
Direction |
Date |
|
| Adelaide Bank |
BBB+ |
↑ |
October 2004 |
| AMP Bank |
A- |
↑ |
August 2004 |
| ANZ Banking Group |
AA |
↑ |
February 2007 |
| Arab Bank Australia |
A- |
– |
January 2007 |
| Bank of Queensland |
BBB+ |
↑ |
April 2005 |
| BankWest |
AA- |
↑ |
August 2006 |
| Bendigo Bank |
BBB+ |
↑ |
February 2005 |
| Commonwealth Bank of Australia |
AA |
↑ |
February 2007 |
| HSBC Bank Australia |
AA |
↑ |
July 2006 |
| ING Bank (Australia) |
AA |
↑ |
August 2005 |
| Macquarie Bank |
A |
– |
November 1994 |
| National Australia Bank |
AA |
↑ |
February 2007 |
| St George Bank |
A+ |
↑ |
January 2006 |
| Suncorp-Metway |
A+ |
↑ |
March 2007 |
| Westpac Banking Corporation |
AA |
↑ |
February 2007 |
|
| (a) Local currency |
| Source: Standard & Poor’s |
.................................................................................................................................. |
Table 7: Financial Strength Ratings of Selected Large Insurers
As at 22 March 2007
|
| Allianz Australia Insurance |
A+ |
| Insurance Australia |
AA |
| QBE Insurance Australia |
A+ |
| Suncorp-Metway Insurance |
A+ |
| Vero Insurance (Promina) |
A+ |
|
| Source: Standard & Poor’s |
.................................................................................................................................. |
Table 8: Assets under Management
December 2006, consolidated
|
Level |
Share of total |
Year-ended growth |
|
$b |
Per cent |
Per cent |
|
| Superannuation funds |
596.5 |
54.4 |
20.1 |
| Life insurers(a) |
209.5 |
19.1 |
6.1 |
| Other managed funds |
289.9 |
26.5 |
11.6 |
| Total |
1095.9 |
100.0 |
14.9 |
|
| (a) Includes superannuation funds held in the statutory funds of life insurance offices |
| Source: ABS |
.................................................................................................................................. |
Table 9: Financial Soundness Indicators for Australia
Per cent(a), 2005(b)
|
|
Indicator |
Australian-owned banks(c) |
All banks(c) |
|
| CORE SET |
|
|
|
|
| Banks |
|
|
|
|
| Capital adequacy |
1 |
Regulatory capital to risk-weighted assets |
10.2 |
11.3 |
| |
2 |
Regulatory Tier 1 capital to risk-weighted assets |
7.5 |
7.6 |
|
3 |
Non-performing loans net of provisions to capital |
4.6 |
4.4 |
| Asset quality |
4 |
Non-performing loans to total gross loans |
0.6 |
0.6 |
|
5 |
Sectoral distribution of loans |
– |
(d) |
Earnings and
profitability |
6 |
Return on assets(e) |
1.8 |
1.4 |
| |
7 |
Return on equity(e) |
25.3 |
21.6 |
|
8 |
Interest margin to gross income |
41.9 |
50.5 |
|
9 |
Non-interest expenses to gross income |
58.4 |
52.9 |
| Liquidity |
10 |
Liquid assets to total assets(f) |
9.8 |
13.1 |
|
11 |
Liquid assets to short-term liabilities(f) |
22.5 |
25.1 |
Sensitivity to
market risk |
12 |
Net open position in foreign exchange to capital(g) |
– |
0.8 |
| ENCOURAGED SET |
| Banks |
13 |
Capital to assets |
6.9 |
7.2 |
|
14 |
Large exposures(h) |
69 |
189 |
|
15 |
Geographical distribution of loans |
(d) |
– |
|
16 |
Gross asset position in financial derivatives to capital |
42.1 |
36.1 |
|
17 |
Gross liability position in financial derivatives to capital |
40.2 |
35.1 |
|
18 |
Trading income to total income |
4.8 |
5.9 |
|
19 |
Personnel expenses to non-interest expenses |
39.7 |
49.6 |
|
20 |
Spread between reference lending and deposit rates (in basis points) |
293.6 |
267.2 |
|
21 |
Spread between highest and lowest interbank rate (in basis points) |
0.0 |
– |
|
22 |
Customer deposits to total (non-interbank) loans |
– |
51.9 |
|
23 |
Foreign currency denominated loans to total loans |
– |
4.5 |
|
24 |
Foreign currency denominated liabilities to total liabilities |
– |
20.2 |
|
25 |
Net open position in equities to capital |
– |
– |
Table 9: Financial Soundness Indicators for Australia (continued)
Per cent(a), 2005(b)
|
|
Indicator |
Australian-
owned
banks(c) |
Non-
bank
FSIs |
|
Other financial
corporations |
26 |
Assets to total financial system assets |
– |
26.2 |
| |
27 |
Assets to GDP |
– |
168.8 |
Non-financial
corporations |
28 |
Total debt to equity(i) |
– |
74.6 |
| |
29 |
Return on equity(i) |
– |
14.2 |
|
30 |
Earnings to interest and principal expenses |
– |
369.6 |
|
31 |
Net foreign exchange exposure to equity(g) |
– |
11.9 |
|
32 |
Number of applications for protection from creditors |
– |
646 |
| Households |
33 |
Household debt to GDP |
– |
102.8 |
|
34 |
Household debt service and principal payments to income(j) |
– |
12.0 |
| Market liquidity |
35 |
Average bid-ask spread in the securities market (percentage of mid-point price) |
– |
4.5 |
|
36 |
Average daily turnover in the securities market(k) |
– |
2.5 |
Real estate
markets |
37 |
Real estate prices (annual percentage change) |
|
|
|
|
(i) Residential real estate prices |
– |
2.2 |
|
|
(ii) Commercial real estate prices(l) |
– |
11.8 |
|
38 |
Residential real estate loans to total loans |
56.5 |
– |
|
39 |
Commercial real estate loans to total loans |
10.4 |
– |
|
| (a) Unless otherwise indicated. |
| (b) Unless otherwise indicated, for stock data, reference date is 31 December 2005; flows data cover the year ending 31 December 2005. |
| (c) The data for Australian-owned banks are globally consolidated, i.e. the domestic operations and overseas branches and subsidiaries are included. The data for all banks include all banks with operations in Australia. The data are reported on either a Licensed ADI or domestic books basis. Licensed ADI data include overseas branches; domestic books data essentially covers the banks’ assets and liabilities in Australia. For more information, see Australia’s FSI metadata on the IMF’s website http://dsbb.imf.org/Applications/web/fsi/fsicountrycategorylist/?strcode=AUS. |
| (d) Data for this indicator are presented in Table 10 below. |
| (e) Before tax and extraordinary items. |
| (f) Using the ‘broad measure’ of liquid assets as defined in the IMF’s Compilation Guide on Financial Soundness Indicators. |
| (g) Data are as at March 2005. |
| (h) Consolidation basis is not applicable. |
| (i) Data presented on an aggregated resident-based approach (domestic consolidated basis). |
| (j) Data presented on a ‘domestic books’ approach (i.e. only enterprises resident in Australia are included and all overseas branches and subsidiaries are excluded from the reporting unit). |
| (k) Debt-service payments only. |
| (l) Average for year to June 2005. |
| Sources: ABS; AFMA; APRA; ASIC; Jones Lang LaSalle; RBA |
.................................................................................................................................. |
Table 10: Distribution of Loans
Per cent, December 2005
FSI 5: Sectoral Distribution |
FSI 15: Geographical Distribution |
|
Sector |
All
banks(a) |
Country/Region |
Australian-
owned
banks(a)(b) |
|
| Residents |
95.9 |
Australia |
68.9 |
| Deposit-takers |
0.7 |
Advanced economies |
29.8 |
| Central bank |
0.0 |
Other countries |
1.3 |
| Other financial corporations |
2.2 |
Central and eastern Europe |
0.2 |
| General government |
0.3 |
Developing Asia (incl. China) |
0.8 |
| Non-financial corporations |
27.7 |
Middle East |
0.1 |
| Other domestic sectors |
65.0 |
Western hemisphere |
0.1 |
| Non-residents |
4.1 |
Other |
0.0 |
| Total |
100.0 |
Total |
100.0 |
|
| (a) FSI 5 is on a domestic books basis; FSI 15 is on an Australian-owned banks basis. See footnote (c) to Table 9 for definitions. |
| (b) Data for Australia represent loans; data for other countries capture all claims on those countries. |
| Source: APRA |
.................................................................................................................................. |
Table 1: Leveraged Buyouts of Australian Companies*
|
Number |
Average deal value |
Total value of all deals |
|
|
$m |
$m |
|
| 1999-2004 average |
21 |
42 |
880 |
| 2005 |
29 |
62 |
1,792 |
| 2006 |
28 |
917 |
25,670 |
|
| * Includes debt and equity funding of deals completed and pending; excludes existing debt of bought-out company. |
| Sources: Australian Venture Capital Journal; Thomson Financial |
|
