NAB smacked down. The National Australia Bank has been sprung for a second time in the UK trying to rort the system and pull the wool over the eyes of regulators on a contentious issue of mis-selling financial products to British consumers. The NAB’s UK Clydesdale Bank subsidiary has been fined for a second time in three years by regulators (this time it’s a record amount of money), raising questions about the adequacy of the processes and managerial systems NAB has in place.
In fact, Britain’s Financial Conduct Authority (FCA) said overnight Clydesdale and its employees had given false and altered information and records to it and also used this to deny compensation to some thousands of customers, or reduce payouts by the bank to thousands of others — around 93,000 or 126,000 customers could have been denied proper compensation by these activities of the bank and its employees. Banks such as NAB, Macquarie, the Commonwealth Bank and ANZ have been caught out by the media or regulators in Australia especially, but also in the UK, in a variety of dodgy or weak practices ranging from poor financial advice to mis-pricing of financial products, misselling products, hiding records, weak controls and managerial oversight.
It’s not the first time NAB’s UK banks have been in trouble with the regulator. In 2013, they were fined 8.9 million pounds for their treatment of customers affected by mortgage payment errors. The problems dated back to the period 2005-10, during which a software error caused repayments on variable rate mortgages to be miscalculated — leaving thousands of borrowers underpaying their loans. And the Financial Times reported overnight that, “A recent report by the Treasury named Clydesdale for mis-selling tailored loans, similar to interest rate hedging products, to businesses, noting that the lender’s terms and conditions ‘would not pass a plain English test’.” — Glenn Dyer
Markets overheating? Are global financial markets overheating and a big threat to stability? Well, some are definitely boiling and bubbling. The monthly survey of global fund managers from Bank of America/Merrill Lynch reveals more than 80% of investors questioned in the April survey think bonds are overvalued, the highest proportion since the survey began in 1998. And a quarter of managers believe global equities are currently overvalued, the highest such estimate since the dot-com bubble peaked in 2000. The survey also shows that, on a regional basis, fund managers think the US represents the greatest risk of having overvalued asset prices, but thanks to differences in monetary policy, all other regions, including Europe and Japan remain undervalued. The US sharemarket has hardly moved this year (even Australia’s is up around 10%!), but China is worrying — the Shanghai sharemarket has more than doubled in the past 13 months and the smaller Shenzhen market is up even more. European markets are up more than 20%, led by Germany’s DAX. But despite these fears, especially about sharemarkets, big global investors still love shares. If big investors were really worried, they would be building their cash positions by selling some shares and bonds — but there’s no mention of that in the survey, so at the moment these are paper fears, not actual “we could lose money”, yet. — Glenn Dyer
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Fortescue feels the pinch. An innocent-reading statement from Fortescue Metals Group quoting CEO Nev Power (the bloke they trot out for all the tough stuff) yesterday talked about changing work rosters at the company’s iron ore mining operations in Western Australia’s Pilbara region. Not a mention in the statement of the impact of the change, which involves going to a completely different roster. But union and media analysts quickly worked out that Fortescue was chopping upwards of 700 workers from its 4000-strong work force, or a cut of more than 15%. So much for the socially conscious image Fortescue tried to project for years.
Tomorrow, the company releases its March-quarter report. Investors will be able to assess Fortescue’s ability to survive from the data in that report. The decisions to halt the remainder of the expansion plan and now these swingeing job cuts have an element of “good” news before some bad in the quarterly report. And Fortescue and its peers received further help overnight Tuesday with another rise in the price of iron ore, which jumped US$1.96 to US$50.78 on Tuesday. In the past week, the commodity hit a 10-year low of US$46.70. Later today, China’s March-quarter GDP and other data will be released. — Glenn Dyer