Two of the big four capitulate. For all their whingeing, moaning and groaning to the federal government, investors and each other about the dastardly banking regulators (APRA and the Reserve Bank, plus David Murray’s Financial System Inquiry) campaigning to force the big banks to boost their capital levels, the ANZ this morning joined Westpac in offering a discounted (1.5%) dividend reinvestment plan (DRP) to investors as the painless way to lift capital levels. It is a quiet, but still significant, capitulation by the two big banks (especially ANZ, which is led by motormouth CEO Mike Smith). The two banks will likely be joined later this week by the third big bank to release its interim results, NAB. The Commonwealth Bank releases a third-quarter trading update later in the week as well.

The ANZ chief did hedge his bets in his outlook, saying that, for the foreseeable future, the bank “will be operating in a lower growth environment in which there will continue to be occasional volatility and shocks”. That’s less Pollyannaish than the mess of words we read from Westpac CEO Brian Hartzer yesterday. — Glenn Dyer

It’s all in the timing. Gee, didn’t the sainted Gail Kelly time her exit from Westpac in February of this year down to a T? Judging by the weak result, she exited just in time, before any of the fallout from the profit-and-dividend shortfall, and other signs of stress in the result, could be sheeted home to her. She departed in February, and was replaced by her chosen successor, Brian Hartzer, who was headhunted from the ANZ, as the heir apparent. Now he’s got a hospital pass and will have to take some tough decisions to repair the profit-and-loss account — job cuts, branch closures and other trims.

Kelly was at Westpac’s helm for all but six weeks of the six month period, so her ghost was around the figures yesterday, but Hartzer had to defend them. The best sign of the newly discovered weakness in Westpac’s finances is the surprise decision to restart the dividend reinvestment program (DRP) offering a discount of 1.5% to market. That will raise an estimated $2 billion, and the bank will probably continue the plan for the next year or more to raise enough capital to keep those pesky regulators at the RBA and APRA happy as they force the banks to stock up with more reserves. You can put yesterday’s 3% fall in the Westpac share price (almost $4 billion) down to the underlying weakness in Westpac that Kelly left behind. And you can also lump the board in, as well, and chairman Lindsay Maxsted. — Glenn Dyer

Seven West’s dead-tree blues. More gloom for Seven West Media’s West Australian newspaper in the latest job ads figures from ANZ yesterday. There was an 18% fall in job ads in Western Australia in April from March, according to the survey, and on a trend basis they were down 34.9% at 484 for the month. Last November, there were 606 job ads in The West Australian (on a trend basis), down 10.9% on an annual basis (so the acceleration in the size of the fall has been pretty dramatic). Overall, newspaper ads fell 2.5% in April (internet job ads though were up 2.4%) leading to a 2.3% overall rise to a two-and-a-half-year high) so the weakness in WA is pretty dramatic — but not that surprising given the slide in activity in iron ore, oil and gas, other mining activities and in the huge services sector dealing with miners. But WA wasn’t the worst state — the ACT (Fairfax’s Canberra Times) experienced a 40% fall in the year to April (to just 99 jobs in the month). South Australia was down a massive 58% (bad news for News Corp’s Adelaide Advertiser). Victoria underwent a 15% fall in the year to April, but a 0.7% rise in Queensland. Job ads in newspapers in NSW were down 8.9%. — Glenn Dyer

Where’s the food? McDonald’s got negative reviews from US investors and ratings group Standard & Poor’s overnight after the new CEO of nine weeks fluffed his lines in launching a new strategy to revive the flagging arches. Steve Easterbrook said in a 23-minute video post on the burger giant’s website that Macca’s would restructure its global business, sell more restaurants to franchise operators, and regroup overseas markets in different categories to make a more nimble organisation and save US$300 million in annual costs.

The aim is to group together markets that have similar dynamics and challenges, rather than simply geographical proximity. It’s claimed this will help Macca’s respond faster to changing consumer needs. All impressive, but part of the changes — increasing the share buyback and dividend payments to shareholders to as much as US$9 billion this year (from US$6.4 billion) didn’t win over S&P analysts, who downgraded McDonald’s credit standing from A to A minus, or just four levels above junk. S&P said it didn’t like the higher debt McDonald’s would have to take on to make the higher payments and buyback. And S&P said it would cut the rating by another notch is sales in China and the US don’t soon improve. While McDonald’s has already revealed some changes to menus and an end to stuffing its chickens with antibiotics, analysts really wanted to see more action on the food side seeing that’s the reason sales growth, especially in the US, has been weakening. As a result McDonald’s shares fell 1.6% on a day when the S&P 500 hit a new all-time high. Thumbs down, I’d say. — Glenn Dyer

Peter Fray

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