Halister News

(Bloomberg) -- CBA’s board has decided to reduce to zero the Short-Term Variable Remuneration outcomes for the CEO Ian Narev and group executives for the financial year ended June 30, 2017, it says in a statement to the ASX.

• Decision made after "consideration to risk and reputation matters impacting the group"
• Narev "retains the full confidence of the board"
• Non-executive director fees to be reduced by 20% in FY18
• NOTE: Commonwealth Bank Sued for Alleged Money Laundering Breaches

To contact the reporter on this story: James Thornhill in Sydney at jthornhill3@bloomberg.net

(Bloomberg) -- Commonwealth Bank’s annual cash profit is seen rising 3.5%, according to median of 11 analysts surveyed by Bloomberg, 2H profit seen rising 4.5% h/h. Results likely to be overshadowed by questions on bank culture, CEO future after Australia’s financial crime regulator Austrac sued the bank last week over alleged money laundering breaches. ESTIMATES:

• FY cash earnings est. A$9.8b (11 analysts, range A$9.7b to A$10.0b)
• 2H cash earnings est. A$4.9b (5 analysts, range A$4.8b to A$4.9b)
• Stat. profit est. A$9.8b (7 analysts, range A$9.7b to A$9.9b)
• Net interest margin est. 2.1% (4 analysts, range 2.11% to 2.12%)
• Final div. BDVD est. A$2.34

WHAT TO WATCH:

• Deutsche Bank (hold): Expect “relatively subdued result” with underlying earnings weak. Key focus is outlook for NIMs and the extent to which bank has been able to benefit from mortgage repricing
• Morgan Stanley (underweight): Austrac action raises further concerns about conduct, with the potential for penalties, brand damage and more scrutiny. Looking for management response to allegations, as well as the composition and outlook for housing loan growth
• Bell Potter (hold): Result likely to be overshadowed by Austrac allegations, fallout will dampen CBA share price prospects for some time. Focus on growth despite margin pressure and ongoing cost discipline 
• NOTE: Money- Laundering Case Adds to Australian Banking Scandals

DATA:

• 3 buys, 7 holds, 6 sells, avg. PT A$83.42: Bloomberg data
• Shrs down 1% YTD vs ASX 200 Index up 1.9%
• Short interest of 1.4% of float, 52-wk high 2.5% in Feb., low 0.8% in May: Markit data

TIMING:

• Expected to report results Aug. 9
• Conf. call 11:00 Sydney time
• CBA is the only Australia big-four bank reporting full-year results in Aug. National Australia will give Q3 trading update Aug. 11, ANZ gives similar update Aug. 15; Westpac update on institutional business was July 28.

To contact the reporter on this story: Emily Cadman in Sydney at ecadman2@bloomberg.net

(Bloomberg) -- Justice Chuka Obiozor of Federal High Court, Lagos, rules that property belonging to Diezani Alison-Madueke, a former oil minister, was acquired unlawfully, Nigeria’s Economic and Financial Crimes Commission says in emailed statement.

• NOTE: U.S. Hunt for Nigeria Fraud Cash May Come Second to a Small Bank

To contact the reporter on this story: Elisha Bala-Gbogbo in Abuja at ebalagbogbo@bloomberg.net

(Bloomberg) -- United Technologies is said to have initially made offer of $140/share for Rockwell Collins, DJ said, citing one person familiar with the matter.

• Two sides still in talks, not clear if will lead to agreement
• COL up as much as 7.9%, most intraday since Jan. 2012
• NOTE: Earlier, United Tech Mulling Rockwell Bid Is ‘Puzzling’: Street Wrap

To contact the reporter on this story: Joshua Fineman in New York at jfineman@bloomberg.net To contact the editors responsible for this story: Arie Shapira at ashapira3@bloomberg.net Steven Fromm

(Bloomberg) -- Since the U.S. Treasury is expected to “materially increase” bill issuance, yields could cheapen more than anticipated as government money market funds may begin to shift some of their cash back to T-bills from repo, JPMorgan strategists led by Alex Roever said in Aug. 4 note.

• JPM Treasury strategists estimate 70% of UST funding needs in 4Q, or about $360b, will be in the form of bills, increasing the stock of T-bills outstanding by 20%
• After the 2015 debt ceiling episode, 3-month bills cheapened 7-8bp vs OIS when Treasury increased supply by $280b in the two months following a resolution
• How much the government funds shift this time “remains somewhat of an open question, as it would not only depend on availability of bills but also repo and how it trades relative to bills”
• Since money market funds are one of the biggest buyers of Treasury bills, “changes to their allocation could impact where bills would trade” 
• Money funds’ exposure to Treasury bills has declined by $92b this year to $330b as of June, JPM says, citing Crane Data; bulk of decrease has come from government and agency money funds
• Meanwhile, money funds’ repo exposure increased $122b YTD, as banks -- particularly Canadian, French and Japanese institutions -- shifted their funding to secured from unsecured after money market reforms 
• Repo has also been “economically more attractive” than short-dated bills, providing avg. 3.5bp of pickup in yield over 1-month bills

To contact the reporter on this story: Alexandra Harris in New York at aharris48@bloomberg.net To contact the editors responsible for this story: Boris Korby at bkorby1@bloomberg.net Greg Chang

(Bloomberg) -- Bluerock Residential drops as much as 5.4% to the lowest intraday since April 2016 after it was downgraded to neutral from buy (PT to $11 from $16.50) at Compass Point following the REIT’s decision to internalize management and review its dividend policy.

• BRG could cut its dividend in half, which would save ~$14.5m, Compass Point analyst Steve Shaw wrote in a note
• Investors should view BRG as a stock that yields 5.2% instead of the current yield of 10.3%; multifamily and small-cap REIT peers have ~3.5% and ~6.0% dividend yields, respectively
• While BRG’s growth trajectory should stay intact, it’s likely going to be a "long claw back to gain investors’ confidence"
• BRG has 5 buys, 1 hold, 0 sells, average PT $14: Bloomberg data
• NOTE: BRG is scheduled to report 2Q results pre-market Tuesday and host conference call at 11am
• NOTE: June 27, Compass Point said it favored BRG given its trading discount

To contact the reporter on this story: Lily Katz in New York at lkatz31@bloomberg.net To contact the editors responsible for this story: Arie Shapira at ashapira3@bloomberg.net Will Daley

(Bloomberg) -- As part of its program to increase issuance to accommodate larger deficits and Fed balance-sheet reduction, Treasury should consider adding a 1-year floating rate note in addition to increasing the size of its 2Y FRN, as “current demand for FRNs is quite strong,” Citi analysts led by Jabaz Mathai say in Aug. 4 note.

• 1Y FRNs “should get strong sponsorship from money market funds,” note says; “lower dealer takedowns” in recent 2Y FRN auctions are evidence of strong demand, Citi strategist Steve Kang added in interview; primary dealers were awarded less than 40% of two of the past four 2Y FRN auctions
• TBAC’s Recommended Financing Table for 4Q calls for increases of $2b in 2Y and 3Y notes and 2Y FRNs, and increases of $1b in all other coupon auctions, starting in November
• This “should put some steepening pressure on the back-end of the curve” and leaves room for further 10Y and 30Y issuance in 2018-2019
• Recommendation to spread issuance across the curve “may also have been done as insurance again ultra-long issuance in the future,” however such issuance is “too early to rule out” based on Treasury’s issuance needs over next few years

To contact the reporter on this story: Anna Windemuth in New York at awindemuth1@bloomberg.net To contact the editors responsible for this story: Boris Korby at bkorby1@bloomberg.net Elizabeth Stanton

--ANTONY SGUAZZIN