Wholesale Banking Performance Analysis
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Australia regional outlook
Economic
CY12
CY13
CY09
CY10
CY11
Indicators (%) 1
(f)
(f)
GDP growth
1.4
2.5
2.0
2.5
3.5
Unemployment
5.6
5.0 5.1
5.4
5.3
rate
Core Inflation
3.5
2.4
2.6
2.1
2.5
Cash rate
3.75
4.75
4.25
3.25
3.75
System
FY09
FY10
FY11
FY12(f)
FY13(f)
Growth (%)²
Housing
7.2
7.6
5.8
6.2
8.1
Other personal
-5.5
2.9
-0.6
0.2
3.5
(incl cards)
Business
-4.1
-3.3
0.3
2.0
5.5
Total system credit
1.8
3.2 3.4
4.46.9
Total A$ ADI
7.5
deposits³
5.6 8.3
8.5
10.0
(1) Percentage change at year end December, except for GDP, which is year-average
at year end December, and cash and unemployment rates, which are as
at end December
(2) Percentage change at bank fiscal year end September
(3) Total ADI deposits also include wholesale deposits (such as CDs), community and
non-profit deposits but exclude deposits by government & ADIS
▸ The Australian economy slowed towards the end of 2011 with
recorded growth of 0.4% in Q4. Fundamentally the economy slowed
to around trend growth and has probably edged a touch lower in
early 2012. Business confidence and conditions remain a touch
below long run averages and forward indicators overall remain soft
▸ The economy continues to exhibit a multi speed nature
▸ The long-awaited mining investment boom is well underway and
accelerating. Many services sectors (utilities, lawyers, business
professionals, health etc) also report solid activity and confidence
levels with strong orders
▸ The trade-exposed manufacturing sector however continues to
struggle with poor conditions, while the construction industry has
softened noticeably on the back of a softening property market and
reduced fiscal spending. Activity in industries dependant on
consumer demand - retail and wholesale - remains soft-
especially discretionary retailing
▸ The latter has seen heightened retail discounting which in
conjunction with a continuing high AUD has seen core inflation fall
to levels towards the bottom of the RBA's target range - and could
well go lower
▸ While the outlook for weakening global demand is likely to see
further softening in commodity prices, they should remain high
relative to history, keeping the terms of trade elevated. That in turn
is likely to see the AUD remaining high by historical standards
▸ The RBA lowered the cash rate by 50bp at its May meeting with the
aim of lowering borrowing rates significantly to help struggling
sectors of the economy - given the prospect of relatively low inflation
over the next year or two. With fiscal policy significantly tightened
and the labour market likely to soften a touch we expect the RBA
will lower the cash rate by a further 25bp in coming months.
However, as 2013 develops, the case will probably build for the
extra cut to be unwound
▸ Business credit growth has been fairly soft in recent months and is
expected to remain moderate over 2012 - with business and
consumer caution still very much to the fore. Consistent with high
savings rates, personal credit growth is expected to remain soft.
Housing credit has also remained relatively modest but could edge
higher in the face of lower rates, a stabilising house price market
and continued undersupply
UK regional outlook
National Australia Bank
Economic
CY10
Indicators (%)
CY11 CY12(f) CY13(f) CY14(f)
GDP growth
2.1
0.7
0.4
1.5
2.0
Unemployment
7.9
8.1
8.7
8.8
8.2
Inflation
3.3
4.5
2.6
2.0
2.1
Cash rate
0.5
0.5
0.5
0.5
2.0
System
FY10
FY11
Growth (%)
Housing
0.9
0.7
1.0
2.2
3.2
FY112f) FY13(f) FY14(f)
Consumer
0.7
1.6
2.1
1.9
3.1
Business
-3.3
-2.6
-2.8
-1.7
0.3
24
Total lending
-0.6
-0.4
-0.3
0.8
2.1
Retail deposits
4.4
3.1
3.2
3.2
3.8
▸ The UK economy has gone back into recession with GDP
falling in late 2011 and early 2012. This is a much weaker
performance than the Government had expected and output is
still over 4% below its early 2008 level. The property market
has been flat (houses) to down (commercial)
▸ Although activity has been cushioned by the lowest policy
interest rates on record, the central bank's efforts to boost
liquidity and the lagged impact of the big Sterling depreciation
in 2007/8, it has been held back by pressure on household
incomes and austerity in the public sector
▸ The UK economy needs to be 're-balanced' so that exports
and business investment play a larger role in future growth
while the contribution from consumer spending and the public
sector falls below what was seen pre-2008. However, although
exports are benefiting from improved UK cost competitiveness
they have been held back by the weakness in key Euro-zone
export markets. Even more concerning, business investment
has stopped growing in the last year and boosting it forms a
crucial part of the growth strategy
▸ Inflationary pressures are now subsiding and that should help
limit the erosion of household incomes that has undercut
consumer spending. However borrowing remains very low, the
savings ratio is higher and unemployment has been trending
higher-factors that should discourage any rapid recovery in
consumer spending (which is still below its early 2008 level)
▸ Overall, the UK economy faces a long difficult period as private
sector de-leveraging continues at a time of government
cutbacks. The danger is that demand proves insufficient to give
business the confidence to invest and the economy gets
caught in a self-fulfilling low-growth trap. System credit growth
is forecast to remain very modest and bad debts, which have
been held down by lender forbearance and very low interest
rates, could remain elevated for an extended period
National Australia BankView entire presentation