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AUSTRALIA MARKETS(2017-10-16)

AIMS
2017-10-16 11:00

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Bank of Queensland Limited (BOQ):
Bank of Queensland has surprised investors with a special dividend of 8¢ per share and is exploring other capital management options after benefiting from the prudential regulator’s rules over how much capital it must hold to be ‘‘unquestionably strong’’. The decision to reward shareholders came as chief executive Jon Sutton pledged to keep a ‘‘laser-like, forensic focus on costs to create the headroom to grow this business’’. He said the nation’s fifth biggest bank was facing pressure on banking fees and the challenges of low housing credit growth, low interest rates and increased scrutiny of conduct and culture.
 
Commonwealth Bank of Australia (CBA):
BankWest, owned by CBA, is finalizing a system of national digital settlements for a January 1, 2018 launch. It is likely BankWest will rebuild its property lending system around the new model and, if successful, will be adopted by the parent. The deals will continue as the threat from existing and new competitors increases. About 90 per cent of interactions with customers for major banks, such as NAB, are digital. Mr Baum claims the traditional relationship between mortgage brokers – which recommend more than 50 per cent of products – and lenders is being broken. Mortgages are commodities, like car insurance, which can be settled by online calculators. ‘‘When a customer applies for our loan online we are conducting the assessment in the background in real-time, not conditional approval. This is true automation of the home loan process, which is why we can offer extremely low rates and no fees,’’ he said.
 
Magellan Financial Group (MFG):
The $50 billion Magellan Financial Group is turning to high-fee retail investors, launching an $11 million campaign to lure cricket fans into the company’s funds amid market-wide pushback against active investment management. Speaking at the group’s annual general meeting in Sydney yesterday, Magellan chief executive Hamish Douglass, a BRW rich-lister with a wealth of more than $500m, said the company was also creating funds for institutions that wanted low-carbon options. “More and more institutional investors are starting to focus on the carbon exposure of their portfolios, almost despite what the politicians are doing,” Mr Douglass said. He noted possible moves by the European Union to require funds to disclose their carbon footprint would drive competition between institutions such as churches and university endowments to find low-carbon solutions for their portfolios. “We’re not preaching to people about the climate science, but we are preaching to people about risk management and understanding how much exposure you have,” Mr Douglass said.
 
Medibank Private Limited, NIB Holdings Limited Funds (MPL, NHF):
Health insurers will feel some short-term pain from the biggest shake-up to the industry in decades but the changes will be worth it in the long run if they slow the number of customers dropping out of the system due to soaring premiums. Health insurers like Medibank Private, NIB and Bupa have been actively involved in the Coalition's health reforms because they know fighting against efforts to reduce premiums will backfire in the long run. The government wields a big stick because it approves the premium increases each year. However, the biggest long-term threat to the health insurance industry is the hundreds of thousands of households downgrading their health cover or dropping out altogether because it has become unaffordable. There is a question mark over how much of an impact the raft of measures Health Minister Greg Hunt announced Friday will have but they are a step in the right direction.
 
Mortgage Choice Limited (MOC):
Mortgage Choice CEO John Flavell has rejected claims that mortgage brokers are to blame for the preponderance of interest only loans, highlighting the enormous fall in the percentage of interest only loans being written by his brokers. Mr Flavell said the proportion of interest only loans being written by Mortgage Choice had fallen from 35.95 per cent in May to 14.64 per cent in September. He said that Mortgage Choice brokers – who write one in every 20 residential mortgages in Australia – made considerable effort to find suitable loan arrangements for their clients. ."Our brokers aren't going to put customers in a particular product for the sake of it, they will make sure it's the right product for them," Mr Favell said. The strident defence came hard on the heels of ASIC's statement on Wednesday that borrowers who used mortgage brokers were more likely to sign up for interest only loans.
 
National Australia Bank Limited (NAB):
NAB has cut its Sydney house price growth expectations this year, saying the market is slowing faster than it expected at its last forecast three months ago. The country's fourth-largest mortgage lender lowered its outlook for houses in the NSW capital to 5.1 per cent from 6.7 per cent in July, even as it raised its expectations for other cities."[Sydney's] slowed faster than we expected in houses," NAB chief economist Alan Oster said on Friday. The report came a day after Domain Group reported Sydney's median house price fell 1.9 per cent in the three months to September, the first decline in almost two years. In its semi-annual Financial Stability Review published on Friday, the Reserve Bank of Australia warned of "potential risks" in the form of lower-income households running up losses on investment properties to take advantage of negative gearing, a rise in borrowers with multiple properties, and an increase in indebted investors over 60 years old.
 
QBE Insurance Group Limited (QBE):
For the second time in two months S&P Global Ratings has affirmed its positive rating on QBE Insurance Group, despite a raft of natural disasters putting the global insurer on course for a $US600 million ($767 million) profit hit. Yesterday S&P said it was sticking with its ‘A+’ financial strength rating on QBE’s core operating entities, but flagged it would revise the outlook to stable within the next 12 months if the insurer’s North American operations did not improve. ‘‘QBE Group’s full-year 2017 operating performance will be lower than our expectations, primarily as a result of atypical natural disasters and extreme weather events rather than deterioration in underlying performance,’’ said S&P.
 
Suncorp Group Limited (SUN):
Former Microsoft managing director Pip Marlow is one of the big winners of management shake-up by Suncorp chief executive Michael Cameron, who is fast-tracking its controversial marketplace model. On Thursday Mr Cameron said Ms Marlow would become the CEO of its new Customer Marketplace unit, less than a year after she joined the banking and insurance group. ‘‘Over the past 12 months, we have embedded a new strategy and operating model. A more streamlined senior team will deliver the strategy more efficiently and effectively.’’
 
Telstra Corporation (TLS): The competition watchdog is set to run the ruler over the merger of Foxtel and Fox Sports, focusing on the acquisition and supply of sports rights and the telecommunications services. The merger, revealed by The Australian Financial Review in August, will see Fox Sports, which is wholly owned by News Corporation, into Foxtel, which is 50-50 owned by Telstra and News Corp. News Corp will own 65 per cent in the new entity and Telstra the remaining 35 per cent. The short-term plan would not be to float the business, as Foxtel deals with a number of headwinds and is given time to implement its subscription video on-demand strategy with Foxtel Now, which launched in July. However, long-term the idea would be to list the business. When the business lists, Telstra is planning to sell down part of its 35 per cent stake.
 
Westpac Banking Corporation (WBC):
Shine Lawyers have launched a class action against Westpac for allegedly selling customers life insurance policies at steep mark ups in a case they speculate could be worth $100 million. The statement of claim filed on October 12 claims Westpac's financial planners sold term life, total and permanent disablement, trauma and income protection insurance at a 10 per cent premium compared to the same policies sold elsewhere. The 20 page statement of claim highlights the bank's use of the code "CF 1.045" for policies that were 4.5 per cent highe and sold by its network of financial advisers. The code "CF 0.95" was used for policies that were sold at a 5 per cent discount that were available to independent financial advisers. Lawyers for Shine claim the bank breached its fiduciary duty, unfairly took advantage of its position and improperly used its position to gain a benefit for itself.
(Source: AIMS)
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