Transcript AFR, Jan 2013

Market Update
John Flavell
General Manager, NAB Broker
Australian property
riding on China’s back
AFR, Nov 2012
Lenders
face off
on outof-cycle
rate cuts
Australian
Broker Feb 2013
Europe delays, US
‘fiscal cliff’ threatens
growth: G20
AFR Nov 12
Japan posts record
trade deficit
BBC News, Feb 2013
China’s investment in
Australia cut in half
3
Australian, Oct 2012
Aussie John
sells to which
bank?
AFR Dec 12
Britain on
the brink of
‘triple-dip’
recession
AFR, Jan 2013
Congress votes to
extend US debt limit
BBC News, Jan 2013
Financial markets have turned surprisingly
optimistic. Equity markets up, fear index down.
FINANCIAL MARKET INDICATORS
60
100
Share markets in
major developed economies
50
95
90
40
85
Australian share market
30
80
VIX index of
market volatility LHS)
20
75
70
10
65
0
06/06/2011
29/08/2011
21/11/2011
13/02/2012
07/05/2012
30/07/2012
22/10/2012
60
14/01/2013
European sentiment may be bottoming but
not their economy
• European confidence still at historic lows
• But can’t say the same about their
economy
• But might have bottomed – re ECB and Fed
• Delaying Basel 3 liquidity will help further
European Economic (Consumer and Business) Sentiment
EUROPEAN GDP AND BUSINESS CLIMATE INDICATOR
- Measured as Deviation in European Sentiment From Long Run Average
2.00
15
10
1.00
5
0.00
0
(F)
-1.00
-5
-10
-2.00
GDP
BUSINESS CLIMATE INDICATOR
-15
-3.00
-20
-4.00
-25
-30
Sep-12
Mar-12
Sep-11
Mar-11
Sep-10
Mar-10
Sep-09
Mar-09
Sep-08
Mar-08
Sep-07
Mar-07
Jul-12
Jan-12
Jul-11
Jan-11
Jul-10
Jan-10
Jul-09
Jan-09
Jul-08
Jan-08
Jul-07
Jan-07
-35
Jul-06
Jan-06
-5.00
Our forecast suggests moderate on-going
US growth
US Quarterly GDP v Nab Mini Model
2
1.5
1
0.5
0
-0.5
-1
-1.5
-2
-2.5
Model based on: Real interest rates, House prices, Equity prices, Oil prices, TWI (currency), Commodity prices, Credit rationing and lags.
Sep-14
Sep-13
Sep-12
Sep-11
Sep-10
Sep-09
Sep-08
Sep-07
Sep-06
Sep-05
Sep-04
Sep-03
Sep-02
Sep-01
-3
China Growth outlook: We expect further acceleration
of growth to around 8 ¼% in 2013 – with policy helping
China Real GDP Growth
%
China - Monetary Policy Response
Year-ended percentage change
%
14
14
12
12
10
NAB
Fcst
8
6
SFM
Percentage points of GDP growth
Ppts
0.3
0.3
50bp cut to interest rate
10
8
Ppts
0.2
0.2
0.1
0.1
6
4
4
2
2
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
0
50bp cut to reserve
requirement ratio
0.0
0.0
0
Source: CEIC, NAB
1
2
Quarters
3
4
5
Source: NAB Research
Economic Forecasts
Year Average Chng %
Year-ended Chng %
2012
2011
9.3
6.3
Real GDP
Exchange Rate (USD/CNY)
Monetary Policy (end of period)
Benchmark Lending Rate
6.56
Reserve Ratio Requirement*
21.0
Sources: CEIC; NAB Group Economics
* For large depository institutions
2013
2012
7.8
6.3
2013
8.2
6.2
Q1
8.1
6.3
Q2
7.8
6.3
Q3
7.7
6.3
Q4
7.9
6.2
Q1
8.2
6.2
Q2
8.4
6.2
Q3
8.2
6.1
Q4
8.0
6.1
6.00
19.5
6.5
19.5
6.56
20.5
6.31
20.0
6.00
20.0
6.00
20.0
6.00
19.5
6.00
19.5
6.25
19.5
6.5
19.5
World still very multi speed
Developed v Developing
G ross domestic product
S e p qtr 2007 = 100
D evelo p ed w o rld
E m erg in g w o rld
160
150
G loba l liquidity crisis
G loba l liquidity crisis
140
130
120
110
100
90
80
D e c-05
D e c-07
US
UK
B razil
D e c-09
D e c-11
J ap an
C hina
D e c-05
D e c-07
D e c-09
D e c-11
E uro are a
Ind ia
S ourc es : O E CD Main E c onom ic Indic ators , CE IC, NA B
AUD a proxy for global risk appetite and
commodities. And of course China
Model AUD and Forecasts v Actuals
1.2
ACTUAL
Plus X2 Std Dev
1.1
Less X2 Std Dev
1
0.9
0.8
0.7
0.6
0.5
Model driven by: commodity prices; USD/EURO – as measure of USD weakness; long and short run rates; relative unemployment; relative equity markets and VIX.
Feb-13
Feb-12
Feb-11
Feb-10
Feb-09
Feb-08
Feb-07
Feb-06
Feb-05
Feb-04
Feb-03
Feb-02
Feb-01
Feb-00
Feb-99
Feb-98
Feb-97
Feb-96
Feb-95
Feb-94
Feb-93
Feb-92
Feb-91
Feb-90
Feb-89
Feb-88
Feb-87
Feb-86
Feb-85
0.4
Near- term Australian growth also constrained by
consumer caution.
 Saving ratio remains around GFC levels
in trend terms
 Personal (credit card) and business credit
currently around flat to negative
 Deposit inflow both by consumer and
(especially) business strong
 Home loans at 5% a 30 year low
Key System Credit Aggregrates
3 mths at annual rate - saar
%
25
20
15
HOUSING
10
5
0
-5
BUSINESS
-10
PERSONAL
Jul-12
Jul-11
Jul-10
Jul-09
Jul-08
Jul-07
Jul-06
-15
Flattish house prices not helping perceptions of wealth.
May be turning now but don’t expect much going forward
 House price expectations at end 2012
have turned slightly positive
 Over the medium term our model wants
moderate growth.
 Very different by state – WA still strong: SA
and VIC less so.
 Accelerating in near term but then flattens
out by end 2013 as unemployment rises
Australian House Prices - 12 Mth %
Property Survey - House Price Expectations
50
50%
Actual / Forecasts
Model
45
40
NSW
Q1'13
Q3'13
Qld
Q1'14
SA/NT
Q3'14
WA
10
10%
5
5%
0
0%
-5
-5%
-10
-10%
-15
-15%
Sep-14
Victoria
Q3'12
15%
Jun-12
Q1'12
15
Mar-10
Australia
Q3'11
20%
Dec-07
Q1'11
20
Mar-01
-6.0
25%
Dec-98
Expectations
25
Sep-96
-4.0
30%
Jun-94
-2.0
30
Mar-92
0.0
40%
35%
Dec-89
% oya
2.0
45%
35
Sep-87
4.0
Sep-05
6.0
Jun-03
%
Interest rates
• Our expectation RBA will cut by 75bps in 2013 to 2.25%
• First cut probably May
• As unemployment rises to 5.75% by mid-late 2013, RBA will
need to respond again
• We expect a final cut in late 2013 as mining phasing heralds
further labour market weakness (say November)
• Forecasts imply a bottom in rates between 2 and 2.5%
depending on extent of the slow down
Australian economic forecasts
2012-13
2013-14
2012
2013
2014
GDP
2.3
2.8
3.5
2.0
3.3
Employment**
0.5
1.5
0.8
1.1
1.3
Unemployment rate*
5.6
5.7
5.2
5.6
5.8
2.8
2.9
2.5
2.7
2.9
2. 5
2.25
3.0
2.25
2.75
0.97
0.99
1.03
.97
0.95
CPI underlying **
(includes carbon)
RBA cash rate*
$US/$A*
* at end of period; ** through-year growth
Customer deposits
Average 3-12 Mth Blackboard Rate and BBSW
8%
7%
6%
5%
4%
3%
2%
1%
0%
Oct 07 Feb 08 Jun 08 Oct 08 Feb 09 Jun 09 Oct 09 Feb 10 May 10 Sep 10 Jan 11 May 11 Sep 11 Jan 12 May 12 Sep 12 Jan 13
Average BBSW
Average Blackboard Rate
Source: NAB Weekly Advertised Term Deposit Rates since 2007
^Represents advertised term deposit rates, used here as a peer comparison. These make up less than 15% of total term deposit costs.
Term Wholesale Funding
Cost of Wholesale Term Funding
Cost(bps)
220
European Sovereign Crisis
Lehman Brothers Collapse Introduction of 70bps Govt
Guarantee
200
180
160
140
Bear Sterns Collapse
(Mar/Apr 08)
120
100
80
60
Start of Credit
Crises (JulAug 07)
6m Avg Monthly Issuance Margin
Cumulative Weighted Average Margin
40
20
0
* Includes Covered Bonds
Source: NAB Treasury
Short-term Wholesale Funding
%
1.0
Lehman
Brothers
Collapse
0.9
90d Rolling Avg
Spot
0.8
0.7
Bear
Sterns
Collapse
European Sovereign Crisis
0.6
0.5
0.4
0.3
0.2
0.1
-
Source: Bloomberg
Pre-Crisis
Spread of
7bps
Overall funding cost picture
Change in Cost of Funding a Variable Rate Mortgage
180
160
Liquidity & Other
Wholesale Funding
140
120
Term Funding
100
80
Customer Deposits
60
40
20
Bank Bill / Overnight Index Swap Spread
0
Pre-Crisis
Dec 07
Jun 08
Source: NAB Treasury & Bloomberg
Dec 08
Jun 09
Dec 09
Jun 10
Dec 10
Jun 11
Dec 11
Jun 12
Dec 12
In summary
• Environment will remain volatile both globally and
domestically
• Confidence running ahead of the fundamentals
• Domestic downturn in growth post peak of mining boom
• Property prices sideways
• Credit growth slow
• Cash rate down
Social media a missed
opportunity for brokers
The Adviser, May 12
Your
choice:
Embrace
social
media or
bust
Australian Broker,
Jan 2013
Small firms say
LinkedIn works,
Twitter doesn’t
Wall St Journal, Jan 2013
Twitter move to
Australia ‘imminent’
AFR, Jan 2013
Get to grips with Gen Y
or lose out, say brokers
19
Broker News, July 2012
MFAA uses
social media to
promote brokers
New App
promotes
brokers to
borrowers
The Adviser, Nov 12
5 tips for engaging
clients on Facebook
Australian Broker Jan 13
NAB Broker Update
John Flavell
General Manager, NAB Broker
Our view is the broker channel will
continue to grow
100%
90%
40%
40-45%
45-55%
80%
70%
60%
7%
50%
15-20%
40%
20-30%
30%
20%
10%
53%
40-45%
0%
2010
30-35%
+ 10 Years
+ 5 Years
Broker
Online
Branch
Broker Satisfaction
83%
76%
77%
79%
70%
66%
56%
55%
47%
37%
39%
Implementation of Single
Document Pack
1
2
1
2
1 0 -1 1
1 1 -1 2
1 2 -1 3
11
12
10
11
12
1
1
10 l-10
1
1
l
l
ar
ar
o v Jan
o v Jan
o v Jan
ep
ay
ay
ay
Ju Sep
Ju Sep
Ju
N
N
N
M
M
S
M
M
M
The basics…where are we today ?
Service
Product &
Price
Credit
People
Commission
+
At
Market
−
Service. Our objective is to deliver consistency. We have made good
progress…with more enhancements to come
Product. Simple yet feature rich.
Price for Risk. Continues to lead the market
We are at market with our credit policy
Our people are regarded the best in the industry
Our Ramped Trail commission structure increasing broker profits on a
daily basis.
Service…what have we delivered
• State-based teams
• Outbound calls, we pick up the phone and talk to you when
there is an question
• Embedded DCAs in production team
• Construction Lending case management
• Customer on-boarding program
• Single Document Pack
• New NAB Broker website
NAB Broker/Homeside
Major Lender of the Year 2012
Product
• Homeplus package
− Bundled NAB Classic Banking
(deposit offset) and Credit Card
• Homeside brand refresh
− New customer website
(homeside.com.au)
Homeside Homeplus
Best Product 2012
− New broker to customer tools
• 3 Year Anniversary
Homeside Price for Risk
Homeside Homeplus
Canstar Cannex 5 star rating
Our people
• Largest broker distribution team in the market
• Recently expanded with 10 new positions to provide greater
levels of support and advice
• Realigned BDM panels to give you access to
knowledgeable experienced staff in person, over the phone
and online
• Tailored and flexible support
− Field-based
− Office-based
− Broker Support Specialist
− Lending Specialist
− Aggregator alignment
Nick Murray
Best Bank BDM 2012
Commission
A win-win approach
0.70%
0.65%
Ramped trail benefits
• Longer customer relationships
0.60%
• Increased revenue and book value for brokers
0.50%
0.40%
0.35%
0.30%
0.30%
0.25%
0.20%
0.20%
0.15%
0.10%
0.00%
Year 1
Year 2
Year 3
Upfront
Year 4
Trail
Year 5
Year 6 +
Rewarding customer life vs loan life
Example scenario
1.10%
1.00%
1.00%
0.90%
• Existing Homeside client of 7 years wants to buy
and investment property
• They take out an additional Homeside loan
0.80%
0.70%
0.60%
0.50%
0.40%
0.35%
0.35%
0.35%
0.35%
0.35%
Year 2
Year 3
Year 4
Year 5
Year 6 +
0.30%
0.20%
0.10%
0.00%
Year 1
Upfront
Trail
In Summary
• Uncertain economic conditions
• Opportunity for broker channel to continue to grow
• NAB Broker will continue to grow our share
• Keynote - Digital marketing
• We will continue to focus and invest in:
− Compelling proposition for the end customer
− Our service proposition
− Compelling partnership proposition
− Our people