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Saturday, 18 September 2021
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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.
The record run in house prices looks unsustainable but the outlook for Australian banks is for improving credit growth and earnings. For house prices to rise, the supply of credit must match demand from borrowers.
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.
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.
The journalist most responsible for the calling of the Royal Commission takes care not to be roped in by everyone with a complaint to push. It takes experienced judgement to gather the right information.
Australia's major banks face many challenges but they are strong and remarkably adaptive and resilient. They have also finally accepted they are too big to behave badly.
Who knew? With some surprise results, the Government is on unexpected firm ground in asking people to draw on all their assets in retirement, although the comments show what feisty and informed readers we have.
It's a remarkable statistic. In any year since 1875, if you had invested in the Australian stock index, turned away and come back eight years later, your average return would be 120% with no negative periods.
Never stand between Australian households and an uncapped government programme with $3 billion in ‘free money’ to build or renovate their homes. But excess supply is coming with an absence of net migration.
Picking macro trends is difficult. What may seem logical and compelling one minute may completely change a few months later. There are better rewards from focussing on identifying the best companies at good prices.
The RBA Governor says rising house prices are due to "the design of our taxation and social security systems". The OECD says "the prolonged boom in house prices has inflated the wealth of many pensioners without impacting their pension eligibility." What's your view?
Some high-quality companies have emerged even stronger since the onset of COVID and are well placed for outperformance. We call these the ‘COVID Opportunists’ as they are now dominating their specific sectors.