Banks turning the corner?

[Kauri]

UBS has just downgraded Australian banks to underweight from neutral today.. that will add to the negative pressure on the AUD/USD.
UBS has also raised US banks to neutral from underweight and upgraded global emerging market banks to overweight from neutral....

Cheers
.............Kauri

 

[Aussiejeff]

Looks like the banks (who had been blithely following the NAB Pied Piper down the Yellow Brick Road) turned the corner alright.... and to the shock, horror and surprise of the media commentators, fell off a cliff!

The banks might now take a good while to scramble back onto a temporarily safe ledge, much lower down the SP cliff face, after NAB's Mr Big intoned ominously today "The worst of sub-prime is still to come" and that the new debt write-downs by NAB were so big because in NAB's estimation, the credit crisis is closer to being a "worst case scenario" than their analysts had first thought.

Ho-hum.... back to the Dark Ages again

PS: As a result of this "new development", would NAB be tempted to raise rates again in the short term?

 

[GreatPig]

Not sure where all this falling off a cliff comes from. Even with NAB being down more than 12%, it's only back to where it was a few days ago (for today at least). Same with the other main banks.

GP

 

[gfresh]

NAB down nearly 14% right now.. hmm, looks like a cliff to me..

Even if they're back to where they were, it doesn't really give any confidence, nor any encouragement for anybody to take a bit of a risk and invest now.

I'm not sure NAB's little graph did much to re-assure.. The CDO component may be effectively written off now, however the question is, in their nice little graph of "conduit" assets, those other components are going take some sort of impact eventually as well? No bad loans to occur in Australia, none to occur in "Primarily Northern Hemisphere" assets in future?? I don't think so

 

[GreatPig]

I find the perception rather interesting though. Being up around 20% in 7 or 8 days barely rates a mention - no Hallalujah's or the future's so bright, etc. Yet down 12% or 13% again and suddenly it's falling off a cliff and into the abyss.

And the others have supposedly fallen off a cliff along with it, while CBA for example is only down 6.2% after being up nearly 20% in the last 7 or 8 days as well.

GP

 

[So_Cynical]

I agree pig...its a total beat up.

On Wed and Thur the Banks were all ok and running hot, today's all doom
and gloom again and yet the NAB SP is above the 10 day low.

NAB Ten day chart below.

 

[IFocus]

Sorry guys but it looks like cliff to me maybe you will get a gap fill, one positive about today for holders is at least it may have washed out a heap of sellers.

Test of support 1st I think

Sucks when there is no market guidance before hand that they are holding that many CDO's


.

 

[kenny]

It does make me wonder who's going to be next to show their "skeletons in the closet" trick. Has CBA come out with anything yet? I recall WBC bravely saying they had little exposure.

Anyone still/now comfortable with the banks on a three year investment time frame?

regards,

Kenny

 

[CAB SAV]

Recommend viewing transcript of ABC's Inside Business programme this morning of John Stewart's interview. He believes US writedowns to reach at least 1 trill plus. only $450 mill so far. Have to be other OZ banks to suffer?I'm picking ANZ to have furthur writedowns and even though WBC deny exposure, will join the downward trend as the banks seem to mirror each other on graphs.

 

[ROE]

Banks are not what it used to be it has evolve into a massive credit beast
and the risk are unknown.

Old day: you deposit the cash into the banks...they lend out to someone else
and they take a cut.

but now it's not enough, they need to go to the market for funding as well
then hang on that isnt enough so let comes up with something else called CDO, oh no this this has failed over let move to SIV that will save the day, oops doesnt look like SIV will save the day, let's go chuck in ABS as well.

what's next they delay the invitable one day some of these banks will blow up and SIV and ABS is the next tool to destroy the bank.

I'm stayed the hell out for now only banks I got is suncorp because I like their insurance arms
and other ventures apart from banking operation.

 

[gfresh]

I'm picking ANZ to have furthur writedowns and even though WBC deny exposure, will join the downward trend as the banks seem to mirror each other on graphs.

Correct, update out this morning, EPS expected to be down 20-25%

Personally, I'd be knocking another 20% off that too for 08/09, as things may well deteriorate here in the property and consumer markets. But that is just theorising.

In a shareholder update today ANZ said its underlying business was continuing to deliver solid results however the continuing eterioration in global credit markets, a weak New Zealand economy and softening Australian economy would continue to give rise to further provisions and valuation adjustments in the second half of 2008.

Key Points

• ANZ's underlying business is performing well, particularly Personal and Asia Pacific. Profit before Provisions is expected to be up by around 8% compared to 2007 and cash profit to be over $3 billion. Income is expected to be up around 8-9% (10% FX adjusted). Margins have stabilized.

• 2008 Cash EPS is expected to fall 20-25% on 2007 reflecting the impact of high provisions.

• Credit impairment costs will remain high in the second half as a result of the ongoing deterioration in global credit markets, a weak New Zealand economy and a softening Australian economy. Provisions in the second half are likely to be around $1.2 billion ($980 million for the first half 2008).

- Collective Provision. The Collective Provision will be reset to above one percent of credit risk weighted assets. This is a prudent response to the sustained deterioration in the global credit environment and softening domestic economies in New Zealand and to a lesser extent in Australia. As a result, the Collective Provision charge is expected to be around $375 million in second half ($376 million in the first half 2008).

- Individual Provisions. Known credit issues have deteriorated including certain commercial property clients, securities lending and Bill Express. As a result Group Individual Provisions are expected to be around $850 million in the second half ($604 million in the first half).

• The value of US credit intermediation trades, previously disclosed, is expected to be adjusted down as a deduction from income by a further $160 million.

• ANZ is continuing to invest to maintain underlying business momentum including growth in Asia. Cost growth for the year will be around 9%. Strategic cost reduction initiatives are being accelerated.

• ANZ continues to maintain a strong capital position. ANZ plans to exchange the ANZ StEPS hybrid securities into ordinary shares at a 2.5% discount. A discount of 1.5% on the ANZ Dividend Reinvestment Program will be continued and ANZ retains the flexibility to underwrite the 2008 Final Dividend. The full-year dividend is expected to be maintained at 136 cents per share fully franked.

 

[Aussiejeff]

Correct, update out this morning, EPS expected to be down 20-25%

Personally, I'd be knocking another 20% off that too for 08/09, as things may well deteriorate here in the property and consumer markets. But that is just theorising.

Bad debt provisions in the second half are "likely" to be "around" $1.2 billion ($980 million for the first half 2008)

.

So, these are their best "guess-timates". I'll bet 50c that it is once again a low-side guess - trying to limit potential SP fallout and all that...

Well, we now know how unaccurate the banks are in forecasting what difficulties they may find themsleves in. So far, it appears most of our banks have grossly underestimated the depth of poop they might find themsleves in as a result of the world-wide credit crisis.

So, can we trust their soothing words any more?
Can we trust a used car salesman??
Can we trust Robots??? :hide:

 

[GreatPig]

But what has really been the alternative for them? Admit right at the beginning that they're so deep in the doo that it could wipe them out? Imagine the carnage then: share prices down 60% in a day and half the country queuing at the doors to get their money out. It's one thing for a whole pile of "experts" to speculate that they're insolvent or close to it, but a completely different thing for the CEO to actually come out and say it.

So it may not be a case of under-estimation, but rather a case of self-preservation (ie. they might have estimated reasonably well, but preferred not to make those estimates known).

GP