THE DISTILLERY: Besotted by banks

Of course the banks star in this morning's commentaries and reports, as they have been doing day after day. But there are other issues and stories about. AXA Asia Pacific's future for one, Qantas' woes for another, BHP Billiton's troubles with upmarket manure and the Queensland government's train sale which is set to generate some heat and light in the next few days.

Fairfax's Stuart Washington says the QR National issue to retail investors is set to close on Friday, but not before the usual argy bargy over price: "Despite a glossy $15 million marketing campaign QR National has been rejected by many advisers to retail investors, while some fund managers are still baulking at the $2.50 to $3 offer range. However the float's lead managers and the Queensland Treasurer, Andrew Fraser, have ruled out any change to the pricing of the $5 billion share sale, destined to become the second-largest float in Australia's history." The Australian Financial Review also picked up on the issue this morning: "QR National's Lance Hockridge is pinning his hopes on strong international demand for the group's $6 billion float later this month after an initial allocation to retail investors fell short of expectations." All aboard?

Fairfax's Adele Ferguson says Qantas has to get its finger out. Issues are piling up, not least the slack share price: "The Qantas boss, Alan Joyce, will need to make some tough decisions in the next year as he grapples with the political, financial and brand damage caused by three mid-air emergencies due to engine malfunctions and a suspected hydraulic fuel fault in as many days. Besides having to juggle the political pressures of a Senate inquiry into airline safety and find ways to mitigate the brand damage from the recent air incidents, Joyce and the board need to address the flagging share price."

John Durie wrote in The Australian: "It's not just the French who are talking to AMP – it seems AXA Australia's Rick Allert met last week with AMP's Peter Mason. The pair met in Adelaide to discuss who was going to win the Melbourne Cup, among other issues. Today, Allert's people released a statement confirming French reports that its parent company had re-opened talks, but they neglected to mention the Australian talks. AXA can be forgiven to the extent that, given nothing had apparently come of the talks in Australia, there was no need to publicly disclose the discussion, provided they remain private. The talks are now public." And the AFR reported today: " After spending a year working on a deal to break up AXA Asia Pacific, there's a growing feeling that AXA SA may just have to give up if it can't reach agreement soon." Merde, they exclaimed in Paris.

Ian McIlwraith wrote in the Fairfax broadsheets on Saturday: "For some light relief, producers of the show could use cutaway shots of market regulators, the ASX and the Australian Securities and Investments Commission, snoring blissfully at their desks while all this was going on. The Packer/Murdoch alliance has yet to tell fellow Ten shareholders what their better mousetrap is, and why it will catch more mice. Maybe that will change at the AGM next month. Until then, small investors in Ten appear to have been badly let down by their board, the ASX and ASIC." That's the Tom Jones approach to regulation, ''Its Not Unusual".

The AFR reported on the weekend: "BHP Billiton's board is likely to consider within the next 10 days whether to spend up to $US4.2 billion buying its own shares, a move that would please investors and probably drive up its share price." And the paper's Chanticleer columnist wrote: "When the Canadians this week read the last rites over BHP Billiton's $US40 billion deal to takeover Potash Corp of Saskatchewan it put an end to a bold strategy that would have tied the $237 billion BHP corporate wagon to one of the greatest secular growth stories the world has seen."

The Australian's Matthew Stevens wrote perceptively on Saturday: "Canada's decision to block BHP's $US39 billion ($38.36 billion) move on a fertiliser miner with the delightfully unfashionable but wholly accurate name of Potash Corporation of Saskatchewan was informed by political realities peculiar to the target's host nation and province. But the underlying community sensitivities that generated a decision thoroughly out of character with Canada's routinely open-door approach to foreign investment has, I think, a more common genesis. Across a host of the globe's most powerful and mature economies there has been a subtle lurch to re-regulation, provincialism and protectionism as communities and their political leadership seek responses to the failures at the root of the global financial crisis." And he included the Australian debate over the ASX bid and banks is in this list.

The banks weren't forgotten. The Australian Financial Review reported this morning: "Banks are lobbying the federal government to change the tax laws so they can avoid paying hundreds of millions of extra dollars in tax." Change the law to suit themselves, not the banks, no! And The Australian reported: "The government will attempt to regain the initiative on banking regulation this week. It will unveil tough new rules that are expected to force most banks to lower the exit fees charged on mortgages. With the Coalition still pressing its case that the government is lagging on bank regulation, Julia Gillard foreshadowed a first strike. And News.com.au carried this report: "The big banks are set to dump mortgage exit fees in a bid to avoid tough government intervention. Senior officials at three major banks said yesterday that exit fees, which cost customers upward of $900, would soon be a thing of the past in a surprise act of appeasement making it easier for customers to switch banks."

Michael Pascoe wrote on the SMH website on Friday: "The bank mania sweeping Canberra, whipped along by the usual populist commentaries, is starting to take on bizarre proportions as the two major parties compete to sound the most interventionist and to display the least confidence in the market mechanisms. The outbreak of posturing by the Australian Competition and Consumer Commission isn't a good look either. The CBA's 45-point mortgage rate increase and the big profit numbers from all the banks have combined to unleash a wave of largely irrational bank bashing not seen since Ben Chifley was trying to nationalise them. Yes, the absolute number of the big four banks reporting $21 billion in combined profits is certainly big – but so are the banks. Their return on equity is less than the likes of BHP, Woolworths, Telstra and plenty of others."

And Ross Gittins said something similar in the SMH on Saturday: "When the punters, the pollies and the media all get their knickers in a twist over rising mortgage interest rates, any argument – no matter how misconceived – is fair game. We're being assured that the banks' huge and growing profits are obvious evidence of ''gouging''. And any increase in mortgage rates in excess of the rise in the official interest rate is obviously immoral and probably should be made illegal. Sorry, but no matter how unlovely the banks are – and I'm no admirer or defender of them – those propositions don't make sense." And this morning Mr Gittins again got stuck into the banks, the media and politicians over the issue. This is what he wrote, accurately, about the media: "The media, as usual, are bringing far more heat than light to the affair. They're playing it for all it's worth, fanning the punters' uncomprehending self-pity for commercial advantage without any real desire to help them understand the wider issues or even help them deal with their problem. After years of Labor faking it, the punters and the rabid end of the media have called its bluff: do something effective to curb the banks' market power or be judged a waste of space. We'll see if it can summon the courage."

And Durie also wrote on Friday: "Commonwealth Bank will be left with the highest mortgage rates for a few more days at least, with rivals unlikely to hike their rates today. Typically, after one bank jumps ahead of the pack the other three lenders leave it to cop the political flack and then increase their rates to just under that laid down by the aggressor. In the past, the rival banks' statements were often released late on a Friday. At this stage that won't happen today, amid continued backroom gripes about CBA's aggression which has helped trigger a political backlash against the industry." And on Saturday Durie followed up this point: "Norris's fellow bank oligopolists are united in thinking he went too far and was too aggressive, and fear he may have sparked an unnecessary backlash. Yesterday they broke with the normal course of events by not, at least in part, following his rate rise. Commonwealth now has the most expensive home loan at 7.85 per cent, 30 basis points above Westpac, 40 basis points above ANZ and 60 above NAB. Next week, the other three will follow Commonwealth in increasing rates by more than 25 basis points, but they will be more like five to 10 basis points above the RBA."

And Michael Stutchbury made a telling point in a Weekend Australian column: "Minority politics has ignited a wave of populist bank bashing suggestive of an Australian fantasy land: we don't appreciate why we avoided the global financial crisis; we don't comprehend its lingering dangers; and our complacent prosperity is clashing with the politics of deleveraging. The International Monetary Fund last week nominated a "healthy banking sector" among the reasons why Australia was one of the few rich economies to escape recession. Our well-supervised AA-rated banks mostly shied away from risky subprime lending. Taxpayers were not burdened with massive bank bailouts, nationalisations or toxic assets as in the US, Britain and Europe. When the crisis hit, our banks used their emergency government guarantee to keep tapping offshore funding markets and avert a sharp housing price correction. Yet now we're out to punish them." Because the banks haven't responded in kind.

That's a point well made by Phil Coorey in The Sydney Morning Herald: "Over the weekend Norris sniffed at the short-term populism in Canberra which, he said, was damaging Australia's reputation as a place for business. He should be careful about further goading this government which, to its own political cost, helped the big end of town through the downturn. It has not been a reciprocal relationship. The mining giants pulled down a prime minister and very nearly a government over the emissions trading scheme and the mining tax. The government, which must bear some blame given its hamfisted design and announcement of the mining tax, has been humiliated enough by business. Should they be on the receiving end of something they do not like, the bankers will have only themselves to blame."