# Best bank to invest in?



## bennib0i (15 May 2008)

Hi everyone,

   Im 20 and fairly new to this and would like to get some ops from you guys who have been trading for a lot longer time then i have. 

   I am not ignorant in how the stock market works and have been looking and reading alot recently. Up to now I have accumulated 8k to invest in the stock market! yay! now the questions lays in which stocks?

   Im interested in investing for the long-term and am considering either dumping it all into a share in one bank or a mix of two, and collecting the dividends as they come. So which bank(s) would you guys recommend for a safe investment. Or any other recommendations in other sectors that provide good dividend returns? 

Im also open to any other suggestions and advice.

Thx


----------



## Whiskers (15 May 2008)

You need to get hold of some data to compare your stocks.

E*trade for example, provide a fair bit of company information as well as search profiles like immediately below under _Research Tools:  Sample Queries, The Bank Analyser_

Another is dividend yield (bottom chart). You will note that dividend yield alone can be misleading, especially when the market corrects like now. Some share prices are quite low historically reflecting in a higher dividend yield %, and some of them while appearing good value may be suffering from the sub prime credit crisis.

On the pure dividend yield the banks are way down the list around 5 to 6% yield, but are probably safer than many above them.

The annual average return is often more reliable, but at the moment even that is tainted with a degree of uncertainty about future prospects. So there is a lot to consider and make judgements about.


----------



## TheRage (15 May 2008)

Hi,

With such a low starting capital why not consider investing in an LIC (Listed Investment Company) such as ARGO or AFI. This will give you broader exposure to all industries and not just the financial industry. LIC's tend to hold up fairly well in choppy markets also. However you could diversify some of your return away. In saying that being invested in one bank could potentially put all your money at risk if something was to happen to that bank, while unlikely it has happened overseas.

DYOR this is not financial advice.


----------



## Frank D (15 May 2008)

That type of *'investing'*will be one of the smartest decisions you’ll ever make when it comes to the stock market.

My father told me to buy banks and keep on accumulating them, I haven’t looked back since buying CBA in the float.

By the time you retire you’ll have more than enough in a dividend stream coming to satisfy most lifestyle needs.

I would split it into 3 banks:- CBA NAB WBC.

This is something I do each year, set a side a portion of savings/profits and buy the same banks each year, the best strategy and most simply strategy is BUY them when they come down an re-test the 200 M/A day average. (buy dips), every year.

I use a more complex model to try and get better entries so I can purchase more, but 200 M/A is a good yearly strategy.

For example you want to buy 8K this year, you might only decide to BUY 5k each year after that. That will depend on how well you save. I personally use 10% of my income.

Personally I think banks might remain flat for another 2 years, and could dip slighty lower than 2008 yearly lows next year, which in the scheme of things it doesn’t matter.

In the future you’ll look at margin trading to maximize exposure, but try and keep margin @ 50% LVR, but that’s a personal opinion, if you are using margin as part of a long term investing plan, and re invest the dividends.

In 15 years time you will be well on your way....

gee where did all those years go, it just seemed like it was yesterday....


----------



## AnDy62 (15 May 2008)

8k is enough to enter the market I think. 
In terms of banks, I would look at NAB/WBC/CBA and SUN. SUN is slightly higher risk and has an insurance arm but I think it's good value and possibly a target like St George. You can't really go wrong long term with banks. If you are looking at v. low risk Westpac is good.  DYOR


----------



## brettc4 (15 May 2008)

I can't help but notice that those who recommend banks stocks, leave out ANZ. Is there are reason for this?


----------



## YELNATS (15 May 2008)

brettc4 said:


> I can't help but notice that those who recommend banks stocks, leave out ANZ. Is there are reason for this?




Maybe ANZ is not so "flavour-of-the-month" due to their recent write-down provisions and their Opes Prime exposure. However, I can't help thinking that generally they're well-managed, their sp is attractive at current levels and their long term prospects are v. good.


----------



## bennib0i (15 May 2008)

Hi, Thank you all for all your helpful information and suggestions.

I too noticed that ANZ was left out of the recommendations, any real reasons? future unsure of? and not as strong as CBA, WBC, and NAB?

Currently I am considering splitting my money into two banks; 4k in each. I know  that I won't be getting many stocks in each company with, less then 100 with CBA hahaha
After reading I believe this would be safe and the dividends (5-6%) would be as good as leaving it in a high-interest savings account (7-8%) after Tax. 

Im going to avoid SUN and take the safe route and go with the big 4, probably CBA and WBC. considering ANZ is not recommended, again any reason? 

Also with the dividend yield i've noticed that CNP is well over 100%..which would be the case of its sinking share price since the sub-prime mortage crisis. 
Also are trust shares reliable?

Again thx for your help


----------



## AnDy62 (15 May 2008)

^ With ANZ, it's not a big deal- it's pretty much six of one, half a dozen of the other (well, almost). But, it has the worst exposure of the big 4 and yet is not at any significant discount (bar WBC), when assessing from November highs. I prefer Westpac for it's solid credentials and addition of SGB, NAB is cheap with much less problems than ANZ and has exposure to agriculture, which I like. CBA too is cheap, and benefits from being a well loved stock- market darling. Just my


----------



## hangseng (15 May 2008)

bennib0i said:


> Hi, Thank you all for all your helpful information and suggestions.
> 
> I too noticed that ANZ was left out of the recommendations, any real reasons? future unsure of? and not as strong as CBA, WBC, and NAB?
> 
> ...




You may wish to speak with an adviser about SFI's http://www.asx.com.au/investor/warrants/tools/library/sfi_positively_geared_investment.htm

Unlike margin loans you will never get a margin call.


----------



## andy87 (16 May 2008)

benniboi,
Ive been told by investors that banks are a good long term investment. In saying that i was told this when SUN were down around the $11 mark at the start of the year, and now $15.  If your 20 and you have 8k to invest, your doing well (compared to the majority).  At the time, I had only the basic understanding in the world of the stock markets, but i invested all my savings (about 9k) into QAN, TLS and MIG evenly with the simple princples (i.e. good p/e ratio, good dividends, good cash flow etc.)when i was about 16 (now 21).  All steady companies with decent dividends and steady growth, and sold QAN last year to record a 100% growth.  Not bad for an amatuer like myself.  So at your age id look at a long term investment and banks seems to be a good investment.  

The majors dont seem to be affected to much by the sub-prime mortgage crisis because, but what someone previously said (or hasnt mentioned) is that there is still a little uncertainty about the market.  Every second week im reading some bank somewhere around the world has written $400billion of bad credit here, $200billion there etc. and its going to be a while before we know the full extent.  Who know's, next year we could see a recession and then were all boned.

Anyway, sorry if ive yapped on, but from one newb to another, invest in strong performing companies with the goal of medium - long term return


----------



## bennib0i (17 May 2008)

andy87 said:


> benniboi,
> Ive been told by investors that banks are a good long term investment.




Thx Andy for sharing your experience. My mum has been telling me that banks are the way to go, but she doesn't have much expertise on stock trading and as such I have gone ahead to do some research and readings myself. 

Even though I am highly tempted to jump into a boat full of CNP stocks and the like, and hope to catch it on the ride up as it shots 6-15% in a day...I believe that my money is better off put on banks for a better/safer return over time.

How do the smaller banks fair compare to the major 4? would they be a wise investment, say bank of queensland or bendigo bank?

Thx again, Ben


----------



## TheRage (17 May 2008)

It might pay to remember in the early 1990's some of Australia's largest banks almost went under. Things are most certainly different now with prudential regulation but I should warn you banks do go bust. Ever heard of bear sterns last year traded at $160 a share Mrogan Stanley recently offered $2 a share to existing share holders. My original point was that owning one or two banks keeps you exposed entirely to one or two shares. Why not buy an index like STW or a listed invested company like arg or afi which by the way have shares in banks but also in many other companies like BHP and WPL.


----------



## JTLP (18 May 2008)

Hahaha...all this risk is making me laugh. Just throw it into an internet saver account...7% ra ra virtually risk free. Sure it's boring but at least you are not umming and ahhhing about it everyday.

Or

Go on one helluva World Tour holiday


----------



## Mofra (18 May 2008)

JTLP said:


> Hahaha...all this risk is making me laugh. Just throw it into an internet saver account...7% ra ra virtually risk free.



7% after tax and inflation is virtually a 0% return. I'd be inclined to lean towards FF dividend paying companies that have a track record of growth over an extended period of time.


----------



## JTLP (18 May 2008)

Mofra said:


> 7% after tax and inflation is virtually a 0% return. I'd be inclined to lean towards FF dividend paying companies that have a track record of growth over an extended period of time.




Virtually 0%? Man have i've been wasting time


----------



## Uncle Festivus (18 May 2008)

Banks profit contribution from 'growth' has been steadily decreasing over time eg decreasing interest margin, and is only compensated by rising fees. If they can still keep raising fees then _maybe_ they can keep increasing profits.


----------



## Garpal Gumnut (18 May 2008)

brettc4 said:


> I can't help but notice that those who recommend banks stocks, leave out ANZ. Is there are reason for this?




They are very much on the nose for Opes prime exposure and many investors and traders were badly burnt in that failure, so ANZ are not flavour of the month

gg


----------



## andy87 (19 May 2008)

TheRage said:


> but I should warn you banks do go bust. Ever heard of bear sterns?




I think everyone shoud know about Bear Sterns.  They were also an investment banker like Citigroup, and they got caught up in the hedge debarkle and consequently started the snowball effect with all the other investment firms around the globe.  I dont expect SUN, ANZ or CBA will right off $800billion worth of bad investment.


Furthermore, a savings account is a joke.  At 7% p.a. interest, inflation is at 4.2% so your only getting 2.8%.  What a crock, and the majority dont even realise this. Its fine if you have a margin loan because your still going to have to fork out the $10,000 but its not worth $10,000 by the time you pay it back because your purchase power has decreased, so technically you might only owe $6000.  Other than that, forget about getting an income off interest.  Pigs bloody ass


----------



## MrBurns (16 September 2009)

*Bank Shares*

Ok instead of jumping into a BMW M3 or Merc C63 AMG I've decided to put $100k into shares for starters, it's never the right time but here I go.

Which bank share is the best or are they all about the same, I'm choosing bank shares because of the safety aspect and the dividends which I understand are quite good ? 

Any hints appreciated.


----------



## Nyden (16 September 2009)

*Re: Bank Shares*



MrBurns said:


> Ok instead of jumping into a BMW M3 or Merc C63 AMG I've decided to put $100k into shares for starters, it's never the right time but here I go.
> 
> Which bank share is the best or are they all about the same, I'm choosing bank shares because of the safety aspect and the dividends which I understand are quite good ?
> 
> Any hints appreciated.




You know that no one can give you advice Burns. The big 4 seem to rise together though -  I myself hold 2 of them. ANZ and CBA  ... what a wonderful day today is 

Dividends ... well, you're a bit late there. Dividends are roughly 4-5% now, which doesn't even match uBank rates. I hold REIT ETFs for dividends, SLF being the core of that. All the capital gains have just been a bonus! That's almost my entire portfolio, barring my BHP holding, but that's quite a modest one


----------



## jono1887 (16 September 2009)

*Re: Bank Shares*



MrBurns said:


> Ok instead of jumping into a BMW M3 or Merc C63 AMG I've decided to put $100k into shares for starters, it's never the right time but here I go.
> 
> Which bank share is the best or are they all about the same, I'm choosing bank shares because of the safety aspect and the dividends which I understand are quite good ?
> 
> Any hints appreciated.




The big-4 are fairly safe with decent dividend yeild - CBA, WBC, NAB, ANZ

Theres also others like macqurie bank MQG, bank of qld BOQ and others...

They've been climbing steadily so far and havnt yet reached their peaks of 07/08


----------



## Ashsaege (16 September 2009)

here is a hint - go and watch the topgear episode where they compare the BMW M3, Merc C63 AMG, and the Audi RS4.

Then go to the BMW dealer and Merc dealer, take the cars for a test drive, and then make up your mind.


----------



## MrBurns (16 September 2009)

Ashsaege said:


> here is a hint - go and watch the topgear episode where they compare the BMW M3, Merc C63 AMG, and the Audi RS4.
> 
> Then go to the BMW dealer and Merc dealer, take the cars for a test drive, and then make up your mind.




Did exactly that 2 days ago, except for the Audi.

Going to Porsche in a few minutes when a mate of mine arrives, Merc is awesome, but a little car with a big motor, much more powerful than the M3 which is a really great car, but even if the shares crash it wont be as bad as the depreciation of those toys.

The C63 just scares the **** out of you, brakes are phenomenal which means you can go into corners at ridiculous speeds, which we did, I was petrified at some points.


----------



## MrBurns (16 September 2009)

*Re: Bank Shares*



jono1887 said:


> The big-4 are fairly safe with decent dividend yeild - CBA, WBC, NAB, ANZ
> 
> Theres also others like macqurie bank MQG, bank of qld BOQ and others...
> 
> They've been climbing steadily so far and havnt yet reached their peaks of 07/08




I agree the big 4 one or 2 or spread it around ?


----------



## Bill M (19 September 2009)

*Re: Bank Shares*



jono1887 said:


> The big-4 are fairly safe with decent dividend yeild - CBA, WBC, NAB, ANZ
> 
> Theres also others like macqurie bank MQG, bank of qld BOQ and others...
> 
> They've been climbing steadily so far and havnt yet reached their peaks of 07/08




I agree with this too and best of all they have all nearly doubled in price since hitting their lows


----------



## dmalcantara (12 October 2009)

*Best bank to invest*

Hi guys,
I'm new in Australian stock market and I'm trying to figure out which bank in ASX 20, would be better to invest  (MQC, ANZ, CBA, WBC) for long term. All of them seem to walk together in my initial analysis. 
Thanks


----------



## Julia (12 October 2009)

I wouldn't be classifying MQG in with the others.  Completely different type of operation.  You left out NAB.


----------



## Dark1975 (13 October 2009)

*Re: Best bank to invest*



dmalcantara said:


> Hi guys,
> I'm new in Australian stock market and I'm trying to figure out which bank in ASX 20, would be better to invest  (MQC, ANZ, CBA, WBC) for long term. All of them seem to walk together in my initial analysis.
> Thanks




Have to agree with previous posts in reguards to the big four australian banks(Anz,Wbc,Cba & Nab),That they pay reliable dividend yields.In reguards to MQG: it's classified not as strong as the four banks(as above listed),From a lending ratio if looked from Bt lending or MF global as a e.g:

MQG= 85 <---loan to value ratio,compaired to:
ANZ/CBA/NAB or CBA = 90 <---- loan to value ratio.

In short,The big four banks are a more conservative investment(due to it's investment strategies are more conserative),E.G: most of there investments are more in domestic home loan mortgages.
If you look at MQG,It's more recognized as a investment bank for Business/Infrastructure/commercial,E.g:MQG purchased constellation energy as a part of one of it's many investments.
So it's risk to reward is greater,If you chart the past stocks mqg/anz/nab/cba/wbc,You will see MQG @ it's low was $15.25(off memory)So it's share has increased by 400%,As in reguards to the big four banks have doubled from there lows,Except Cba(tripled from it's lows).In saying this *MQG is not as defensive as the big four*,As MQG once traded close to $100 in 2007.

End of the day im not a financial adviser,So best to DYOR


----------



## doctorj (13 October 2009)

*Re: Best bank to invest*



Dark1975 said:


> In short,The big four banks are a more conservative investment(due to it's investment strategies are more conserative),E.G: most of there investments are more in domestic home loan mortgages.



I'm no MacBank fanboy, but in fairness to them, saying they're less conservative than ANZ/CBA/NAB/WBC because the vast majority of the latter's exposure are res mortgages is a bit of a non-starter. We've all seen what can happen when banks have concentrated exposures to particular residential mortgage markets and underlying asset prices start going south. 
Aus is relatively small market of 20odd million people that is heavily exposed to commodity prices and China - two things that won't keep charging on for ever.


----------



## eddyeagle (13 October 2009)

From thebull.com.au today:


_Credit Suisse warns about optimism

Credit Suisse has warned of "exuberance" in rising big banks' share prices following last week's interest rate hike and several broker upgrades.


Credit Suisse has warned of "exuberance" in rising big banks' share prices following last week's interest rate hike and several broker upgrades.

As JPMorgan upgraded its 12-month price targets for all of Australia's major lenders on Monday, Credit Suisse said banks were now expensive when compared with industrial stocks.

Bank stocks surged three per cent last week after the Reserve Bank of Australia's (RBA) 25 basis point cash rate rise, with analysts tipping forecasts for banks' bad debts in 2010 may be too high.

Share prices rose again late last week as Morgan Stanley lifted its bank forecasts and targets.

But Credit Suisse's Damien Boey says the market may be too optimistic by pricing in a complete normalisation of margins and bad debt charges in 2010 when history shows bad debt charges peak a few quarters after nominal gross domestic product (GDP) starts to recover off its lows.

"If you believe that we really are in a post-stimulus world now and everything is all good, you would expect bad debt charges, at least on the corporate side, to normalise completely," he said.

"The trouble is that ... when the RBA is tightening too quickly then you're not going to get the GDP growth recovery that you previously saw.

"So rather than getting a V-shaped recovery you get a U or even W-shaped recovery in which case the likelihood is that ... bad debts could fall but not all the way back to what they were pre-crisis.

"That's what the market is pricing in for the banks and that's a bit of a problem."

The "early-cycle exuberance" in share prices came after the RBA's rate hike decision which was based on economic data still inflated by the government stimulus, Credit Suisse said.

Mr Boey said the central bank would have gained a clearer picture of the economy by waiting until data emerged that was free from the stimulus' impact.

If the RBA tightens too quickly, this could cause growth to slow prematurely and bad debt charges to remain "stubbornly high", Credit Suisse said.

The broker is recommending clients buy industrial stocks in defensive sectors over the next two months which it says has more earnings growth potential than cyclical stocks.

Credit Suisse has an underperform rating on Commonwealth Bank of Australia (CBA), National Australia Bank (NAB) and Westpac Banking Group, and is restricted from commenting on its client, ANZ Banking Group.

It rates Bendigo and Adelaide Bank an outperform, and is neutral on Bank of Queensland.

The broker's 12-month share price targets are $52.00 for CBA, $30.00 for NAB, $26.00 for Westpac, $12.00 for Bendigo and Adelaide Bank, and $13.00 for BoQ.

Separately, Merrill Lynch downgraded NAB to Underperform on Monday based on its "demanding valuation" and risks surrounding its retail banking strategy._


----------



## Dark1975 (13 October 2009)

*Re: Best bank to invest*



doctorj said:


> I'm no MacBank fanboy, but in fairness to them, saying they're less conservative than ANZ/CBA/NAB/WBC because the vast majority of the latter's exposure are res mortgages is a bit of a non-starter. *We've all seen what can happen when banks have concentrated exposures to particular residential mortgage markets and underlying asset prices start going south. **Aus is relatively small market of 20odd million people that is heavily exposed to commodity prices and China - two things that won't keep charging on for ever.*




Yes agreed,If our property market bubbles?Unlike the U.S,Our financial system is alot different?In terms of debt/unemployment?
Our large four banks make profit?Don't rely on goverment handouts?Infact the large four are rated the best 20 in the world.Infact these banks make there money on bank fees..
Yes we are heavily exposed to commodities,Having the largest mining & resouces gaint B.H.P is a good point?Australia's rich in resources?Looks good from my point of view for at least the next 20years.Have the Largest Uranium producers with ERA-15% of the world's electricity is produced from uranium for nuclear reactors(until a alternative energy is found).Not even going to mention coal/iron ore .
Yes it's good to be in good relations with china & india,Since there the new super-power countries with a great appetite for commodities.Infact if you look up the U.S debt-bond securities,You will be surprised on how much china owns!The tides are turning,The sleeping giant china is now awakening.


----------



## GumbyLearner (13 October 2009)

I hold BEN.

Very little Real Estate exposure.

Having said that shouldn't repeat the first statement.

Still HOLD

DYOR


----------



## zzaaxxss3401 (13 October 2009)

*Re: Best bank to invest*



doctorj said:


> Aus is relatively small market of 20odd million people that is heavily exposed to commodity prices and China - two things that won't keep charging on for ever.




What's your definition of "for ever"?

China has a population of 1.33 billion (or 1,330,000 thousand) people - their car ownership has increased from 2/'000 in 1999 to 15/'000 in 2007. It's expected to reach 148/'000 by 2020. That's an increase from just under 20 million cars in 2007 to 200 million cars assuming their population doesn't increase (yeah right).

India has around 1.13 billion and has around 11/'000 people. An interesting 2 page read from 2 years ago: NYTimes.com /2007/10/12/business/worldbusiness/12cars.html

Cars are mostly a lump of steel and four rubber tyres. And with a need for steel and petrol (for rubber / plastic production), commodities and fuel are going to be in demand for at least the next decade. If we start to focus on greener technologies, then nickel (for batteries) has a place. For stainless steel production you need chromium (18%), nickel (10%), molybdenum and of course, steel. For the wiring you need copper. All of which are in big (and accessible) areas of Australia. We're one of the very few countries, where the resources aren't buried under a shopping mall or school.

To manufacture / smelt steel you need coking coal. To run the production line, you need electricity and either a gas or a coal fired power station. Coal is the cheapest (least green) and it's what most of the chinese power stations are running on.

I'm a little off-topic (but one reason the boom won't stop overnight) - I'm getting there...

Australia is one country that has a pretty open immigration policy and our population is growing faster than the normal birth rate. In contrast Japan's population is decreasing because they have a very tight immigration policy. As we've seen over the past decade, water is our biggest problem. If we start treating it as a finite resource, instead of wasting it, we should be able to sustain our current food production levels - we currently produce enough food for around 60 million people, and export a lot of grain and rice (yes, rice of all things). We can sustain a large population and therefore will need housing.

The Big 4 control around 74% of all mortgages. Of all the banks, the CBA holds the largest percentage at 25.3%, followed by WBC at 23.2%. Of the other banks, ANZ focuses on retail banking while NAB on business banking. Which bank? Take your pick... and perhaps throw in a coal, copper and steel mine as well. I know - not very helpful, but perhaps interesting???


----------



## gooner (13 October 2009)

Personally, I have no bank holdings.

Too expensive given number of shares issued at very low prices, continuing bad debt issues and regulators talking about permanently higher capital levels. Yet not far off record highs.

If shorting was in my strategy book, I would be shorting the big 4, particularly CBA and WBC.


----------



## dmalcantara (13 October 2009)

Good posts guys. Thanks


----------

