Australia's leading banks May Gain reforms Swan

Australia's four largest lenders, led by Commonwealth Bank of Australia and Westpac Banking Corp., may emerge as winners of Treasurer Wayne Swan package to promote competition in banking, analysts said.

Commonwealth Bank, Westpac, National Australia Bank Ltd. and Australia & New Zealand Banking Group Ltd. rose in Sydney trading as Swan 13-point plan reached the expectations of investors more pessimistic. A proposal for financial services providers issue of bonds and expand access to the funds will help the leading providers of the majority and makes them the "long-term winners" package, according to Credit Suisse AG.

"The treasurer of the bark was far worse than his bite," said Prasad Patkar, who helps manage about $ 1.8 million at Platypus Asset Management Ltd. in Sydney. "The measures will have no adverse impact on the major banks at all."

Swan has announced plans to help customers switch from one lender, strengthening Australia's smaller banks, and develop the domestic bond market to allow banks to raise cheaper funds. The package was a response to public anger at record profits of the largest banks, which control more than 80 percent of domestic loans and advances mortgage rate, which exceeded the increase in borrowing costs in the reference central bank.

Commonwealth Bank, the largest in Australia, 1.2 percent to $ 51.20 at the close 4:10 pm local time, cutting down this year to 6.7 percent. Westpac rose 1.5 percent to $ 22.90, having fallen in the year to 9.5 percent. National Australia Bank rose 1.5 percent to $ 24.57 and ANZ Bank rose 1.1 percent to $ 24.10.

"Political Footballs"

In a parliament where no party holds an absolute majority, a "tangible" risk some cash plans will fail, Credit Suisse analysts led by Jarrod Martin in Sydney, said in a note to clients with date.

Swan Labour minority government needs support from other lawmakers in the lower house of parliament to pass legislation. As we said last month that preparations for the reforms underway, UBS AG said banks had become "political footballs."

Swan plans to ban exit fees on new mortgage loans from July 2011 to empower the Australian Competition and Consumer Protection to prosecute banks that signal changes in interest rates to rivals. With the goal of making credit unions and building societies in a competitive force, said a government guarantee of deposits, set up after Lehman Brothers Holdings Inc. collapsed, will be permanent.

'Very modest'

The package is unlikely that a "significant impact" on the short-term profitability of large banks and regional lenders such as Bank of Queensland Ltd., Nomura Holdings Inc., said in a note to clients dated yesterday.

"The result seems to be very modest," said Victor German, an analyst at Nomura in Sydney. "We see that the restricted nature of the reforms as a positive short-term to the majors."

Since October, Westpac and ANZ Bank have argued that covered bonds will help banks to reduce their dependence on external debt markets for funding. Australians borrow more than they save, and major lenders have blamed the rising cost of funds abroad from the crisis in rising mortgage costs nationwide.

Mortgage Bonds

Australia regulators currently ban the sale of bonds because they conflict with local banking laws. Mostly sold by European banks, covered bonds to attract higher ratings than regular notes because they are backed by assets like mortgages that remain on the balance of the lender and can be sold in a default.

Allow covered bonds will help "ensure the long-term security and sustainability" Australia's banking system, according to a federal document outlining the reforms. Treasury may impose a limit on the amount of bonds that each bank can sell, he said, citing a 5 per cent of total assets in Australia of an issuer as an example.

This proposal is a "great victory for large banks," said Credit Suisse. A cap of 5 percent would, for a total of approximately $ 100 billion of bonds sales, analysts at Deutsche Bank AG Gustavo Medeiros and Colin Tan wrote in a note to clients today.

The first sale of the notes covered in New Zealand in June, a NZ $ 425 million (318 million U.S. dollars) offered by the Bank of New Zealand, was priced at a discount of 38 percent of what the banks nation would pay without coverage, according to Moody's Investors Service.

'Important step'

National Australia Bank chief executive Cameron Clyne, appear before a Senate committee studying the competition in the banking sector in Sydney, called the proposal for the bonds "an important step in the diversification of funding."

The average cost of funding could fall if the lender National Australia Bank to finance some of the A $ 28,000,000,000 ($ 27,600,000,000) is required for the year ended in September 2011 with the bonds, he said.

Among them, the four largest banks control almost 90 percent of residential mortgages sold by all banks, and write 83 percent of all loans, according to October data from the Australian Prudential Regulation Authority .

Central Bank governor Glenn Stevens said Australia mortgage rates are at appropriate levels for the economy and access to mortgage loans is "adequate."