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Thursday, 28 October 2021
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In 2020, new investors were keen to build wealth in the sharemarket and were actively investing to ‘buy the dip’. But as markets have rallied to new highs amid Covid doubts, investing patterns have changed.
The Big Four banks look similar but they are at fundamentally different stages as they move to simpler business models. Amid challenges from operating systems, loan growth and neobank threats, one factor stands tall.
It's an incredible turnaround. One bank reported 121,000 home loans in deferral in 2020 but only 2,000 remain in hardship a year later. Profits have recovered, loan losses are tiny ... but which are the best banks?
Australian major banks reported a decline in financial performance in 2020 but as the impact of the pandemic evolves, the banks maintained a strong focus on customers. Is the renewed market optimism justified?
Banks severely cut dividends in 2020 but are expected to improve payments in 2021. History provides clues to when the banks will return to their 2019 levels of profitability, but who is positioned the best?
Uncertainty was the key theme in recent results, but how did they score on loan provisions, capital resources, margins and most importantly, dividends. There's a lot of guesswork going on in banks.
Australian bank share prices are down about 40% since February 2020, with many of the risks factored in. It's hard to estimate short-term loan losses and asset growth, but the longer term is more positive.
Traditional SMSF asset allocations to cash, banks and property are changing as ultra-low interest rates start to bite, and SMSFs take on more diversified equity and fixed interest exposures.
Many of Australia's bank directors lack crucial skills in technology, operations and HR as part of a broader shortage of experience that is as important in dodging scandals as in business success.
Looking back over the last decade shows the factors which have driven success for some companies and failure for others, driven by falling interest rates, a lower Aussie dollar and technology changes.
Many investors are tempted by high yields on shares, but when they are not sustainable, and in weak businesses, the outcome is disappointing compared with better quality and lower yields.
Our annual scorecard for Australian banks shows earnings were hit by remediation costs and slow credit growth, but they are in good health and look attractive versus other listed companies.
We tend to forget that house prices often fall. Direct lending controls are more effective than rate rises because macroprudential limits affect the volume of money for housing leaving business rates untouched.
The survey drew a fantastic 2,000 responses with over 1,000 comments and polar opposite views on what is good policy. Do most people believe the home should be in the age pension asset test, and what do they say?
Any policy decision needs to recognise who is affected by a change. It pays to check the data on who pays taxes, who owns assets and who earns the income to ensure an equitable and efficient outcome.
With articles on the pensions assets test read about 40,000 times, 3,500 survey responses and thousands of comments, there was a lot of great reader participation. A few comments added extra insights.
It is hard to think of any area of widespread public concern where the same policies have been pursued for so long, in the face of such incontrovertible evidence that they have failed to achieve their objectives.
There are reasons to believe inflation will stay under control, and although we may see a slowing in the global economy, two companies should benefit from the themes of 'Stable Compounders' and 'Structural Winners'.