No win for Fin. Yesterday we pointed out that the AFR had shied away from reporting the dressing down that Reserve Bank governor Glenn Stevens had given to bankers and financial personages assembled at their Tuesday conference, where he warned about the growing problem of trust in banks and other financial groups here and offshore.
It was an unprecedented chiding of the banks, their boards and their senior managers by the country’s most senior financial regulator. And yet the AFR ran dead on the story.
Yesterday Wayne Byers, the coal-face guy heading up Australian Prudential Regulation Authority — the most direct regulator of the banks and other financial groups — continued the Stevens assault when he told the assembled personages “a positive culture will best be encouraged when incentives require staff to compete by genuinely looking after the long-term interests of customers. Available evidence suggests that there is further to go in this regard.”
He also pointed out that the “few bad apples” argument advanced by some institutions (think the CBA and Macquarie, for example) to try to explain away financial planning abuses, overcharging and abuse of clients monies, was not good enough any more. He said regulators were placing a “great deal of attention” on culture and behaviour in financial institutions.
It would seem the RBA and APRA have quite serious and deep-rooted concerns about the management of some financial groups in this country, which transcend the usual regulatory concerns about capital, lending and profits and interest margins. That is something the AFR has failed to notice at its own conference. — Glenn Dyer
US weak speak. The Fed triggered a nervous end to the day on Wall Street and a start to proceedings here by confusing its message this morning. It admitted the US economy had slowed (as the ultra-low GDP reading for the March quarter of just 0.2% confirmed) since its last meeting, removed the reference to April in discussing a possible rate increase, and then suggested that its June meeting could now be the kick-off date.
The post-meeting statement made it clear the Fed saw the US economy as weaker at the moment because of transitory factors such as the very cold winter. Other factors will persist, such as the impact of the high US dollar, which knocked exports down nearly 8% in the March quarter, weaker activity in the oil-producing states of the mid-west and south (and weaker employment growth).
However, the first quarter GDP reading of just 0.2% growth was the first of three estimates and it was so low that economists believe it will almost certainly be revised upwards to around 1% (annual and not great) when more data on trade and personal income become available in the next fortnight or so.
In this morning’s statement, the Fed did not rule out a June move, but given the weakness of the data, that looks unlikely. Next week’s jobs report for April could end up being quite telling — another weak report, then no rate rise. But a rebound in hiring and a June increase could be back in the mix.
The Fed also reiterated that it would be appropriate to raise rates when it has “seen further improvement” in the labour market and economy, and that means a rate rise later in the year. A sort of each-way bet from the Fed. — Glenn Dyer
Mates and rates. Three central banks met overnight or this morning and two announced no changes, including the Riksbank, the central bank of Sweden (key rate minus 0.25%, yes, minus) and the Reserve Bank of NZ (3.50% for its main rate, with a bias to cut).
But the Bank of Thailand unexpectedly cut its key rate to 1.5% yesterday — the second surprise cut in a row, which means rates have been chopped by 0.50%. The economy is hurting from weak export growth, weakening domestic demand and inflation in the minus column (0.5% at the moment) because of the slide in oil prices.
The RBNZ is poised to cut rates if it sees demand weakening from its current high 3% a year level, or if the record low level of inflation persists. In Sweden the problem remains the ultra low level of inflation (more disinflation than deflation) and the continuing high level of the krona against the euro.
Sweden’s problems (like those in Denmark and Switzerland) are very different to those in Australia, the US, NZ and elsewhere. Ours is dealing with very low inflation, mixed growth and weak employment. In Sweden, Denmark and Switzerland, it’s dealing with those and the impact of strong currencies as the euro falls because of the European Central Bank’s quantitative easing program. That is a major, major headache that will persist for some time.
And this morning, Brazil’s central bank lifted its key rate to its highest level since 2008 — 13.25% as it fights rising inflation (the crash in oil prices has had little impact). The rise — a huge 050% was the fourth increase in five months. — Glenn Dyer
Samsung no unsung hero. Samsung Electronics may have overtaken Apple to recapture the title of world’s top smartphone maker by volume in the March quarter (estimated by research firm Strategy Analytics , or SA), but Apple is heads and shoulders ahead in the profit stakes and will remain there, judging by the appalling financial figures confirmed by Samsung yesterday.
Strategy Analytics said Samsung shipped 83.2 million smartphones worldwide and captured 24% of the market in the quarter, down from 31% a year earlier. Apple had an 18% share (but all those profits). Samsung Electronics reported a net profit of 4.6 trillion won (US$5.36 billion) for the January-March period, down 38.9% from the year ago quarter, but up 13.1% from the December quarter.
Mobile phone earnings plunged 42% in the quarter as too many unsold phones (especially at the bottom of the market) forced Samsung to sell off excess stocks at a loss.
On Tuesday morning Apple revealed that it sold 61.2 million phones in the March quarter, over US$58 billion in revenue and more than US$13 billion in net profit, it also lifted dividend by 11% and the share buyback was boosted to US$200 billion from $130 billion by mid-2017. — Glenn Dyer