# Banks



## MaZed (30 April 2013)

There is a lot of chat about buying bank shares as their fully cranked dividends are a lot higher than your money in a cash term deposit account, would you agree?


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## sptrawler (30 April 2013)

MaZed said:


> There is a lot of chat about buying bank shares as their fully cranked dividends are a lot higher than your money in a cash term deposit account, would you agree?




Wrong thread.


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## burglar (30 April 2013)

MaZed said:


> There is a lot of chat about buying bank shares as their fully cranked dividends are a lot higher than your money in a cash term deposit account, would you agree?




By the time the _experts_ told you, the banks have cranked so hard, its impossible to tell.
Now they will be looking for _you_ to buy them so they can make a superb capital gain.


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## Bill M (1 May 2013)

MaZed said:


> There is a lot of chat about buying bank shares as their fully cranked dividends are a lot higher than your money in a cash term deposit account, would you agree?




Yes I would.

Let's look at NAB for example. At yesterdays closing price it's yield on Commsec is showing 5.4% fully franked. Gross it up with the franking credits and it comes to around 7%.

The best term deposit you can get is around 5% for a 2 year period and then you got to pay tax on it. Bank dividends win hands down.


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## tinhat (1 May 2013)

My guess is that banks have a way to go yet. I expect another 25-50 basis points cut in interest rates this year which will push up bank share prices and pull down the yield.

In the post GFC crash banks lead the post-crash recovery. In the current bull run banks have lead the way. While the ASX is in a bull run the banks will go up. There are signs of recovery in the housing market which will also be good for the banks.

As an investor I'm feeling good about holding banks for the medium term. CBA has only just recently gone above its all time high. Since the market top in mid 2007 CBA has gone through distribution during most of 2008, accumulation during early 2009, distribution during the first half of 2010, accumulation in Sept/Oct 2011 before its current bull run.

The banks have only recently pulled out of a sideways movement that lasted from mid 2010 to Jan 2013. While there will no doubt be more periods of consolidation (distribution and accumulation) to come the recent break out takes out the all time highs of 2007 as well and I expect the banks to perform well in the medium term over the rest of the decade too.


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## MaZed (1 May 2013)

But as you said they are at a all time high now. Are they too high?


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## sinner (1 May 2013)

I am not 100% sure on the accuracy of these numbers since I just did them quickly in a spreadsheet without adjusting for inflation but:

CBA CAPE: 23.01
WBC CAPE: 20.5
ANZ CAPE: 17.96
NAB CAPE: 14.64

This would indicate the banks are starting to be priced for perfection, except maybe NAB. 

If you want to invest on an all time high, trend following basis (a valid signal in my book), make sure you have an appropriate trendfollowing trailing stop in place.


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## tinhat (4 May 2013)

Dividends up! ANZ, WBC. NAB to report any minute?


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## Tyler Durden (4 May 2013)

Are these rather short term outlooks on the banks?

From what I understand, ANZ at least, did a lot of cost cutting by shedding jobs. I know the usual response is an increase in SP when jobs/costs are cut, but from a long term perspective, if you are cutting jobs, doesn't that mean you expect less work in the future, and hence therefore the SP should decrease?


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## G Gekko (4 May 2013)

Tyler Durden said:


> Are these rather short term outlooks on the banks?
> 
> From what I understand, ANZ at least, did a lot of cost cutting by shedding jobs. I know the usual response is an increase in SP when jobs/costs are cut, but from a long term perspective, if you are cutting jobs, doesn't that mean you expect less work in the future, and hence therefore the SP should decrease?




Cutting jobs can be a result of lack of work, or it can result from efficiency gains through out the business and a desire to cut operational costs. If services can be provided at a lower cost than before that has to be good for business.


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## MrBurns (5 May 2013)

Seems too late to get into the banks now......also if there's another crisis overseas we could see a quick reversal.


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## Garpal Gumnut (5 May 2013)

MrBurns said:


> Seems too late to get into the banks now......also if there's another crisis overseas we could see a quick reversal.




Agree Burnsie. A max of 10% more gain in big 4 imo. Purely a play for short term traders now. 

Unable to post chart but all look toppy.

gg


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## MrBurns (5 May 2013)

Garpal Gumnut said:


> Agree Burnsie. A max of 10% more gain in big 4 imo. Purely a play for short term traders now.
> 
> Unable to post chart but all look toppy.
> 
> gg




Haven't seen you for ages gg welcome back


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## Tyler Durden (20 May 2013)

Interest rates have been cut, hence I think people tend to pay off their mortgages faster (ie. paying same amount instead of reducing to minimum payments required) and there have been stats to show people are also reducing their credit card balances.

Do you think these two factors are enough of an indication that banks will not be as profitable as they were previously?


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## VSntchr (20 May 2013)

Tyler Durden said:


> Interest rates have been cut, hence I think people tend to pay off their mortgages faster (ie. paying same amount instead of reducing to minimum payments required) and there have been stats to show people are also reducing their credit card balances.
> 
> Do you think these two factors are enough of an indication that banks will not be as profitable as they were previously?




Increase in propensity to take on new debt is an off-setting factor.

Margin-loans are increasing, home lending probably increasing etc


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## chops_a_must (20 May 2013)

Tyler Durden said:


> Interest rates have been cut, hence I think people tend to pay off their mortgages faster (ie. paying same amount instead of reducing to minimum payments required) and there have been stats to show people are also reducing their credit card balances.
> 
> Do you think these two factors are enough of an indication that banks will not be as profitable as they were previously?




And if that's the case, quality of borrowing is also improved.

Less impairments, and therefore better margins.


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## Gringotts Bank (24 May 2013)

Banks will have a solid bounce at some point.  Might even be next week.    Currently at or close to supports.  Next supports are a fair way below for most, especially MQG.


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## tinhat (27 May 2013)

Bought some bank stocks today.

NAB @ $31.01 goes ex-div this week. What great timing for a pull-back. Forward dividend yield forecast of 8.7% for Sep 13 financial year. Buying this week gives three dividends over 53 weeks.

WBC @ 29.05 whent ex-div last week. Forward dividend yield forecast of 9% for Sep 13 financial year.


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## tinhat (29 May 2013)

All the banks down again today. A fall below $67 will be a bearish signal for CBA in my view but an opportunity to buy. $67 based on forward analyst forecasts of 376.9c for FY14 gives a grossed up yield of 8%. If the price gets below $67 I'll be looking for an entry point to buy more.

NAB is ex-dividend tomorrow.


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## coolcup (29 May 2013)

tinhat said:


> All the banks down again today. A fall below $67 will be a bearish signal for CBA in my view but an opportunity to buy. $67 based on forward analyst forecasts of 376.9c for FY14 gives a grossed up yield of 8%. If the price gets below $67 I'll be looking for an entry point to buy more.
> 
> NAB is ex-dividend tomorrow.




The yields are starting to look great on the banks, particularly NAB given proximity to the ex date. The question is when to get in. I suspect when they turn around, they will rally pretty hard so maybe it is not a bad time to catch a falling knife?


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## TheUnknown (29 May 2013)

coolcup said:


> The yields are starting to look great on the banks, particularly NAB given proximity to the ex date. The question is when to get in. I suspect when they turn around, they will rally pretty hard so maybe it is not a bad time to catch a falling knife?




So do you think banks will gain and go upwards from now on?


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## nulla nulla (29 May 2013)

I suspect the fall in the Aud$ will be pushing up their off-shore borrowing cost. This is probably a contributing factor to the sell down in the Aussie Banks. At some stage the yield/price/Aud$ ratios will make the banks attractive to other off-shore investors as well as local fund managers. Only problem is determining when???


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## tinhat (30 May 2013)

nulla nulla said:


> I suspect the fall in the Aud$ will be pushing up their off-shore borrowing cost.




I hadn't considered this.


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## heathlancaster (17 June 2013)

Good time to buy into ANZ? dropped to around $26 last week now slowly rising again.


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## coolcup (2 July 2013)

Banks looks to be respecting a long term support zone as shown in the chart below of the XXJ index. I'd be looking for a rally above recent resistance at 6,200 before getting in though.


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## Tyler Durden (5 August 2013)

So the new proposed levy to create a bail out fund...does anyone think this will just encourage banks to take riskier moves?


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## Julia (5 August 2013)

No.  The levy is nothing to do with the banks' risk profile.
All to do with Labor trying to fill their budget black hole.
One commentator today suggested that the levy at the currently proposed rate would take 100 years of accumulation (and that's assuming it won't be siphoned off into general revenue) to bail out a crash of a second tier bank.


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## Sharkman (5 August 2013)

Julia said:


> No.  The levy is nothing to do with the banks' risk profile.
> All to do with Labor trying to fill their budget black hole.
> One commentator today suggested that the levy at the currently proposed rate would take 100 years of accumulation (and that's assuming it won't be siphoned off into general revenue) to bail out a crash of a second tier bank.




i agree. horrible policy. hardly the stuff to encourage savings.

wondering if i should start moving all my AUD offshore and sticking it in singaporean bank accounts as a contingency measure in case this thing actually comes to pass?


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## Klogg (5 August 2013)

Julia said:


> No.  The levy is nothing to do with the banks' risk profile.




I could be wrong, but there might actually be some truth to this... Both S&P and Fitch have come out saying that the Australian banks get an extra notch or two because of the government guarantee (i.e. AAA instead of AA or AA+)

Now the obvious conclusion to draw from this would be that the lower the credit rating, the higher the rate on any loans the company takes out... But being a bank, I thought they borrow at OCR+0.25% (and this is why I say I could be wrong...)
If anyone knows the system well, could you please confirm what a credit rating would mean for a bank (other than looking good to potential customers)?

And apologies if I am wrong.


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## Zedd (5 August 2013)

Klogg said:


> I could be wrong, but there might actually be some truth to this... Both S&P and Fitch have come out saying that the Australian banks get an extra notch or two because of the government guarantee (i.e. AAA instead of AA or AA+)




This is my take on the situation. I don't know if I'd go so far as to say an extra notch, but it clearly has ramifications on their risk profile if a significant portion of their deposits are guaranteed by another party with a AAA rating.

There are definitely cost implications for the government in providing this guarantee, and they should rightly be passed on to the banking sector. IMO the guarantee is not required though. I'd rather see depositors diversifying their cash deposits throughout the banks, and it should be seen as a competitive advantage if a bank can encourage a public perception that it has a safer business model than its competitors. Why shareholders are given preferential treatment/attention over depositors has always dumbfounded me, and the government guarantee only distorts this further.

As to the timing of the levy coinciding with a decline in the books ...


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## doctorj (5 August 2013)

Julia said:


> No.  The levy is nothing to do with the banks' risk profile.
> All to do with Labor trying to fill their budget black hole.
> One commentator today suggested that the levy at the currently proposed rate would take 100 years of accumulation (and that's assuming it won't be siphoned off into general revenue) to bail out a crash of a second tier bank.




Funded deposit insurance schemes are the norm for much of the world.  In most of the EU for example, there is an explicit guarantee of 100% of the first â‚¬100k of retail deposits.  The purpose is to prevent an isolated failure of a single bank from becoming a systemic problem by causing a bank run.  To be a member of the schemes, banks pay a fee measured as a percentage of deposits (or eligible deposits) into a separate fund that can be used to repay the insured portion of eligible deposits following a bank failure.

Some deposit insurance laws permit risk-based premiums being levied against banks, but in practice (almost) no country has implemented anything other than a uniform % fee. There is moral hazard here, however it can’t be any worse than the moral hazard generated by a government guaranteeing 100% of all deposits which not only creates massive moral hazard, but is also unsustainable.


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## Julia (6 August 2013)

Agree with Zedd's comments re competitive situation in banks.

The following is from an analysis by David Crowe in The Weekend Australian:


> The economy will survive this deposit levy just as it survived the cost of the guarantees during the GFC.  To put this change in perspective, remember that *the guarantee on wholesale funding and big deposits cost banks and savers $4.1 billion.*
> 
> This new levy will raise just $350 million a year instead.
> 
> ...


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## satanoperca (6 August 2013)

Without going over old ground, but why is it the depositors that will end up paying for this?

Why isn't it the indebted mortgage holders? Without the depositors, the banks would find it difficult to loan money into an over indebted sector - residential housing.

Why discourage saving?

I for one would like to see a group formed that with enough numbers could have leverage against the banks through the threat of removing their deposits simultaneously. 

Find it quite amusing that we need to guarantee deposits, thought the banks were safe as houses and ran strong balance sheets. Time banks served the people instead of their own interests.

Cheers


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## Klogg (6 August 2013)

satanoperca said:


> Without going over old ground, but why is it the depositors that will end up paying for this?
> 
> Why isn't it the indebted mortgage holders? Without the depositors, the banks would find it difficult to loan money into an over indebted sector - residential housing.
> 
> Why discourage saving?




I agree with you that it shouldn't just be depositors paying for this, but in the current state of subdued credit growth, they're not going to discourage mortgage applications any more than they have to.

In addition to this, the banks are very close to being adequately capitalised for the BASEL 3 regulations (even though they've been delayed), so they don't need to promote deposits as much.

Should those two factors turn around, you could see the cost shift to the borrowers... unlikely though.

(As mentioned in an earlier post, I have a limited understanding of banking, so if I'm wrong, please do correct me)


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## Julia (6 August 2013)

satanoperca said:


> Without going over old ground, but why is it the depositors that will end up paying for this?
> 
> Why isn't it the indebted mortgage holders? Without the depositors, the banks would find it difficult to loan money into an over indebted sector - residential housing.
> 
> ...



Agree, but Klogg has provided a sensible response here.

The reality of the government's levy is exposed when you do the basic sums as provided in my earlier post, showing it would take 100 years to accumulate enough to bail out just one second tier bank.  It's way more about helping the government's black hole than any realistic fear about our well capitalised and well regulated banks.


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## satanoperca (6 August 2013)

Hi Julia,

I totally agree with what you are saying, but with interest rates going again lower today, it is time depositors teamed together to show how vulnerable the banks actually are to a bank run.

We are at the stage where our deposits in the banks arn't even keeping up with inflation after taking tax into consideration. 

Housing affordability is going to get worse as house price rise once again. This country is no longer competitive on the world stage, this I should know as I move more and more of my business offshore. My design team and PA are employed in Asia, my manufacturing and suppliers are all in Asia. This allows me to keep my overheads low in order to weather the storm that is brewing. I have moved most of my funds offshore now as a hedge against the falling $AU.

I feel for those who are retired, they are getting little to no return on their investments and will become more and more reliant on the govnuts.

Cheers


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## Julia (6 August 2013)

Interesting, satanoperca.  Is it just the low dollar that's prompting your moving much of your business off shore?
Would a change of government influence what you do at all?

I was hearing today several small business owners saying that essentially business has just dried up.
No one wants to do business, given the overall climate of uncertainty.

The same uncertainty might well apply to any potential success of today's interest rate cut.  Will it actually stimulate borrowing to invest, or will it continue to reflect lack of change following previous rate cuts with mortgage holders pocketing the difference, and potential spending by retirees and other savers further made unlikely?

There has been wide coverage on the ABC radio networks about today's rate cuts, including the political ramifications.  Not once have I heard any reference being made to the disadvantage for savers.
Instead, just endless rhetoric from both sides about how great low interest rates are for borrowers.
Never mind that there are substantially more people with savings than with mortgages.


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## FxTrader (6 August 2013)

satanoperca said:


> ... This country is no longer competitive on the world stage, this I should know as I move more and more of my business offshore. My design team and PA are employed in Asia, my manufacturing and suppliers are all in Asia. This allows me to keep my overheads low in order to weather the storm that is brewing. I have moved most of my funds offshore now as a hedge against the falling $AU.



By this I presume you mean that, due to the wonders of globalization and labor arbitrage, you can now employ Indian, Chinese or whatever labor at a fraction of the cost of employing someone locally.  True enough, we can't compete with people who can be exploited by paying them subsistence wages, often in substandard working conditions we would never except, in their home country all done under the guise of being "competitive".  What of the decimation of people's jobs and futures locally in the name of ever greater profits?  Such is the essence of capitalism where profit motive overrides all other considerations.

Sorry for the diversion off topic but satanperca, you are just contributing to the very problem you are highlighting here. Sounds like you have essentially offshored your business already with just a satellite office in Aus.  How many local jobs were trashed in the process I wonder?  How many loyal, hard working local staff were told to train offshore workers to replace themselves prior to being sacked?  What's the human cost of your business decision?  Care to share that part of your business success story?


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## satanoperca (6 August 2013)

Hi Julia,

It would seem the system is geared towards the borrower. That is the game today.

My decision to move business offshore has been a long term process after being a manufacturer in this country many years ago, international free trade saw the demise of manufacturing here, I am just going with the flow. 

It is in part a decision based on the political climate here, but both parties offer the same. In reality it is based on the fact that the cost base of doing business in Australia has become way to high to compete, the internet has changed everything. While our RBA and govnuts are convinced that high property prices generate wealth without the need for productive industries to prosper I will continue to grow my business by off shoring both my services and products. Our wages are to high, cost of living to high. Asia is but a milli second away in virtual terms and a sleep away in physical terms (9 hours and your are there on a plane)

I don't think the average Australia really understands the international competitive world we live in today. Why should I pay a graphic designer $75K here when I can employee three for that price in Vietnam, all trained by our own institutions, RMIT. How does a bookkeeper demand $35 an hour when I can have a suitably trained person in Malaysia for $15, or an IT person $100K when I can have a team for that in India - ah the cost of living and supporting property prices. Service based industries will all go overseas, manufacturing has left our shores, but as keeps being rammed down our throat, borrow and borrow big and invest in property. I laugh, as soon you will not have a job to pay the mortgage. I feel Ireland will become all to familiar.

Our politicians need to wake up to the fact (actually grow some balls), we compete internationally and high property prices are just a drag on our productive society. Digging up dirt is just akin to a band aid solution without a greater game plan in action. 

Keeping punishing savers will result in the failure of the system. 

I ask you this, while we have a central bank determining interest rates and not the market, how will it end well for the average Australian. Never understood the fact, that while times are tough interest rates are low ( risk is high) and when the economy is strong (risk low) we punish people with high interest rates. Would you loan your hard earned money to someone in this climate for <5% return. 

I am also against the acceptance that inflation should sit somewhere between 2-3%. We need to strengthen this country not weaken it. Why is it that Rudd has come back into popularity when even he has made some many mistakes and wasted so much money, money this country doesn't have.

We need to make tough decisions, but I feel no one has the guts. I think we have lost the spirit that made this country great.

Cheers


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## pixel (6 August 2013)

Not unexpectedly, the RBA has reduced interest rates by 9.09% from 2.75% to 2.5%.
And if you think 9.09% is a typo, do the Math: 0.25 is 1/11th of 2.75, and 9.09% is 1/11th of 100%.

So, think about it in this context: Debt has just become 9.09% *) cheaper than it was yesterday.
No wonder that Labor seems to believe we can afford more and more of it...

Of course, the flip side of the equation: Saving becomes less attractive because every saver's "wages" have been cut by 9.09%. Making matters worse, we now have to pay an additional "insurance premium" to protect ourselves against loss of income.
"How so?" you ask?
If you're a self-funded retiree and rely on the interest as your "wages", the new deposit guarantee levy amounts to precisely that: An additional premium to make sure the Banks don't "lose" your capital. Surely as death and taxes, the banks will pass that impost on to you, their customer.

And how is all of this likely to affect the Sharemarket?
I'd rather expect the XJO to rise because, as most of the Top 200 companies pay a dividend, their yield, compared to bank interest, has now to compete against a benchmark that has dropped by 9.09%.

"Traders, rejoice!"  

*) OK, so not everybody has been borrowing at 2.75%; so the 0.25% or whatever the banks will pass on, doesn't come off quite as low a figure as 2.75%. But even using 5% as the starting point, it's become 5% cheaper. And conversely, saving becomes less rewarding by a similar, more likely even bigger, margin.


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## Julia (6 August 2013)

Thanks for interesting response, satanoperca.  I particularly note your phrase here


> I laugh, as soon you will not have a job to pay the mortgage.




This is precisely the point Joe Hockey attempted to make in his interview on 7.30 this evening.

You're competing in a global market.  It's up to Australia to facilitate such competition if we don't want to see people like you moving offshore.  I wish you all the best for the future, and hope (probably vainly) that eventually conditions back here will see you able to return your business here.


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## pixel (6 August 2013)

FxTrader said:


> By this I presume you mean that, due to the wonders of globalization and labor arbitrage, you can now employ Indian, Chinese or whatever labor at a fraction of the cost of employing someone locally.  True enough, we can't compete with people who can be exploited by paying them subsistence wages, often in substandard working conditions we would never except, in their home country all done under the guise of being "competitive".  What of the decimation of people's jobs and futures locally in the name of ever greater profits?  Such is the essence of capitalism where profit motive overrides all other considerations.
> 
> Sorry for the diversion off topic but satanperca, you are just contributing to the very problem you are highlighting here. Sounds like you have essentially offshored your business already with just a satellite office in Aus.  How many local jobs were trashed in the process I wonder?  How many loyal, hard working local staff were told to train offshore workers to replace themselves prior to being sacked?  What's the human cost of your business decision?  Care to share that part of your business success story?




How do you know that Asian workers of the kind satanperca employs are exploited and paid subsistence wages? I have friends in India, who live the life of Riley on a fraction of what it would cost them here. It's the unaffordable housing, the lack of infrastructure, and a generation that has been dumbed down by decades of neglect, that has caused this problem. And once our kids had been taught how "precious" they are and how they deserve a luxury home with home cinema and all electronic gizmos, they "need" all of that, even if their standard of education is barely sufficient for a job at the lowest end of the spectrum. Add to that the new-found "logic" that it's "the Bosses' fault" if such an under-educated kid cuts his finger at slicing onions, or gets zapped by a life wire because he forgot to switch off the fuse.

The red tape all this has created for businesses, just so "Policies and Procedures" can be shown to exist (usually on the top shelf in the Safety Officer's den), has just about halved productivity rates here as compared to smarter countries. And they're the ones we have to compete against globally.

If I were still employing people that are required to think and manufacture good quality products, I'm sure I'd be, if not ahead of satanoperca, then at least hot on his heels.


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## Zedd (6 August 2013)

satanoperca said:


> I don't think the average Australia really understands the international competitive world we live in today. Why should I pay a graphic designer $75K here when I can employee three for that price in Vietnam
> 
> ...
> 
> I ask you this, while we have a central bank determining interest rates and not the market




The salaries paid in Australia ARE set by the market. So like it or not, in the current economic climate the salaries paid, are salaries earned, as the unemployment rate wouldn't be where it's at if businesses weren't profiting, even while paying some of the world's highest salaries. 

As for the central bank - They're in charge of monetary policy to try and keep inflation within a desired band. Much like the government, while its actions have an effect on the market, their purpose is not an economic goal but a social one - stability. The RBA rate has nothing to do with risk vs return, or rewarding or punishing people. Pure and simple, it is to maintain the inflation rate within the desired band to avoid as much as possible large booms and busts.

Maintaining a low, yet positive inflation figure makes it easier for employers to adjust wages in real terms, rather than reducing wages in absolute terms, or worse laying off staff. A low and positive inflation rate is exactly what this country needs in order to get our wages back to a more competitive level, while maintaining low unemployment.


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## Zedd (6 August 2013)

pixel said:


> I have friends in India, who live the life of Riley on a fraction of what it would cost them here. It's the unaffordable housing, the lack of infrastructure, and a generation that has been dumbed down by decades of neglect, that has caused this problem.




I had to laugh at this. Are you honestly comparing the affordability of suitable housing, the level of infrastructure and our literacy/education levels to India and saying we're left holding the wooden spoon?


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## doctorj (6 August 2013)

pixel said:


> we now have to pay an additional "insurance premium" to protect ourselves against loss of income.




This is very eloquently put.  Why shouldn't savers pay a premium to protect their savings?  Who should pay it for you?

In actual fact, this is just a storm in a tea cup.  It's the bank lobby mobilising savers to fight in their corner because they don't want to pay a fee for something they have already, but funded by the taxpayer. It may slightly increase the cost of deposits slightly for Australian banks - but they will still want to maintain their deposit base given the challenges they face on the funding side.


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## FxTrader (6 August 2013)

satanoperca said:


> I don't think the average Australia really understands the international competitive world we live in today.



Really!  You think that when the average Aussie sees the made in China label on just about everything, does more and more shopping online and steps into a JB HiFi filled with only foreign made goods they don't understand what's happening with global sourcing and competition?



> Why should I pay a graphic designer $75K here when I can employee three for that price in Vietnam, all trained by our own institutions, RMIT. How does a bookkeeper demand $35 an hour when I can have a suitably trained person in Malaysia for $15, or an IT person $100K when I can have a team for that in India - ah the cost of living and supporting property prices.



And I might add, why pay someone here to make clothing when it can be done in Bangladesh so much cheaper!  Yes, we should all envy the lifestyles of those living in the likes of Vietnam, Malaysia and India.  While we live in our overpriced houses they have millions living in squalid huts working for peanuts (their primary competitive advantage).  I wonder though when the wages eventually rise in these countries and they aspire to the standard of living we have here, where will the opportunities arise to exploit cheap labor again?  Mongolia perhaps?

Globalization is the great equalizer, dragging everyone down to the lowest common denominator.  Nothing to celebrate IMO.


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## satanoperca (6 August 2013)

FxTrader said:


> By this I presume you mean that, due to the wonders of globalization and labor arbitrage, you can now employ Indian, Chinese or whatever labor at a fraction of the cost of employing someone locally.  True enough, we can't compete with people who can be exploited by paying them subsistence wages, often in substandard working conditions we would never except, in their home country all done under the guise of being "competitive".  What of the decimation of people's jobs and futures locally in the name of ever greater profits?  Such is the essence of capitalism where profit motive overrides all other considerations.
> 
> Sorry for the diversion off topic but satanperca, you are just contributing to the very problem you are highlighting here. Sounds like you have essentially offshored your business already with just a satellite office in Aus.  How many local jobs were trashed in the process I wonder?  How many loyal, hard working local staff were told to train offshore workers to replace themselves prior to being sacked?  What's the human cost of your business decision?  Care to share that part of your business success story?




You comments do make me laugh. Ever traveled or spent time in some of those countries you mentioned. I have and find the vast majority happy and willing to work for a better future, not expecting it to be handed to them.

I wonder how many products surround you that are made off shore, your clothes, computer, television etc. Did you stop to consider when purchasing who made them and under what conditions. No. I didn't write the rules, just have to work within them.

As for trashing local jobs, I stuck it out for long enough employing locals, at the cost of my own financial situation. Did you or any one else care, I think not and nor should you. Just another person on their high horse, but are you willing to put your money where your mouth is. Again, I think not.

Do you invest or trade? FXtrader implies you trade, does that benefit greater society or just you. Be careful what you wish for.

Zedd, inflation positive or low we are no longer competitive in the world market, if it wasn't for the dirt we dig up we would be a third world country. We are no longer clever nor inventive.

Pixel +1 to you, someone who has lived and breathed it.

Cheers


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## satanoperca (6 August 2013)

FxTrader said:


> Globalization is the great equalizer, dragging everyone down to the lowest common denominator.  Nothing to celebrate IMO.




Exactly, so what do you do to prevent it? As he/she sits in front of a foreign made computer.

Never said I was for globalisation, but have to work with it. I didn't make the rules, I am just a grain of sand on a very big beach.


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## FxTrader (6 August 2013)

satanoperca said:


> I have and find the vast majority happy and willing to work for a better future, not expecting it to be handed to them.



Yes, you must be right.  All the people around me working 50+ hours a week are really just lazy bastards looking for a handout, they are just fooling everyone.  From a recent article "_Nearly 1.7 million Australian employees - that's about one in six - work 49 hours or more each week, the latest census showed._"  Yep, we Aussies are just plain lazy.



> I wonder how many products surround you that are made off shore, your clothes, computer, television etc. Did you stop to consider when purchasing who made them and under what conditions. No. I didn't write the rules, just have to work within them.



I'd say you are doing more than just working within the rules but actively exploiting them.



> As for trashing local jobs, I stuck it out for long enough employing locals, at the cost of my own financial situation. Did you or any one else care, I think not and nor should you. Just another person on their high horse, but are you willing to put your money where your mouth is. Again, I think not.



The point is you don't care and neither does any other employer.  Profit potential is all that matters.



> Do you invest or trade? FXtrader implies you trade, does that benefit greater society or just you. Be careful what you wish for.



Of course I do and internationally as well.  My market participation is just that, for profit, just like your trade in human capital is for profit only and not for the lofty claim of benefiting greater society.


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## Zedd (6 August 2013)

We're getting a bit of topic so I'll be brief:



satanoperca said:


> Zedd, inflation positive or low we are no longer competitive in the world market, if it wasn't for the dirt we dig up we would be a third world country



I was clarifying the reason for the inflation target, as you seemed to disagree with the concept. It will help to reduce the cost of wages in real terms, as well a falling AUD. Real wages and the AUD will continue to fall as long as we are uncompetitive in the global arena. I think you'll find we'll stabilise well short of a 3rd world nation.



satanoperca said:


> We are no longer clever nor inventive.



Speak for yourself. In my travels over the last two years I'm confident I can go toe-to-toe with anyone I've met in intellect, creativity and work-ethic and I'm not the best the nation has to offer by far. We might have some tough years ahead of us, but the future is anything but bleak for Australia.


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## FxTrader (6 August 2013)

satanoperca said:


> Exactly, so what do you do to prevent it? As he/she sits in front of a foreign made computer.



Even worse I work for a Japanese car company.  

You know, that country where property prices are ridiculous, wages are high, the currency overvalued.  Yet people just love to buy the made in Japan label.  Why?  A perception of quality at the right price.  Same is true of Germany.  That is the space Australia needs to play in and not offshoring production of everything to the lowest cost location in the name of competition and profit.  We can agree on one thing, digging holes in the ground is not the secret to sustainable prosperity and neither is offshoring our skilled workforce.


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## pixel (7 August 2013)

Zedd said:


> I had to laugh at this. Are you honestly comparing the affordability of suitable housing, the level of infrastructure and our literacy/education levels to India and saying we're left holding the wooden spoon?




Stop laughing, Zedd; start thinking.
The point is *what level of housing of infrastructure is "suitable"?*
Do we really have to waste time, money, energy, and scarce resources on gossip about Hollywood or Bollywood "Superstars"? On mags like "No Idea" and "Women's Daze"? On spacious mansions with 5 bedrooms and 6 bathrooms plus a home cinema? Three car-garage for two people?
Our waste and illusion of "entitlement" is driving our cost of living to extremes. Far more than the tyranny of distance that lengthens the food miles etc compared to more densely-populated areas.


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## Covalev (15 August 2013)

Commonwealth Bank Australia - Earnings more optimised than ever

● CBA reported (company defined) FY13 cash earnings of $7,819 mn (up 10% on $7,113 mn FY12), which was 3% better than both our $7,597 mn estimate and the $7,614 mn consensus average (with earnings surprise to our estimates coming through revenues and, to a lesser extent, bad debt charges).

● What we liked about the result: Reasonable lending balance growth; strong margin expansion; improving asset quality (except in unsecured personal); wealth FUA flows and balance growth; and continued half- early ROE expansion.

● What we didn’t like: FY14E cost headwinds that appear to challenge the prospect for positive FY14E cost/revenue "jaws"; declining collective provision coverage (acknowledging reduced BankWest overlays); and softer-than-expected equity Tier 1 ratio (IRRBB RWA inflation).

● Following the FY13 result we have upgraded our estimates by 1% with an unchanged $71.00 target price and an unchanged UNDERPERFORM rating.


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## burglar (15 August 2013)

Covalev said:


> Commonwealth Bank Australia - ...




What has just happened here ... a post about a bank?! :


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## tinhat (15 August 2013)

Covalev said:


> Commonwealth Bank Australia - Earnings more optimised than ever
> 
> ● CBA reported (company defined) FY13 cash earnings of $7,819 mn (up 10% on $7,113 mn FY12), which was 3% better than both our $7,597 mn estimate and the $7,614 mn consensus average (with earnings surprise to our estimates coming through revenues and, to a lesser extent, bad debt charges).
> 
> ...




Who's we?


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## Covalev (22 August 2013)

National Australia Bank - Reasons for the discount slowly dissipating

● Following the trading update traders have made compositional changes to our estimates. A low surprise 3Q from NAB, although on balance marginally disappointing; that said, the reasons for NAB's "excess" peer group PE discount are slowly dissipating.
● What traders liked about the trading update: Customer margin improving (headline margins perhaps lower given apparently weaker financial markets income); Good performances overall in the UK (both businesses reporting higher revenues / lower bad debts, with strong UK CRE balance run-off).
● What traders didn’t like: Negative Group cost / revenue “jaws” (with soft Group revenue growth), although underlying cost discipline appears strong; Continued stalled Business Banking earnings momentum; Further UK conduct and redress costs; Modest Group asset quality deterioration with softer (collective and specific) provision coverage.
● NAB trades on 11.4x 12-month prospective earnings (equating to an 11% discount to the major bank peer group vs. 7% four-year average discount) and a corresponding book multiple of 1.8x.


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## CanOz (22 December 2014)

I heard a rumour that during the last G20, there was agreement to the concept of "bail ins" where the depositors of banks will take hair cuts when the bank fails....

Anyone got better detail on this?


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## McLovin (22 December 2014)

CanOz said:


> I heard a rumour that during the last G20, there was agreement to the concept of "bail ins" where the depositors of banks will take hair cuts when the bank fails....
> 
> Anyone got better detail on this?




Not depositors, bondholders. In essence their bonds become common equity. The idea of modern banking is always to ensure depositors lose their money only when every other avenue has been exhausted. The concept of bail ins is designed to lessen the liability on governments if a bank fails.


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## CanOz (22 December 2014)

McLovin said:


> Not depositors, bondholders. In essence their bonds become common equity. The idea of modern banking is always to ensure depositors lose their money only when every other avenue has been exhausted. The concept of bail ins is designed to lessen the liability on governments if a bank fails.




Yeah ok, got that part. What I heard though was that if, in the event of a possible failure, the depositors would see a portion of their savings converted to some kind of bond....


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## McLovin (22 December 2014)

CanOz said:


> Yeah ok, got that part. What I heard though was that if, in the event of a possible failure, the depositors would see a portion of their savings converted to some kind of bond....




A Google search seems to show that turning up on conspiracy type websites. I can't find a single credible report that depositors will be bailed in. Have you got one?


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## banco (22 December 2014)

CanOz said:


> Yeah ok, got that part. What I heard though was that if, in the event of a possible failure, the depositors would see a portion of their savings converted to some kind of bond....




You might be confusing what happens with depositor money versus what happens with hybrid issues.


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## DeepState (22 December 2014)

Bail-ins have occurred.  A key focus of the Basel III accord, and associated rulings from local bodies that extract concepts from this, is that there needs to be a very clear understanding on what is capable of being bailed in and what is possibly not likely to because of systemic issues.  Those instruments that are communicated to be clearly available for bail-in are tier 1 and tier 2 (Murray contemplates a tier 3 concept too for Australia) which include unencumbered equity and certain types of bonds/hybrids.  There is nothing per se which says that senior debt and deposits can never be bailed-in.  Acting as if they can never be bailed-in also brings moral hazard. However, it is a reality that crashing these brings the risk of systemic failure.  The focus is then on determining which instruments can be bailed-in without systemic issues and then setting the capital requirements involving these securities so high that the concept of bailing in from higher ranked securities is moved to more remote levels.  This also reduces the cost of implicit federal support in the event of bank failure.

Nonetheless, when Bank of Cyprus fell, depositors were bailed in.  The Bank's balance sheet was such that it had the characteristics of a mutual fund.  When the assets fell in value, this passed along very strongly to the depositors/unit-holders.  Most banks are not like this.


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## noirua (2 November 2018)




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## sptrawler (2 November 2018)

McLovin said:


> Not depositors, bondholders. In essence their bonds become common equity. The idea of modern banking is always to ensure depositors lose their money only when every other avenue has been exhausted. The concept of bail ins is designed to lessen the liability on governments if a bank fails.



Once depositors, find the money they put in a Bank as savings can be lost, the Banking system will fail.
Just about everyone in Australia, has their wages direct deposited into a Bank by EFT, this was part of a National wage case years ago.
Basically the four major banks, are the Government money tap, in Australia.
There is a lot of confidence built into that, they are basically an extension of Government, in Australia.IMO
That is why there is only Four pillars, as opposed to a hundreds of two penny banks.
Much easier to regulate and oversee four, as opposed to four hundred, not that one would have thought so after the Royal Commission. lol


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## noirua (2 November 2018)

Will this happen again - yes:


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## dutchie (4 February 2019)

Does not look like the banks are too worried about the Haynes Report.


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## Smurf1976 (4 February 2019)

dutchie said:


> Does not look like the banks are too worried about the Haynes Report.



Banks that seems true although I note that AMP shares have today hit a new low and are now lower than at any point during the Global Financial Crisis or before that the early 2000's bear market.


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## sptrawler (14 January 2020)

Good time to resurect this thread, as all the banks are in the same boat, falling returns, higher capital adequacy required, fines pending, lower interest margins, tighter security on money transfers, better I.T monitoring.
Yet they are being asked to free up lending, bit of a mixed signal IMO, I wonder which will give first? My guess is the fines.


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## sptrawler (14 January 2020)

The other thing that must be affecting the Banks bottom line, will be P2P lenders and buy now pay later providers, actually when you think about it they must be feeling the pinch and I wonder if the dividends have further to fall? Hope not or my belt tightening will have to continue.


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## Smurf1976 (15 January 2020)

sptrawler said:


> Good time to resurect this thread, as all the banks are in the same boat, falling returns, higher capital adequacy required, fines pending, lower interest margins, tighter security on money transfers, better I.T monitoring.
> Yet they are being asked to free up lending, bit of a mixed signal IMO, I wonder which will give first? My guess is the fines.




I can foresee a panic among government if the economy looks like actually slipping into a technical recession and judging by the constant stream of news about slow growth, retailers and building firms going broke and so on that seems a distinct possibility.

That will be the banks' "get out of jail card" in my view. At that point the banks collectively have government over a barrel if they're smart.


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## Smurf1976 (15 January 2020)

sptrawler said:


> The other thing that must be affecting the Banks bottom line, will be P2P lenders and buy now pay later providers, actually when you think about it they must be feeling the pinch and I wonder if the dividends have further to fall? Hope not or my belt tightening will have to continue.




Short term definitely.

Longer term, let's see how these other players survive the next financial crisis when it comes along since the history of banking in recent times has been one of major consolidation of smaller players into the large ones.

Consider how many lenders were around prior to the GFC and how many were around after it. Also various deposit takers ended up becoming part of the Big 4 at that point.

In my own case well I don't change banks often but I've managed to be a customer of 4 banks using the same account. Opened an account with the SBT (Savings Bank of Tasmania - that was a private bank not a government one) in 1981. Sometime circa 1990 that merged with Tasmania Bank (a government "state bank") to become the Trust Bank. A decade or so later Trust Bank was taken over by Colonial First State which not too long afterward ended up being swallowed up by CBA.

There'd be a lot of people who previously banked with small state or regionally based banks who'd have a similar story to that one. Opened an account with whoever, they merged with something else which some mid-tier took over and then they were gobbled up by one of the big 4.

Open an account with any smaller bank, keep it, and odds are you'll end up with one of the big 4 eventually. Might take 20 or 30 years to get there but you will eventually and I expect that basic pattern to continue whenever the next crisis arrives as it surely will.

The big 4 are a bit like casinos really. So long as everyone keeps playing they end up taking the money eventually with the only question being the detail of how that occurs.


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## qldfrog (15 January 2020)

I believe a clear consequence of the fire is a gdp growth
So no technical recession ahead in my books..no easy way out for the bank.....


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## sptrawler (15 January 2020)

Like I said four posts ago, I think it is a good time to resurect this thread, I think there is going to be a lot of action going on if the foreseable future.
Australia's financial stability is dependent on a stable banking system, they basically carry out the money flow control for the RBA and are regulated.
The problems that are surfacing now, are what happens at the unregulated levels.
https://www.abc.net.au/news/2020-01...tgage-lending-risks/11869276?section=business
The problem is the more the regulators clamp down on regulated entities, the more unregulated lenders flourish, which in turn negates the regulation.
OMG. This is getting bigger than Ben Hur.


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## sptrawler (15 January 2020)

The really funny thing is, if this all implodes, the SMH will be asking why wasn't Scomo all over it. 
Jeez if it does implode, I hope Scomo isn't on holidays.


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## dyna (26 July 2021)

sinner said:


> CBA CAPE: 23.01
> WBC CAPE: 20.5
> ANZ CAPE: 17.96
> NAB CAPE: 14.64



CAPE....Something I've been reading about, lately. Only ever mentioned  on this forum, in this old post.
Cyclically..Adjusted..P.E. ratio [ developed by a Nobel Economics winner ] currently  sitting at 24  in this country, but above 38 in the states. The only time it has ever been higher was just before the dotcom bust.
The theory, based on what's happened in the past, predicts an annual return of 1% for the US market ( and  about 9% chez nous ,here in OZ ). As a timing tool , CAPE seems perfectly hopeless, as the US market has been above its long term average for the past 20 years !


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## Garpal Gumnut (18 January 2022)

From my good friend Gotti in the Australian.

Q. Whither now for the banks?

A. Between a rock and a hard place.

gg


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