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  • 🏦 P&N Bank Cancels Merger with Beyond Bank Amid CEO Controversy.

🏦 P&N Bank Cancels Merger with Beyond Bank Amid CEO Controversy.

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👇 Santos Unfiltered is a podcast that uses the best journalism to find the answers to the biggest questions.

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🛎️ BEFORE THE BELL

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Data is provided by Market Index AU. Stock data as of market close

🥝 RBNZ
Analyzing the Impact of OCR Surprises on New Zealand's Financial Markets

The RBNZ has gauged the impact of an OCR surprise on the financial-market response of monetary policy surprises. The findings reported below show that a positive 10 basis point OCR surprise results in a 0.5% appreciation in the NZ dollar one hour following an OCR announcement, which is greater compared to the 0.4% appreciation found in earlier research (Wong and Cook, 2012).

Highlights:

  • This also evidences that monetary policy surprise has an improved relationship with interest rate swaps than the interest of NZ dollar.

  • Besides this, the Reserve Bank of New Zealand also finds evidence that OCR surprises to Monetary Policy Statement announcements tend to have somewhat stronger and longer-lasting impact on financial instruments than on announcements related to Monetary Policy Review announcements.

  • It also identifies that OCR surprises still affect the exchange rate after a week. However, estimates become highly inaccurate quickly as the event window is extended.

Effects of Monetary Policy Shocks:

The Reserve Bank of New Zealand also evaluates the consequences of monetary policy shocks on asset prices, including the NZ dollar exchange rate.

While there have been prior literatures related to the impact of policy surprises, most have considered their effects on either the exchange rate or the long-term interest rate.

Importantly, the analysis by the Reserve Bank of New Zealand shows that positive OCR surprises lead to an appreciation in the NZ dollar and upward domestic swap rates and increase the differential in the swap rate between NZ and Australia or the US. The effects of exchange rates persist across currency pairs, but point estimates decline as one shifts from a one-day window to a one-week window.

Bottomline : is that positive OCR surprises have significant impacts on the NZ dollar exchange rate and swap rates, especially vis-à-vis Australia and the US. While the surprises wear off over time, their effects remain long-lasting in financial markets.

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🌋BIG PICTURE

  • NAB Supports New Legislation to Combat Scams in Australia. The NAB has welcomed the release of draft legislation establishing the Scams Prevention Framework, implementing Scam Codes across digital, social media, telecommunications, and banks to combat scams and make Australia a safer place.

  • Kiwibank CEO Advocates for Local Ownership Amidst Banking Competition. Kiwi bank chief executive Steve Jurkovich previously spoke of his concerns regarding the need for the bank to retain its 100% local ownership to be able to compete more aggressively with the big four Australian-owned banks. According to him, "this is critical in the offering - New Zealand's bank, owned by New Zealand, working for New Zealand.

  • Coalition Rejects RBA Board Split Amid Political Tensions. The National-Liberal Coalition has renounced its support in principle for a restructuring led by Governor Michele Bullock and will not attempt to divide the Reserve Bank board in half if elected.



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🚨AUSTRALIA
P&N Bank Cancels Merger with Beyond Bank Amid CEO Controversy. 

The P&N Bank Board has approved a cancellation of its proposed merger with Adelaide-based Beyond Bank, citing the fraud allegations associated against RAMS Home Loans, owned by Beyond Bank.

The Allegation: Claims surfaced that Beyond Chief Jake Bromwich had been stood down from a previous role at Westpac while an investigation was conducted into allegations of financial impropriety in his business. Beyond Bank Australia (Beyond Bank) and Police & Nurses Limited (PNL) today announced that they have mutually agreed to terminate their plans for a merger.

PNL: PNL's Chair Gary Humphreys said the Board had hoped that a merger recommendation would be the outcome from the Due Diligence process.

Although it is disappointing that we will not be progressing this opportunity, our Due Diligence process was robust and I am confident that we have made the right decision," Humphreys said.

PNL is operationally strong and safe at present. However, because investments in cybersecurity, fraud prevention, and financial crime detection are continuous in nature, maintaining size and scale remains very important. We will therefore continue our strategic agenda of organic growth and mergers while always acting within the best interest of members.

Beyond Bank: One of Australia's most trusted customer-owned banks, Beyond Bank proved its priority of customers by adding personal financial advisory services and community outreach to improve the financial wellbeing of its customers and local communities. Beyond Bank remains a strong, prosperous bank with an exciting strategy for the future.

Beyond Bank said it needs to adhere to strict confidentiality from the MoU for the protection of commercially sensitive information relating to the possible merger and maintaining the integrity of the negotiation process.

Zoom Out: Beyond Bank signed a memorandum of understanding in June 2024 with PNL on the opportunity for the two entities to merge. Extensive research carefully weighed the benefits of such a merger, which would advantage both organizations through an improved financial service offering, an enhanced member experience, and greater operational efficiencies for the collective 450,000 members from both organizations. If merged, the banks would have created one of the largest customer-owned banks in the country, with combined total assets of almost $20 billion and significantly greater market presence.

Why it matters: A Beyond Bank-PNL merger has the potential effect of changing the banking sector, particularly reshaping the customer-owned banking landscape in Australia. It may stir up competition in the banking sector, promoting innovations in the form of new digital banking facilities and interest rates that could provide consumers with more choices and, quite possibly, with superior services.

Bottom line: In addition, the merger can facilitate efficiency and cost-cutting for the combined entity to enable them to offer competitive rates and products to members. In a nutshell, a potential merger between Beyond Bank and PNL will increase customer satisfaction through improved financial products and services. This move ensures innovation in the customer-owned banking sector while improving both institutions' financial stability and growth opportunities.

🌏GLOBAL MARKETS

WORLD MAP

🇬🇧 BIS Warns Central Banks Against Rapid Interest Rate Cuts. The Bank for International Settlements (BIS) has advised top central banks not to overspending on interest rate buffers by cutting them too rapidly, as markets await the start of the US Federal Reserve's rate cutting cycle this week.

🏮 Global Stocks Show Mixed Results Amid Economic Concerns. US stocks finished the best week of this year, while the dollar fell below 140 yen, and stocks were mixed globally on Monday. France's CAC 40 rose 0.1%, Germany's DAX lost 0.3%, and Britain's FTSE 100 lost 0.1%. During Asian trading, Hong Kong's Hang Seng finished 0.3% higher and Australia's S&P/ASX 200 gained 0.3%. Markets were closed for holidays in Japan, mainland China, and South Korea.

🇺🇸 Central Bank Poised for First Interest Rate Cut in Four Years . The US central bank is tipped to disclose its first interest rate cut in four years, while the June quarter GDP release will provide an updated economic outlook for investors.


The business bank of the Commonwealth Bank of Australia reported that its vehicle and equipment financing was up by 15% compared to the corresponding period in the previous year.

The Details: Motor vehicle purchases have been a key driver, with 55% growth in motor vehicle purchases due to improved supply chains post-Covid. increased fivefold-500% in the past financial year, Financing for light commercial vehicles, including utes, vans, and light trucks, rose 27%.

Trends in Business Investments: Businesses have commenced investing in shop and office fit-outs; financing for shelving and furniture fittings grew 25% compared to the previous corresponding period.

This, on the other hand, has helped business owners make their operations future-fit and resilient. CommBank has partnered with Carsales to introduce a car buying service and automated its business lending products including its business overdrafts.

struggling under the weight of increased living expenses, and CBA has specific support such as deferred repayments on loans or restructuring of debt. Businesses can contact their relationship manager or phone CBA's specialized business financial assistance line 24/7.

Why it matters: Navigate unsteady economic times with ease. For example, companies that were quick to adjust the way they function in light of the pandemic continued on a path of long-term success. Mitigate challenges and come out on top in a world changing at an unprecedented pace.

Bottomline: it is important to support a business through thick and thin. This commitment not only will allow businesses to stay afloat but also will help in the overall economic stability and growth of the community. Indeed, this support can be crucial for the overall economic stability and growth of the community.

 

🛸 ECONOMY
What would a second Trump presidency mean for the global economy?  

Evan El-Amin/Shutterstock
John Hawkins, University of Canberra

Donald Trump inherited a strong economy from President Obama and managed it poorly.

Real GDP grew more slowly under Trump than it had under any president since the second world war. He was the only president since then to preside over a fall in the number of workers with a job.

In 2016, the United States (US) economy was the world’s largest; by 2020 China’s was more than 10% bigger.




Trump’s economic policies

Would a second Trump presidency be any better? Hopefully, there will not be another pandemic for him to mismanage. But his policies suggest the economy would again do poorly.

Admittedly, it is hard to be sure about the policies Trump would adopt in a second term as his record of implementing his promises is so poor. Mexico never paid for a border wall. Hillary Clinton was not locked up. And I doubt many Americans were “tired of winning”.

The provision of policy detail has not been a defining feature of Trump’s rallies. There is a lot of detail in the 900 pages of Project 2025, produced by right-wing think tank the Heritage Foundation and whose writers include many former Trump advisors.

But Trump has disowned it. On his social media site he said both that “I disagree with some of the things they’re saying” and “I know nothing about Project 2025”.

Trump and Elon Musk

In businessman and investor Elon Musk’s rambling conversation with him on X, Trump had little to say about economics beyond not taxing tips. The moderators in the debate with Harris did try to elucidate more about his economic plans but it was a struggle.

To Musk, Trump claimed there is a “disaster with inflation”, which he falsely claimed was the worst in a century. In his debate with Harris, he was even more inaccurate calling it “probably the worst in our nation’s history, we were at 21%”.

Actually inflation had been higher in the 1970s than the peak of 8% under Biden. Inflation is now down to 2.5%.

He promised to end inflation quickly, but did not say how. He claimed a “drill, baby, drill” policy would cut petrol prices, an odd priority when talking to an electric car maker. And this would take years to have any impact.

In the debate he claimed he would “cut taxes very substantially”. Which taxes, he did not say, but his record suggests it would be taxes on the rich. Nor did he say what spending he would cut to fund the tax cuts, or whether he would just allow the government debt to expand further.

He has threatened the independence of the Federal Reserve, which could lead to interest rates being higher as expectations of inflation rise.

Policies or ‘concepts’?

Eight years after he campaigned for president criticising Obama’s health care arrangements, all Trump could offer as an alternative at the debate was “concepts of a plan”.

The clearest policy he has announced is more tariffs. He has proposed an across-the-board tariff of 10%, or perhaps 20%. For China they would be 60% or more.

The clear result would be American households paying much more for basic goods. Many goods US households buy are imported and US manufacturers import raw materials and components for the goods they make and machinery to make them.

It is likely many countries on which Trump imposes these tariffs will retaliate, making it harder for US exporters.

IMF modelling estimated the impact of Trump’s previous trade policies was to cut US (and global) GDP by around half to 1%. But now he is proposing much higher tariffs.

US and trade deficits

Trump is almost as fixated about the size of trade deficits as he is about the size of crowds at his rallies. But in his term as president, notwithstanding his tariffs, the US trade deficit was not narrowed.

Another way Trump would damage US trading interests is his impact on their “soft power”. He is very unpopular in many countries. A Trump-led US would likely attract fewer tourists and international students.

A pile of gold coloured coins
Trump says he would create a national bitcoin stockpile.Shutterstock/macondo

A bizarre new Trump policy is to create a “national bitcoin stockpile”. Following the lead of El Salvador’s self-described dictator Nayib Bukele, Trump would gamble taxpayers’ money on a hoard of speculative tokens which he had formerly called out as a “scam”.

As the world’s second largest economy, and a major customer of the rest of the world, a protectionist and smaller US economy would be a drag on global economic growth. There would be lower wages and fewer jobs globally as a result.

The big concern

But the major longer-term impact of a second Trump presidency on the global economy would come from his rejection of climate change.

He has called climate change a hoax. Asked directly about climate action in the first 2024 debate, Trump just referred irrelevantly to clean water. There was no mention of any action to reduce greenhouse gas emissions.

He would, again, withdraw the US from the Paris climate accords. This would be a major setback to attempts to moderate the increase in greenhouse gas emissions. As the second largest emitter, the US would directly contribute to a hotter planet and more deaths.

This is an edited version of a speech given by the author at the University of Canberra on the weekend.The Conversation

John Hawkins, Senior Lecturer, Canberra School of Politics, Economics and Society, University of Canberra

This article is republished from The Conversation under a Creative Commons license. Read the original article.

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