Banks

[MaZed]

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?

 

[sptrawler]

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.

 

[burglar]

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.

 

[Bill M]

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.

 

[tinhat]

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.

 

[MaZed]

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

 

[sinner]

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.

 

[tinhat]

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

 

[Tyler Durden]

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?

 

[G Gekko]

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.

 

[MrBurns]

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

 

[Garpal Gumnut]

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

 

[MrBurns]

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

 

[Tyler Durden]

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?

 

[VSntchr]

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

 

[chops_a_must]

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.

 

[Gringotts Bank]

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.

 

[tinhat]

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.

 

[tinhat]

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.

 

[coolcup]

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?