PowerPoint Presentation by u8BO3ah

VIEWS: 10 PAGES: 18

									FUNDING & LIQUIDITY                           Strictly Private and Confidential

AM Institute 2012 Business Strategy Forum - Cameron Rae
CURRENT STATE OF THE MARKET
Credit markets tighten
  ■ Credit markets have tightened after recent quantitative easing's by US and
      European central banks, benign news out of Europe and better than expected
      US economic data.
  ■ New debt issue launched in January 2012 have performed well in the
      secondary market
  ■ While the recent trend has been positive we still expect volatility during 2012.
  ■ “I think the only thing which is certain, is that uncertainty is likely to persist
      for some time to come.” – Guy Debelle, RBA Assistant Governor 14 Feb 2012
  ■ Overall borrowing costs will still remain at long term highs
  ■ Covered bonds initially well received in the domestic market giving major
      banks another alternative
  ■ Will this take pressure off domestic term deposit rates?


                                                                      Strictly Private and Confidential
AUSTRALIAN ITRAXX INDEX
Australian Credit Index is at widest levels since July 09




                                                            Strictly Private and Confidential
MAJOR BANK CREDIT DEFAULT LEVELS
Credit Spreads on the improve




                                   Strictly Private and Confidential
COVERED BONDS
Performance may drag domestic borrowing cost in




                                                  Strictly Private and Confidential
COMPARATIVE ISSUE MARGINS
Term deposits rates are still historically high

                        Major Bank      Large Regionals   Rated Mutuals         Small Mutuals

                            AA             A-/BBB+         BBB+/BBB                 Unrated

      Term Deposits        120              120+              120+                    120+

          NCD’s             0               15-30            30-50                     75+

     Senior Unsecured
                            90               200              200+                    250+
         (3 Year)

        Sub Debt           275               400              475*                   550+*

       RMBS Senior         140               140              140+                    140+

       RMBS Junior         450               450              450*                    450**

      Covered Bonds        130               N/A              N/A                      N/A




                                                                          Strictly Private and Confidential
COMPARATIVE ISSUE MARGINS
Bank issue margins have been dragged out with global pressures




                                                             Strictly Private and Confidential
IMPACT ON MUTUAL SECTOR
Term deposit competition will remain high



  ■ Term financing remains difficult
  ■ Scenario analysis ADI’s motivated to increase exposure to retail deposits
  ■ Lower run off assumptions can be made on retail deposits
  ■ Major banks still remain very active offering historically high TD rates and we
     don’t see that changing in the near future – paradigm shift.
  ■ Smaller ADI’s will begin to look at funding alternatives where possible to
     defray the significant increase in borrowing cost
  ■ APRA have begun focusing on operational risk where added sophistication is
     perceived




                                                                     Strictly Private and Confidential
OPERATIONAL RISK
APRA are looking at operational risks and requesting higher standards



  ■ HQLA beneficial ownership
  ■ Austraclear
  ■ RITS Membership – Repo Capability
  ■ Internal Securitisation




                                                               Strictly Private and Confidential
Scenario Analysis ADI’s
APRA is bringing more sophisticated reporting requirements to mutuals



  ■ Liquidity Coverage Ratio (LCR) – ADI’s are required to maintain an
     adequate level of unencumbered, high quality liquid assets to meet
     their liquidity needs for a 30 day period under a significantly severe
     stress scenario. The value of LCR must not be less than 100%
  ■ Stock of high quality liquid assets
     Total net cash outflows over the next 30 days      >100%
  ■ MLH ADI expected to have scenarios for “going concern” however
     those shifting to Bank status of taking wholesale funding may be
     required to run scenarios for stressed environments
  ■ Prescribed run off assumptions in Draft APS 210 release November
     2011




                                                                       Strictly Private and Confidential
LIQUIDITY
Draft APS 210

  ■ Removal of clause b) from the current standard which states "securities
     eligible for repurchase transaction with the Reserve Bank" as a generic catch
     all
  ■ Removal of the explicit requirement for bank bills and CDs to be at least
     investment grade from clause c)
  ■ Explicit inclusion of debt securities issued by supranationals and other foreign
     governments as HQLA
  ■ Combination of debt securities with a credit rating grade 3 or lower (long-
     term mapping of BBB+) to form no more than 20% of the MLH of an ADI
  ■ Debt securities (including CD’s) held must be eligible for repurchase
     agreement with the RBA
  ■ An explicit operational requirement to ensure the ADI has the capacity to
     liquidate securities held within two business days




                                                                      Strictly Private and Confidential
RBA Repo Criteria
The Reserve has made changes to the eligibility criteria


  ■ NCDs are now required to have a public credit rating to be repo
     eligible - Unrated NCD programs are no longer repo eligible
  ■ Reduction of the minimum long-term credit rating from A- to BBB+ for
     repo eligible debt securities
  ■ Removal of the requirement for the issuing ADI to be
     an exchange settlement holder with the RBA.




                                                                      Strictly Private and Confidential
TRENDS
The mutual sector is actively pursuing its alternatives



  ■ Move to Bank status
  ■ Credit ratings
  ■ Short term wholesale debt programs
  ■ Non HQLA strategies where liquidity allows




                                                          Strictly Private and Confidential
RATINGS




          Strictly Private and Confidential
CAPITAL
Basel III is putting more emphasis on the quality of capital



  ■ Lower Tier 2 still achievable
  ■ No step us or inducements to call
  ■ Region Bank secondary Market - BBSW + 400
  ■ ANZ Listed - BBSE +275
  ■ New issue Mutual BBSW + 450 and beyond
  ■ WBC Listed Tier 1 – BBSW +325
  ■ No implied credit support under Basel III
  ■ Member share programs?




                                                               Strictly Private and Confidential
CAMERON RAE
Managing Director - Laminar Group




                          QUESTIONS




                                      Strictly Private and Confidential
CONTACT DETAILS
Laminar Group Pty Ltd:
Melbourne
■Mezzanine Level, 181 William Street, Melbourne, VIC, Australia
■PO Box 16230 Collins Street West, Melbourne, VIC, 8007
■P: +61 3 9001 6990
■F: +61 3 9001 6933

Sydney
■Level 29 Chifley Tower, 2 Chifley Square, Sydney, NSW, Australia
■P: +61 2 8094 1230
■F: +61 2 8094 1231


■ACN 136 871 915
■AFSL 338485
■www.laminargroup.com.au
■info@laminar.com.au




                                                                    Strictly Private and Confidential
Disclaimer and Confidentiality

Laminar Group Pty. Ltd., ABN 75 136 871 915 (“Laminar Group”) AFSL Number 338485, its officers, employees, agents and
associates (“Associates”) from time to time hold interests in securities of, or earn brokerage, fees and other benefits from,
corporations or investment vehicles referred to in documents provided to clients. All information contained herein is
confidential and proprietary to Laminar Group and, accordingly, this material is not to be reproduced in whole or in part or
used for any purpose except as authorised by Laminar Group. It is to be treated as strictly confidential and not disclosed
directly or indirectly to any other person, firm or entity. It is important to note that this document is only intended to be
used by “wholesale clients” as defined in section 761G Corporations Act (Cwth).

Distribution of this information to anyone other than the original recipient and that party's advisers is unauthorised. Any
reproduction of these materials, in whole or in part, or the divulgence of any of its contents, without the prior consent of
Laminar Group is prohibited. Any securities recommendation or comments (including an opinion) contained in this
document is general advice only and does not take into account your personal objectives, financial situation or needs.
Laminar Group is not acting in a fiduciary capacity. Recommendations or statements of opinion expressed may change
without notice. You should not act on a recommendation or statement of opinion without first considering the
appropriateness of the general advice to your personal circumstances or consulting your investment advisor to determine
whether the recommendation or statement of opinion is appropriate for your investment objectives, financial situation or
needs. Nothing in this document should be construed as Laminar Group providing an opinion, statement or research dealing
with the creditworthiness of a body or the ability of an issuer of a financial product to meet its obligation under the product;
nor should it be treated as “credit service” under the National Consumer Credit Protection Act 2009 (Cth).

Laminar Group believes that the information contained in this document is accurate when issued. Laminar Group does not
warrant that the information contained herein is accurate, reliable, complete or up-to-date, and, to the fullest extent
permitted by law, disclaims all liability of Laminar Group and its Associates for any loss or damage suffered by any person
by reason of the use by that person of, or their reliance on, any information contained in this document or any error or
defect in this document, whether arising from the negligence of Laminar Group or its Associates or otherwise. No action
should be taken on the basis of or in reliance on the information, opinions or conclusions contained in this document.

This document is not, and is not intended to be, an offer or invitation for subscription or sale, or a recommendation, with
respect to any securities, nor is it to form the basis of any contract or commitment. This document does not purport to
identify the nature of the specific market or other risks associated with these products. Before entering into any transaction
in relation to the products, the investor should ensure that it fully understands the terms of the products and the
transaction, relevant risk factors, the nature and extent of the investor’s risk of loss and the nature of the contractual
relationship into which the investor is entering. Prior to investing in these products, an investor should determine, based on
its own independent review and such professional advice as it deems appropriate, the economic risks and merits, the legal,
tax accounting characteristics and risk, and the consequences of an investment in them.




                                                                                                                                   Strictly Private and Confidential

								
To top