BANKING INDUSTRY IN GENERAL - CAPITAL RAISING

WE HAVE SEEN A LOT OF MEASURES PUT IN PLACE SINCE THE OUTBREAK OF COVID19 WHAT ARE SOME OF THE ASPECTS OF FINANCIAL MARKETS YOU SEE AS RELEVANT IN TODAY's ENVIRONMENT.

It is impossible to talk about business in 2020 without mentioning Covid19 and its impact on all aspects of Social, Work, Education and Business Life in Australia. It has simply influenced every decision in how we conduct our lives and also significantly impacted the Economy from Mining Giants down to Day Care centres. Needless to say the tragic loss of life has a significant impact on social structure combined with isolation and a mounting mental health issue as a result of these measures.

If you take a minute to look at what happened during the GFC, you can draw similarities to what is happening now. All markets enter a high-risk phase and jobs are lost, all investment asset classes either lose value or become highly volatile. From a financial system perspective, we need to look both at why we have an advantage over the most seriously affected countries.

Australia largely avoided catastrophe during the GFC as it did not have a heavily leveraged property market that needed to unwind, nor was it starting from a low-interest-rate environment, so had more room to ease. We were insured if you like. Whilst the impact was significant here, it was less than we saw in complicated communities such as the interdependent EU and the multi leveraged property sector in the US.

Importantly, the federal government also supported the banking system by assuring bank deposits & wholesale funding guarantees; covered bonds; preventing the short-selling of stocks; executive remuneration; retail investment protection combined with a large Stimulus Package – and as a result saw no bank failures.

Fast forward to 2020 and Australia, like the rest of the world is frozen in the pandemic. Again we have an advantage. An island shutting its borders to contain the infection, a single central bank, a unified government and the ability for our banking system to act swiftly and in a coordinated fashion to prevent a meltdown.

We have seen our 4 major banks shore up their balance sheets with a mix of Capital Raisings, dividend cuts and after advising of large profit downgrades compared with the same period in the previous year, trimmed forecasts. NAB, for example, increased its raise to 3.5 billion.

WHAT DOES THIS MEAN FOR THE CONSUMER?

Some reactions to the crisis have been as significant as the Banks raising capital. The Australian Banking Association for example has ratified the measure that if you defer interest payments on your home loan for 6 months it does not affect your credit rating. A lifeline for mortgage holders out of work. But it should be noted here that each individual needs to seek advice on whether or not accessing this relief is both in their best interest and how it may impact them in the future. It will also vary bank to bank as to the exact terms. As usual pay attention to the detail. Ask your advisor.

AND FOR BUSINESS WHAT MEASURES HAVE BEEN PUT IN PLACE OR WHAT CAN A BUSINESS OWNER ACCESS TO ASSIST DURING THESE TOUGH TIMES.

The government has been very pro-active following hot on the heels of the bushfire crisis with concessions to business owners during this pandemic crisis. Lessons learned from the GFC as mentioned earlier. Act early, don’t be afraid to use significant resources of the country to protect business. It’s the LARGE SCALE GOVERNMENT INTERVENTION (QE) we did not need during 2008-2010 – we are getting it now.

Not being able to have face to face meetings in the financial services industry makes it very tough to keep business flowing. And all of us are being forced to adjust accordingly. Meetings via facetime, skype or zoom as we are doing now. Banks allowing this type of client identification so long as it is recorded are part of the new normal.

Financially though the government has acted swiftly and provided some real dollars to the small business community, firstly;

JOBKEEPER – if you employ staff and have seen 30% or more drop in revenue in the March to June 2020 (actual or projected) compared with the same period in 2019 – you may qualify for the Jobkeeper payment.

$1500 per fortnight, per employee. For six months.

JOBKEEPER

Sole traders, partnerships, trusts or companies may also qualify and be entitled to the Jobkeeper payment. We have some more knowledgeable people than me following in this webinar who may provide clarity on this situation, but a reminder, you need to talk with your Tax Professional to see if you or your entity qualifies for this payment and how to access it. On the screen you can see one of our business portals and by logging in via MygovID you can simply press the link to run through the application pages. I have done this for an entity with my accountant on the phone for certainty. If the entity or employer qualifies it is a simple process to register.  Then there are some monthly housekeeping activities to ensure compliance.

BOOST

Eligible Small and medium businesses can apply for temporary cash flow support during the Pandemic Downturn by lodging their activity statements up to the month or quarter of September 2020. The boost is between $20,000 and $100,000 delivered as credits in the activity statement system. Basically, if you have employees or employ yourself – the equivalent amount withheld from wages paid to employees is kept for these periods.

You do not need to apply you simply lodge your upcoming activity statements and the cash flow boost will automatically be credited to your activity statement. Again talk to your tax professional before enrolling.

SPENDING RESTRICTIONS ARE ALSO IMPORTANT DURING THIS TIME WHAT SHOULD BUSINESSES OR INDIVIDUALS BE DOING IN THE CURRENT ENVIRONMENT.

bEAZY

During these difficult times, it is more important than ever to keep a track on your spending either from an individual household perspective or when tracking your business activities. Have a look at what are you spending money on today that you can do without for six to 12 months. Look at your subscriptions, unnecessary expenses. Sorry to the barista’s out there but do you really need that extra $5 coffee every day? Motor vehicle and transport costs are down as we are all staying at home more. Add up the saving and apply the same rigour to other expenditure. It all adds up.

Same applies to your clients. Trimming unnecessary spending can mean the difference between cancelling or keeping things like level of life insurance. Understanding what your level of (or clients) discretionary spending is can have a direct impact on viability during the crisis.

Potentially look at some cashflow management platforms – there are a number of coaching or self access software tools available in the market use something like this to measure your position daily for the household, your business & talk to your clients about it also.  This one is available via the AFAN network. The one on screen is a business finance module. You permission the software to collate bank, credit card, debit card statements – really any financials associated with your business – and it models income and expenditure to show where you are really spending money. You can set up any number of goals, objectives or forecast known upcoming spending to achieve your targets, line it up quarterly for BAS etc – much like accounting software. This one is specifically aimed at self employed and sole traders, but there are modules for Personal household expenditure as well – for things like saving for a house or goal setting to pay off the mortgage, go on a holiday etc

There is also a platform for Brokers, Financial Planners and other Advisors or the MENTORS to help guide their clients – with client consent, where they can see the client goals and objectives etc and engage at appropriate times. If you want to know more get in contact after the webinar and I’d be happy to discuss.

ABOUT THE AUTHOR - IAN MACPHERSON

Ian Macpherson is a former Vice President & senior advisor at Credit Suisse Private Bank and Division Director with Macquarie Private Bank, and is now Founder and MD of Artemis Capital as well as Director and board member of financial software company XFM Tech.

Described as articulate, discrete, conscientious & knowledgeable he is prepared to take the lead or break new ground where necessary and has a strong personal reputation and a network of contacts spanning Private Bank, Investment Bank and client circles alike.

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