Australia’s big four banks have gained more than $20 billion in value after relieved investors welcomed the Kenneth Hayne’s royal commission’s recommendations by driving the financial sector to what looks like its best day in a decade.
Shares in Commonwealth Bank, ANZ, NAB and Westpac all gained more than five per cent on Tuesday – with Westpac rising by as much as 8.08 per cent – after Commissioner Hayne slammed their culture but stopped short of recommending the big banks be dismantled.
But Mortgage Choice wasn’t so lucky, with traders dropping the ASX-listed home loan broker like a hot potato after Commissioner Hayne recommended the industry move from a commission-based pay structure to a fee-based model.
The suggestion, aimed at providing greater clarity for consumers, drove down Mortgage Choice shares by 32.3 per cent.
The wider financial sector was up by five per cent at 1330 AEDT, in what is shaping up to be its best day since a 5.27 per cent, post-global financial crisis lift on March 13, 2009.
Westpac shares surged the most among the big banks, while NAB jumped as much as 5.4 per cent despite its chief executive and chairman being singled out for criticism by Commissioner Hayne.
Investors seemed happy when NAB chief executive Andrew Thorburn announced on Tuesday he was cancelling his planned leave and leading the bank’s response to the royal commission.
Mr Thorburn’s future has been subject to speculation from analysts and investors since December, when he announced he was going on leave both before and after the release of the Hayne report.
“I am proud to be CEO of NAB, and am more determined than ever to lead NAB with even greater urgency and intensity and show through our ongoing actions that we do what we say,” Mr Thorburn said in a statement.
Commonwealth Bank, ANZ and Westpac all acknowledged the commission report late on Monday after its release, signalling their cooperation.
CBA CEO Matt Comyn said there was a “clear need for change”, while ANZ’s Shayne Elliott described the royal commission as “a humbling experience”.
Westpac said it had already taken steps to address some of the issues raised.
“Our focus remains on learning from the mistakes of the past and preventing them from happening again,” chief executive Brian Hartzer said.
Under one of Commissioner Hayne’s proposals, mortgage borrowers would pay a fee rather than trailing commissions over the life of a home loan.
The mortgage broking industry attacked the royal commission, saying it “failed” to understand its role in the home lending market.
Finance Brokers Association of Australia managing director Peter White warned borrowing costs would increase if Commissioner Hayne’s recommendation that trailing commissions be dumped is accepted.
“This could force up-front commissions to rise in order to compensate for reduced revenues to brokerages, which in turn will lift interest rates and make housing affordability more difficult,” he said.
More than half of home loans in Australia are written through mortgage brokers.
Mr White said the commission recommendation would “hand even more power to the big banks” and showed “just how out of touch he [Commissioner Hayne] is when it comes to brokers”.
Meanwhile, the Australian Shareholders Association welcomed the report and said it expected the industry to work toward a similar outcome to the HIH Royal Commission in 2003, “where there is assurance that every industry participant has carried out their job or role in an ethical and effective manner”.
“We especially support the reaffirmation that new laws aren’t required, but current laws need to be enforced and a better outcome would be achieved by having clearer laws, and the proposal to reduce the number and the area of operation of special rules, exceptions and carve outs,” ASA chair Diana D’Ambra said.