# Time to look at the banks again?



## alex keaton (16 January 2009)

Interesting article from Kohler regarding the Aussie banks.

They are making great margins on loans.

I get the the feeling that when the market does turn the banks will jump 30-40% in the space of a few weeks. 

Which bank is the preferred option?

Alex



The banks are in Kevin heaven

Australian banks have issued about $40 billion worth of government guaranteed, AAA-rated bonds in five weeks – two-thirds of the amount they raised from global markets in the whole of 2007.

http://www.businessspectator.com.au/bs.nsf/Article/The-banks-are-in-Kevin-heaven-$pd20090116-NBQUW?OpenDocument&src=sph


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## MrBurns (16 January 2009)

alex keaton said:


> Interesting article from Kohler regarding the Aussie banks.
> 
> They are making great margins on loans.
> 
> ...




Yes I saw that and thought the same thing, they are scheming profit addicts with no morals who would sell their own grandmother down the river to make a buck, perhaps we should start buying in ?


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## Frank D (16 January 2009)

Technically No!

Fundamentally Not yet.

If and when the Financial Index is trading around 2900, you might begin to think about moving into long term holdings.

The big four are just chewing up and wiping out all the other players, and eventually they will come out bigger and stronger...

Just my thoughts...


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## nomore4s (16 January 2009)

I agree with Frank, not yet.


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## Agentm (16 January 2009)

same..

too soon..  much later imho


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## MrBurns (16 January 2009)

Put the cheque book away for now Smithers..................


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## Buddy (16 January 2009)

yes, I have been think the same thing. I rather fancy NAB. At these levels banks are paying around 9% FF. Not bad, and difficult to see profits eroding that much, after all they are barstards aren't they? Instead of putting the money in the bank, why not buy the bank. However, I do agree that it is probably not quite the right time yet. We have 4-5 months (around May/June isn't it?) before divs are paid and plenty of time to review.  I suspect that when they do start to move up it will happen very quickly so one needs to be vigilant.


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## gfresh (16 January 2009)

I was thinking it might be time to tip *some* funds in, but I'm still too cautious to go all in at this point. I'd want to see the final impact of all these centros', b&b's, etc on the bottom line first, and there may be more to come. 

With much of the alternative providers now squashed, when they do come back, they may have greater avenues for profits however.

It will be a very different environment that they operate in the coming years, may not be the same as the "old days".


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## Julia (16 January 2009)

MrBurns said:


> Put the cheque book away for now Smithers..................



This made me laugh.

My term deposits mature early April.  Given the cash rate is likely to be further down by then, I'll probably put some into the banks then iff they hold the dividends at the present level.


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## IFocus (16 January 2009)

2009 will see further contraction in the economy as it all starts to bite and with it bad loans mounting on the balance sheets.

Not sure about where you guys are but around here they have built lots and lots of retail stores I expect to see a few empty buildings as the year progresses and with that stress on commercial loans.

One last thought all the mainstream economists have consistently underestimated the rate of decline in 2008 in other words they are behind the curve so more surprises to the down side I think.


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## drsmith (16 January 2009)

With the 1987 stock market crash and subsequent economic downturn Westpac and ANZ did not confess to all their sins (bad debts) untill 1992. If memory serves me correct their share prices bottomed that year, 5 years after the initial crash. NAB fared better as it had less bad debts from that economic downturn. The privatisation of CBA did not begin until 1991.

If the above is any guide buying bank shares now is a case of judging which bank(s) have the best loan book.


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## Sean K (16 January 2009)

I've taken a stab at picking a bottom ish on WBC and CBA. Both still green, just, and will sell when they tell me to sell.


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## cutz (16 January 2009)

I was just a kid at the time so i wasn't paying to much attention but apparently Westpac actually nearly went under.

Anyone recall what happened ?


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## nunthewiser (16 January 2009)

Keep your Big 4 


Bendigo for this duck , own a small parcel at 10.09 from other day 

wants more under 10 ...9.50 would be fine 

will buy at 5 % intervals below that 

viewed for a LONG TERM hold

this correction isnt finished yet guys , personally think theres no hurry for bank buying

avaniceday


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## cuttlefish (16 January 2009)

I won't be going near the banks yet - though the govt guarantees and capital raisings are a positive for them - but the fact that they need them indicates the times we're living in.

Not sure what all this government backing  does to the governments credit rating (and implicitly the AUD) - particularly if even with all of that cash they still find their capital adequacy being eroded as more businesses go to the wall.

We haven't had the results of unemployment feed through, or the inevitable declines in retail spending as people tighten belts.  Commodities are also not in recovery mode yet.  This will all feed on itself for a while and I find it hard to see how the banks are going to maintain dividends - though maybe some of this capital raised through govt backed bonds can be spent on the divvies as well.

It will be very interesting to see where the Aussie economy heads over the coming year - I'm not optimistic but I'll be happy to be proven wrong.   It will also be interesting to see how the Aussie dollar tracks.



			
				drsmith said:
			
		

> With the 1987 stock market crash and subsequent economic downturn Westpac and ANZ did not confess to all their sins (bad debts) untill 1992. If memory serves me correct their share prices bottomed that year, 5 years after the initial crash. NAB fared better as it had less bad debts from that economic downturn. The privatisation of CBA did not begin until 1991




exactly - we're still in the early days of this imo - we haven't had the actual pain occur yet - we're just feeling a bit feverish and thinking we're probably about to come down with something -  the full blown flu hasn't even set in yet.


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## drsmith (16 January 2009)

cutz said:


> I was just a kid at the time so i wasn't paying to much attention but apparently Westpac actually nearly went under.
> 
> Anyone recall what happened ?




From wikipedia

1992: WBC recorded a 1.6 billion dollar loss, which at the time, was the largest loss for an Australian corporation. In this environment, the Bank dismissed staff and raided the superannuation[citation needed] to sustain its viability. In the process WBC came close to insolvency, and slipped from being Australia's largest to third largest bank.[citation needed]

1992 was the first time I entered the share market and one of the shares I purchased was Westpac. Along with the above loss Westpac also announced a massive rights issue (1 for 3 I think) to shore up it's balance sheet. Fortunately for the bank it was underwritten as the share price soon sank below the rights issue price. As part of the above capital raising, Westpac promised an annual dividend of $0.24 per share which was soon cut to $0.12 per share.

Some interesting underwriters emerged as part of the above capital raising. Pioneer International was one and I had shares in that too. Pioneer stuck more closely to it's core building materials activities after that little distraction. 

Kerry Packer also purchased a sizable stake of Westpac around the time but did not hang around for long.

The following table shows how dramatically Westpac's dividends declined between 1991 and 1993 and interestingly how quickly they recovered in subsequent years.

http://www.westpac.com.au/internet/publish.nsf/Content/WIICSS+Dividend+Information

NAB and ANZ also cut their dividends in response to that recession although in the case of NAB the dividend reduction was less than ANZ's or WBC's.

http://www.anz.com/aus/shares/services/dividends/DividendHistory.asp
http://www.nabgroup.com/0,,32876,00.html

I ultimately sold Westpac (and Pioneer) for a profit but the ride was perhaps a little more interesting than I would have liked. A large portion Westpac's $1.6 billion loss above was due to writedowns on commercial property loans.


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## Big_Daz (17 January 2009)

drsmith said:


> With the 1987 stock market crash and subsequent economic downturn Westpac and ANZ did not confess to all their sins (bad debts) untill 1992. If memory serves me correct their share prices bottomed that year, 5 years after the initial crash. NAB fared better as it had less bad debts from that economic downturn. The privatisation of CBA did not begin until 1991.
> 
> If the above is any guide buying bank shares now is a case of judging which bank(s) have the best loan book.




I agree with the theory here...we haven't (in my opinion) seen the end of corporate collapses. Hence the banks may still have some more bad debts to record. The banks are looking good but in time they will look great.


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## doctorj (17 January 2009)

No no no no no (well, there may be a swing up, but the fundamentals aren't there).

These are largely my own thoughts on the matter and please don't consider it as advice to buy, sell, hold or scratch your chubby butt.

The spreads banks are able to achieve on their loan book at the moment are only half the story. In fact, if you think about it widening credit spreads are exactly what you'd expect given the current financial conditions and do not represent a free lunch for the banks. In my very humble and generally ill-informed position, widening loan margins reflect (a) increased counterparty credit risk and (b) relative scarcity of funds. 


For me (a) is considerably more serious as it suggests an increased likelihood of writeoffs on the existing loan book. If 2008 was the year of the credit crunch, 2009 will be the year of declining asset quality. While the lending practices in Australia across the whole book were much more robust than the US, the other side of the rising coin lifting all boats is when the tide goes out, everyone suffers. Think GTP, ABC etc.

(b) is considerably more minor, but at the end of the day, banks are going to be more selective in the business they write. Or atleast they should be. Almost no surer way to spot a bad bank than to look for outliers in asset growth - they're probably writing busines others are ignoring.


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## nomore4s (17 January 2009)

doctorj said:


> (b) is considerably more minor, but at the end of the day, banks are going to be more selective in the business they write. Or atleast they should be. Almost no surer way to spot a bad bank than to look for outliers in asset growth - they're probably writing busines others are ignoring.




This is starting to play out imo.

Went to our accountant (business) yesterday and he said all of his mortgage broker clients are now only getting about 15 out of 100 applications approved for home loans. Also applications are taking alot longer to go through.

Looks like the banks are starting to be a lot more selective.


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## noirua (17 January 2009)

A bit of a warning.  I notice all the UK quoted banks did poorly last week, Barclays -45%, Royal Bank of Scotland -34%, Lloyds TSB -25% and HSBC -15%.  
Anglo Irish Bank was nationalised by the Irish Government as confidence was increasingly being eroded.

Aussie banks have too many ifs and buts and are only for the brave.


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## rcm617 (17 January 2009)

No way in the world am I touching any of the banks yet. We're just a bit behind the rest of the world in our economic downturn due to the kick along we had from our resources in the last few years, but our house prices are also overpriced, and our companies are starting to fall over. There's no way our banks will grow anywhere near the rate they have been over the last decade, and most have been raising more equity so the profit has to be spread over a larger number of shares. Maybe in a year or two.


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## Sean K (17 January 2009)

Hope all you guys bagging the banks, saying no recovery anytime soon and near disaster are putting your boxers on. 

If it is all disaster, what an opportunity!


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## nunthewiser (17 January 2009)

kennas said:


> Hope all you guys bagging the banks, saying no recovery anytime soon and near disaster are putting your boxers on.
> 
> If it is all disaster, what an opportunity!




 im not bagging the bank I like


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## nomore4s (17 January 2009)

kennas said:


> Hope all you guys bagging the banks, saying no recovery anytime soon and near disaster are putting your boxers on.
> 
> If it is all disaster, what an opportunity!




Even if it's not all disaster from here it will still be an opportunity imo.

But there is no rush, even if there is no more downside from here there will be opportunities to get in with alot less risk imo.


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## rcm617 (17 January 2009)

kennas said:


> Hope all you guys bagging the banks, saying no recovery anytime soon and near disaster are putting your boxers on.
> 
> If it is all disaster, what an opportunity!




Not bagging the banks, ours have done pretty well on a global scale, just think there is more downside over the next year or two. I also think there will be time to make a cheaper entry down the track when a bit more risk is out of the market, and it will take many more years for them to get back to their former growth rates in a more debt averse enviroment.


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## Sean K (17 January 2009)

rcm617 said:


> Not bagging the banks, ours have done pretty well on a global scale, just think there is more downside over the next year or two.



Sorry if my point was misconstrued.

If you think there's downside, short them, and make some money.

I have the feeling too many people have been sitting on the sidelines with this rout and have missed the downside opportunities. I'm kicking myself for not taking more advantage of it.


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## IFocus (17 January 2009)

The weekly charts of the Big 4, nasty down trends

.


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## drsmith (17 January 2009)

noirua said:


> A bit of a warning.  I notice all the UK quoted banks did poorly last week, Barclays -45%, Royal Bank of Scotland -34%, Lloyds TSB -25% and HSBC -15%.
> Anglo Irish Bank was nationalised by the Irish Government as confidence was increasingly being eroded.
> 
> Aussie banks have too many ifs and buts and are only for the brave.



Barclays fell 25% on Friday alone which prompted the following media release from the company after the close of trade.

http://www.newsroom.barclays.com/Content/Detail.asp?ReleaseID=1492&NewsAreaID=2

The Times Online has hinted that the sharp fall on Friday was the work of short sellers.

http://business.timesonline.co.uk/tol/business/article5533488.ece

It will be interesting to see how this plays out next week.


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## drsmith (17 January 2009)

kennas said:


> Sorry if my point was misconstrued.
> 
> If you think there's downside, short them, and make some money.
> 
> I have the feeling too many people have been sitting on the sidelines with this rout and have missed the downside opportunities. I'm kicking myself for not taking more advantage of it.



The bank dividend cuts that followed 1987 stock market crash make sobering reading for any long term bank investor both in terms of amount and timing. They leave me with the impression that it took much more time than the few months after the initial crash before bank boards realised the eventual impact on their organisations.

For the longer term investor looking to strike a more conservative risk/return balance than a trader this is something to consider.


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## noirua (18 January 2009)

drsmith said:


> Barclays fell 25% on Friday alone which prompted the following media release from the company after the close of trade.
> 
> http://www.newsroom.barclays.com/Content/Detail.asp?ReleaseID=1492&NewsAreaID=2
> 
> ...



Barclays is a big worry as it's paying 14% interest on its US$7 billion loan. The British pound has tanked badly adding to the cost.  The companies market cap is now only about US$6 billion above the loan and they seem to need much more.
This loan interest is far above that paid by the average guy in the street.


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## GumbyLearner (18 January 2009)

I heard citi have just reported another US$8 billion qtr loss this weekend.

I would keep right away from the financials ATM. There is still
plenty of garbage out there and the blinkered financial press will remain passively muted and lack any spontaenity in revealing the next write-downs, losses, negative news until they are fed it
IMHO!

DYOR


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## Glen48 (18 January 2009)

Going short on all the Banks? I read a newsletter last nigh sent out by an accountant say CBA still has to answer questions about home loans it has undertaken.
I must say every time I go short they got in the opposite direction soon as I work that out I can make some money.


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## nunthewiser (18 January 2009)

IFocus said:


> The weekly charts of the Big 4, nasty down trends
> 
> .




 now place a chart of BEN .bendigo bank right next to em 

blessem


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## Sean K (18 January 2009)

nunthewiser said:


> now place a chart of BEN .bendigo bank right next to em
> 
> blessem



LOL. 

Maybe I should look at BEN.

Past results are no indication blah blah blah ...

Actually, isn't BEN back at 5 year lows like every one else?????


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## Garpal Gumnut (18 January 2009)

A nice little takeover or two and the end of the four pillars is what we need.

I'm watching volume carefully as the insiders will get the good word way before anyone else.

Watch the prices go north if the 4 Pillars go.

gg


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## wonderrman (18 January 2009)

No way not touching them at all. To much crap is still out there and who really knows what is hidden in their huge balance sheets. Capital raising a positive? It just shows that the banks are struggling and don't know what is going to happen to their so called assets. More corporate failures to come, especially on the small - medium scale if we do go through a even mild recession. All spells more trouble from this perspective. Why buy into them now? Why buy into them at all? Just because they grew a **** load in the last bull market doesn't mean they will in the next (and didn't in the past). Remember the last 10 years was funded by debt, fake money, the world's been shot to pieces because of it this past 18 months. Do you really think it is going to be so proficient in the next few years. I'd prefer to be going with the companies that supply services that people actually need (banking is one of them, but they're a very tricky investment the past year has shown this), or the industrials that will see the big turn around when the economy turns and people start to spend again.


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## nunthewiser (18 January 2009)

kennas said:


> LOL.
> 
> Maybe I should look at BEN.
> 
> ...




.........I hold , been buying around $10.09 as posted previously ...... pay no heed to me m8 but do think a comparison of charts next to the big 4 shows a different pattern .YES they have come off there highs as with most others BUT not a big a % fall as some others .my anyalsis (if u can call it that) is posted previously in another thread when i moved my savings and deposits there .

as posted in another thread too my future entrys to this bank are posted also .

as with all  a good read will point out a few differences between this bank and others and definately NOT claiming it to be in the same finacial class as the big 4 , BUT at times biggest isnt always best 

cheers


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## sammy84 (18 January 2009)

The commonwealth is just going to continue to provide the banks an un-proportionate amount of support. I wouldn't be surprised to see a lot looser regulatory restrictions on the banks in the next year, allowing them to get what would be an otherwise uncompetitive market power. Whats not to like!


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## drsmith (18 January 2009)

Is there any easily accessable up to date information on the big 4's net tangable asset backing per share ?

The info from their latest profit reports is a little dated given capital raisings and takeovers since.


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## drsmith (18 January 2009)

I have performed some crude bank NTA backing calculations of my own as displayed in the following table,

*..........Balance date......Estimated post raisings/aquisitions*
WBC.....*$7.87*...............*~$8.10.* Post StGeorge takeover and $2.5b raising.
ANZ....*$10.72*...............No institutional share raisings that I'm aware of.
CBA....*$12.38*...............*$14.00 to $14.50.* Post raisings/Bankwest purchase. Too complex hence range.
NAB....*$10.16*...............*~$11.00.* Post $3.0b raising.

It would be interesting to see how the current ratio of share price/NTA per share compares to previous economic downturns. If memory serves me correct, bank share prices at their low point in the late 80's/early 90's recession were on average closer to NTA/share than they are now.

Note that the above estimates do not take into account share capital raised from SSP's or DRP's (underwritten or otherwise) post balance date.


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## wonderrman (18 January 2009)

drsmith said:


> Is there any easily accessable up to date information on the big 4's net tangable asset backing per share ?
> 
> The info from their latest profit reports is a little dated given capital raisings and takeovers since.




I doubt the banks would probably even now their *true* NTA backing. All estimates I think are major guesstimates.


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## drsmith (18 January 2009)

I made a ballsup with the Westpac calculation as I forgot to take into account that Westpac offered shares in StGeorge at a ratio of 1.31:1.

NTA/share post merger is estimated to be *~$7.60*.



wonderrman said:


> I doubt the banks would probably even now their *true* NTA backing. All estimates I think are major guesstimates.



Yes, ultimately very dependent on the quality of their loans.


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## noirua (19 January 2009)

noirua said:


> Barclays is a big worry as it's paying 14% interest on its US$7 billion loan. The British pound has tanked badly adding to the cost.  The companies market cap is now only about US$6 billion above the loan and they seem to need much more.
> This loan interest is far above that paid by the average guy in the street.



Barclays Bank's position is in fact worse than I thought. 

They have US$4.8 billion of reserve capital instrument loans and US$7 billion of mandatory convertible notes.
Both these pay interest at 14% per annum (16% in the first year) until June 2019.
Barclays market cap was infact £8.4 billion (US$13 billion approx) last Friday.

I suppose if Barclays was not a Bank it would now be close to bankruptcy. In its favour, like Freddy Mac and Fanny Mae, the UK can't let it.


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## noirua (19 January 2009)

Interesting to see if Aussie Banks are affected by the UK Prime Ministers official announcement whilst visiting Egypt, about 60 minutes ago.

Prime Minister Gordon Brown has said he will make an announcement about the UK's Banks tomorrow (Monday), probably before markets open.

Speculation is that the Royal Bank of Scotland may be nationalised.  Meanwhile a 70% stake will be taken whilst the nationalisation terms are thrashed out.

A new toxic supporting bank to be setup where banks can place their difficult loans with Government support in return for a form of fee.

Speculation that the overall support package including the recent £37 billion (AU$77 billion) may eventually stretch out to reach £200 billion (AU$420 billion).


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## noirua (19 January 2009)

Link to the announcement to be made by the UK's Prime Minister, Mr Gordon Brown, in London on Monday.
"New bank bail-out to cost billions":  http://news.aol.co.uk/new-bank-bail-out-to-cost/article/20090117124758246628573


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## sinner (19 January 2009)

More great news from the banking sector.

How will we be immune from this when our banks fuelled all their growth in the same wholesale debt markets as these countries?

http://www.nakedcapitalism.com/2009/01/british-banks-deemed-technically.html



> Of course, it takes one to know one. The no-doubt accurate call on the health of British banks comes from one of their own, Royal Bank of Scotland. Funny how no US bank is willing to make the same call.
> 
> From the Independent:
> 
> ...


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## MrBurns (19 January 2009)

By Alan Kohler.

http://www.businessspectator.com.au



> The only thing standing between Australia and the sort of catastrophic mess that Britain and America are heading into in 2009, and that Iceland is in now and that Ireland would be in if it wasn’t part of the Euro, is the state of our banks.
> 
> *Most of their banks are quite broke; Australia’s are okay … so far.*
> 
> ...


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## Glen48 (19 January 2009)

I was reading were Citi and Morgan Stanley are looking at combining and calling it Citi Morg.
Whats the long term forecast for the OZ banks  one case they were prepared to lend some kid 900K to buy a house they must know by lending money to buy a falling asset is not good business practice.


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## nomore4s (19 January 2009)

Glen48 said:


> I was reading were Citi and Morgan Stanley are looking at combining and calling it Citi Morg.




Is that a joke?


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## Sean K (19 January 2009)

nomore4s said:


> Is that a joke?



I laughed.


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## drsmith (19 January 2009)

nomore4s said:


> Is that a joke?



It would have been a good one for April fools day.


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## Julia (19 January 2009)

An article on likelihood of dividends being cut, even with the banks:

http://business.smh.com.au/business...vidends-20090116-7j4q.html?sssdmh=dm16.356277


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## drsmith (19 January 2009)

noirua said:


> Barclays Bank's position is in fact worse than I thought.
> 
> They have US$4.8 billion of reserve capital instrument loans and US$7 billion of mandatory convertible notes.
> Both these pay interest at 14% per annum (16% in the first year) until June 2019.
> ...



Even with Friday's profit announcement and more bank bailout money from the British and US Government, Barclays share price is struggling to keep it's head above water after an initial surge.


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## ROE (19 January 2009)

cutz said:


> I was just a kid at the time so i wasn't paying to much attention but apparently Westpac actually nearly went under.
> 
> Anyone recall what happened ?




I'm way way too young then probably still wet my pants but uncle history tell me it's bad corporate loans that bought them down..

they learn their lessons or maybe not with snapping up the dragon at a premium and they have big mortgage book ....this time the housing may  bring them down 

I just happen to know someone, CBA and Suncorp wont lend them the money for a property with but dragon did ...hmm wonder if that is a good or bad move  and what risk metrics they have in place


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## ROE (20 January 2009)

wonderrman said:


> I doubt the banks would probably even now their *true* NTA backing. All estimates I think are major guesstimates.




There is no way in hell anyone could accurately calculate banks NTA... if they can they are smoking something...all they can do is estimate with reasonable assumptions

Banks are VERY VERY VERY highly leverage beast and any one bad move could completely wipe them clean of their profit and then some more.

Look at all the banks that miscalcuate sub-prime..they are gone and bankrupt...

Take someone like CBA,  it has a loan book of around 480 Billion..it doesn't takes much for **** to hit the fans, all it need is a few percent out of that $480 Billion and you are a goner.


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## noirua (20 January 2009)

How bad a position are Aussie banks really in?  If they dare say there's a problem the speculators will be on them immediately. 

The UK's Royal Bank of Scotland forecasts a trading loss between AU$17 to AU$19 billion. Write downs will increase the loss by AU$42 to AU$45 billion.

From the above, it does show that Aussie bank write downs could be a problem for the banks.


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## investorpaul (20 January 2009)

By the middle of the year I believe we will have a clearer picture on the whole economic outlook. A few more companies will be forced to admit their mistakes and we might finally be able to work out where the price of securities (including the Banks) lay. I think that once we have this clearer picture that the big 4 could represent a good long term buying opportunity, depending of course on anything that gets revealed over the next 5 or 6 months.


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## wonderrman (20 January 2009)

> There is no way in hell anyone could accurately calculate banks NTA... if they can they are smoking something...all they can do is estimate with reasonable assumptions
> 
> Banks are VERY VERY VERY highly leverage beast and any one bad move could completely wipe them clean of their profit and then some more.




Yep that's exactly right and that is why I don't like investing in them. They're fragile beasts. I read this good article on the banks and how they lend money. It's a few pages long but worth a look .... http://www.tocqueville.com/article/show/249.


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## Glen48 (20 January 2009)

My Mother  has money with Challenger and been sweating on a Cheque since December any one heard any thing????


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## gfresh (20 January 2009)

ROE said:


> Take someone like CBA,  it has a loan book of around 480 Billion..it doesn't takes much for **** to hit the fans, all it need is a few percent out of that $480 Billion and you are a goner.




Yup.. Residential loans will be the one that will show it's hand this year. Doesn't even have to be the doomsday 20-30% falls in residential property, and we're not far away from the US and UK situation. Even a few % fall is already tightening up the banks' lending standards, if it gets worse that tightening will increase. If less and less people able to take out those expensive loans for mid-to-upper level property then the banks are stuck between is stuck between a rock and a hard place between taking on more risk, or foregoing risk and contributing to a market implode. 

Such a situation will quickly show who has the dodgiest loans on their books.


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## wonderrman (20 January 2009)

gfresh said:


> Yup.. Residential loans will be the one that will show it's hand this year. Doesn't even have to be the doomsday 20-30% falls in residential property, and we're not far away from the US and UK situation. Even a few % fall is already tightening up the banks' lending standards, if it gets worse that tightening will increase. If less and less people able to take out those expensive loans for mid-to-upper level property then the banks are stuck between is stuck between a rock and a hard place between taking on more risk, or foregoing risk and contributing to a market implode.
> 
> Such a situation will quickly show who has the dodgiest loans on their books.




The famous Buffett quote comes to mind again,

*"Only when the tide goes out do you discover who's been swimming naked." *

I think it's fair to say that most banks and pretty well swimming naked at the moment.


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## DowJones (20 January 2009)

noirua said:


> A bit of a warning.  I notice all the UK quoted banks did poorly last week, Barclays -45%, Royal Bank of Scotland -34%, Lloyds TSB -25% and HSBC -15%.
> Anglo Irish Bank was nationalised by the Irish Government as confidence was increasingly being eroded.
> 
> Aussie banks have too many ifs and buts and are only for the brave.




I tend to agree - not enough clarity on the bad debt exposure and some may be still working its way through to a bad debt because of the deteriorating economy. CBA's capital raising was a prime example... Plus no one could have thought the ways things panned out for Bank of America and RBS recently, when both looked in much much better shape only recently...

Also, has anyone thought what would happen to the big 4 Banks if the Australia housing bubble were to burst?


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## noirua (20 January 2009)

Time to look at banks in a personal way and particularly, if you have a business account with large sums held.

Losers in Europe and America have lost big time and quite large companies have collapsed. Spread your money around amongst the best banks, take no risks, as you MAY have fearful problems if you don't. 

Take care of your most important asset, money.


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## doctorj (20 January 2009)

Bank shares here in the UK are trading more like an option than a stock.  Lloyds just hit 34p, Barclays at 76p (180p just a week ago).  Essentially, owning a bank stock here is a bet that the entire system won't be nationalised.

How are governments at running banks?


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## MrBurns (20 January 2009)

DowJones said:


> Also, has anyone thought what would happen to the big 4 Banks if the Australia housing bubble were to burst?




The bubble will and is actually in the process of bursting now, the banks have factored in huge amounts of bad loans.
They will protect themselves and with the help of the Govt will get through somehow.


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## Julia (20 January 2009)

Extract from today's SMH:



> Back on December 9 when Westpac announced the $500 million SPP and raised $2.5 billion from institutional shareholders, $16 was a handy discount to the market price. Even last week Westpac shares were worth $16.75, which meant existing retail shareholders at least had the opportunity for a little arbitrage - they could keep their exposure steady but make a profit by subscribing for new shares while selling the same number of existing shares.
> 
> But now there are only a few cents in it. If the share price is below $16, the SPP will be set at the average price in the five trading days up to January 30. That line was crossed in morning trading, with Westpac shares sinking recently to $15.52.
> 
> ...


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## drsmith (21 January 2009)

doctorj said:


> Bank shares here in the UK are trading more like an option than a stock.  Lloyds just hit 34p, Barclays at 76p (180p just a week ago).  Essentially, owning a bank stock here is a bet that the entire system won't be nationalised.
> 
> How are governments at running banks?



With this and the renewed downtrend in global equities generally it will be interesting to see if the ban on shorting financial stocks here is extended.


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## Dezza (21 January 2009)

Who would've thought you could purchase a share each in Barclays, Lloyds and RBS for under 2 quid?


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## GumbyLearner (21 January 2009)

:jump:







Dezza said:


> Who would've thought you could purchase a share each in Barclays, Lloyds and RBS for under 2 quid?





What the hell are you talking about?...If it wasn't for Obama this world wouldnt have to worry about the banks getting re-capitalized? Not that its any great solution. But again thanks Mr.Bush for your warm piece of lettuce effort at insulting our REAL enemies!
:jump:

JUST REMEMEBER, DONT BLAME OMABA FOR THE GARBAGE HAND OFF FROM GEORGE "KNOW-IT-ALL" BUSH.

BUSH SCREWED the economy not Barack Obama!


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## noirua (21 January 2009)

GumbyLearner said:


> :jump:
> 
> 
> What the hell are you talking about?...If it wasn't for Obama this world wouldnt have to worry about the banks getting re-capitalized? Not that its any great solution. But again thanks Mr.Bush for your warm piece of lettuce effort at insulting our REAL enemies!
> ...



I think you're on the wrong thread GumbyLearner. Dezza hasn't mentioned Barack Obama in anyway whatsoever. Very odd response to a very fair comment.


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## Dezza (21 January 2009)

Haha...think he drank too many Red Bulls to stay up and watch his inuguration. But yeah, his swearing in hasn't 'ignited' the markets as some were hoping for. Banks and Financials dragging everything down again...not looking too good for the Aussie Banks.


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## wayneL (21 January 2009)

Dezza said:


> Who would've thought you could purchase a share each in Barclays, Lloyds and RBS for under 2 quid?




...and still have a high probability of losing the blinkin' lot!

toxic toxic


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## xyzedarteerf (21 January 2009)

GumbyLearner said:


> JUST REMEMEBER, DONT BLAME OMABA FOR THE GARBAGE HAND OFF FROM GEORGE "KNOW-IT-ALL" BUSH.
> 
> ​





ok i can't help it, just one last one for the year.

​


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