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Colin Lea
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The author is Australian with a long term interest and personal stake in financial planning and management. He works within the Financial Services Industry, is a member of the FPA Australia, and is a Certified Gold Seeking Alpha Contributor. Prior professional background of 20 years in military... More
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  • Bouris To Take On Australian Big Four

    The following article is from today's Sydney Morning Herald, discussing Mark Bouris partnering with Macquarie Group to take on the Big Four Australian banks in the residential mortgage market. Bouris made his name in setting up Wizard Home Loans in 1996 which he then sold to GE. This will also place market pressure on Mortgage Choice as an Australian residential mortgage provider.


    By Georgia Wilkins

    THE Mark Bouris-backed Yellow Brick Road has signed off on a deal with Macquarie Group that will see it competing with the big four banks in the nation's mortgage market.

    The venture will see Macquarie fund mortgages through Yellow Brick Road's 130-store retail network, to offer ''aggressively priced'' mortgage products.

    Mr Bouris, the Yellow Brick Road chairman, said the deal would ''bring back choice, access and competition like there was in the 1990s''.

    ''Plenty of commentators, including politicians, talk about the need for competition,'' he said.

    ''This is a game-changer that will take the big four head on.''

    Under the deal, Yellow Brick Road will try to undercut the big banks by offering a 1.15 percentage-point discount on all new home loans for the first 12 months of the loan. It will also offer discounts for the life of the loan. Credit Suisse analyst James Ellis said the deal was ''bread and butter'' business for Macquarie, which orchestrated a similar contract with Aussie home loans 20 years ago.

    But he said the market had changed considerably.

    ''When Aussie home loans entered the market, mortgage spreads were hundreds of basis points over the cash rate,'' he said.

    ''In a few years, it had quite a seismic and important impact. I wouldn't expect the same this time round because it's just a fundamentally different market.''

    Mr Bouris made his name setting up Wizard Home Loans in 1996, which he later sold to GE Money for $500 million.

    A spokesman for Treasurer Wayne Swan said the move showed competition was starting to heat up in the banking sector following a range of reforms last year.

    ''The government is supporting smaller lenders to compete with the big banks so that Australians who aren't happy with their bank can walk down the road and get a better deal,'' the spokesman said.

    Since 2007, the big banks have increased their mortgage rates by an average of about 135 basis points compared with the cash rate. For credit unions and mutuals, the increase has been about 97 basis points relative to the cash rate.

    Read more:

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Nov 07 3:40 PM | Link | Comment!
  • Australian Big Four To Pass $25b In Profit

    From the Sydney Morning Herald's Eric Johnston:

    THE combined annual cash profit of Australia's four big banks is set to pass $25 billion, with earnings helped by widening profit margins and a fall away in bad debts.

    Westpac is on Monday scheduled to round off the big bank reporting season, with the nation's second-biggest lender tipped to deliver a profit of $6.46 billion.

    This would be up slightly from last year's $6.30 billion.

    This is behind Commonwealth Bank's bumper $7.11 billion profit and ANZ's $6.01 billion.

    National Australia Bank was the only major bank to see profit go backwards, following problems at its UK banks, with earnings down 0.5 per cent to $5.43 billion.

    Read more:

    Nov 04 9:16 PM | Link | 2 Comments
  • Standard & Poors Worthless AAA Rating

    From the Sydney Morning Herald's Michael West:

    The Federal Court's Justice Jayne Jagot has accepted the evidence from 12 NSW councils - who claimed they had been duped into buying a toxic financial product - that the ratings agency Standard & Poor's was little more than a lap dog for slick merchant bankers.

    Investors are entitled to and indeed do rely on credit ratings and can expect them to be based on reasonable grounds.

    The ruling means the councils will recover about $30 million in losses following failed investments in complex synthetic derivatives known as constant proportion debt obligations, or CPDOs, that were arranged by ABN Amro, rated AAA by S&P and sold by LGFS in 2006.

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    Nov 04 9:11 PM | Link | Comment!
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