High cost of bank inquiry
MORE than $75 billion has been stripped from the value of the big four banks and AMP since the financial services royal commission was announced little more than a year ago.
The cost to shareholders – which does not include billions in ongoing compensation payments – comes as the sector braces for the release on Monday of commissioner Kenneth Hayne’s final report, which is set to redraw the nation’s financial landscape.
Data from the corporate regulator also shows major investors are expecting more pain to come for the nation’s biggest financial players, with the number of shares shorted in the big four banks doubling since the start of November.
Short sellers make money when the price of a stock falls by effectively betting against the stock and the rise in short positions in the major lenders means growing numbers of large investors expect their share prices to fall further.
The Hayne report is set to land as a slowdown in Australia’s property market continues. Latest figures show the slide in house prices, driven in part by banks tightening their lending standards throughout the royal commission, is now worse than that notched up during the GFC.
Capital city property prices on average fell another 1.2 per cent last month, marking 16 months of consecutive price declines, numbers released by research house CoreLogic show. Property prices have now fallen 7.8 per cent nationally from their high in September 2017. That fall is deeper than the 7.6 per cent slide during the GFC.
AMP chief economist Shane Oliver said house prices were being hit by a “perfect storm” of factors including tighter lending conditions, poor affordability, surging unit supply, reduced foreign demand and widespread switching from interest-only to principle-and-interest loans.
Other factors included fears that negative gearing and capital gains tax concessions would be made less favourable if there were a change of government and falling price growth expectations, Dr Oliver said.
“Fear of missing out risks turning into fear of not getting out for investors,” he said.
The slowdown in lending has sparked concern among business leaders. Australian Industry Group chief Innes Willox yesterday called for the response to the royal commission to be “proportionate”.
“In this pre-election climate we caution all political parties to avoid the temptation to appeal to populist sentiment in responding to the report rather than focusing on measured actions to improve the effectiveness and integrity of the sector and its regulation,” he said.
Shares in the Commonwealth Bank have fallen almost 14 per cent since then-PM Malcolm Turnbull announced the royal commission in late November 2017.
Westpac shares have fallen 22 per cent, erasing $22.2 billion, while National Australia Bank is off 20 per cent in a $13.4 billion rout. Shares in ANZ are down 13.3 per cent, erasing $13 billion in value. Shares in AMP have more than halved, wiping out $8.5 billion in value.