So 10% of the 13% of the profit growth came from arreas reserves (or whatever it's called), with credit growth slowing to almost nothing, am I the only one who expects CBA's next reported profit growth to be extremely low?
That is a reasonable assessment in my opinion. There will be growth but it will be tight. This applies not just to banks though, going forward. The profit level will probably be maintained or improve slightly but I bet cost cutting plays a bigger role.
I never mind disclosing what I don't know [which is quite a lot......]
I hold some CBA in my SMSF - pension phase.
1. If I sell some on Monday - when the stock goes XD - do I get the dividend or must I hold them until Tuesday?
and
2. As I have held them for less than 45 days -- will my SMSF get the franking credits or is that off the cards?
With thanks
Rick
If the stock goes ex-div on monday and you sell them, you still get the div.
I believe you need to hold them for 45+ days to get the franking credit (however the size of the parcel may be relevent) check with your accountant.
That is a reasonable assessment in my opinion. There will be growth but it will be tight. This applies not just to banks though, going forward. The profit level will probably be maintained or improve slightly but I bet cost cutting plays a bigger role.
Do you feel as though this is priced in? I have read that financials are looking for staff cuts lately, I suppose there is a bit of wiggle room for artificial profit growth, but it can't be much/sustainable.
Bank [Price to Book]* ratios during Australia’s last major domestic recession.
Years--90---91---92
WBC---.65--.72--.75
ANZ---.89--.82--.70
NAB---.86--1.08--1.14
CBA -------------1.10 (listed Sept 91)
Overall Average .87
Banks @ latest book value and a .87 Price to book ratio.
WBC $11.12
ANZ $11.59
NAB $15.88
CBA $20.60
Are banks likely to see historical recession level Price to Book multiples return during the next recession?
*[Closing share price on the last day of the company's financial year / shareholders equity per share]
Bank [Price to Book]* ratios during Australia’s last major domestic recession.
Years--90---91---92
WBC---.65--.72--.75
ANZ---.89--.82--.70
NAB---.86--1.08--1.14
CBA -------------1.10 (listed Sept 91)
Overall Average .87
Banks @ latest book value and a .87 Price to book ratio.
WBC $11.12
ANZ $11.59
NAB $15.88
CBA $20.60
Are banks likely to see historical recession level Price to Book multiples return during the next recession?
*[Closing share price on the last day of the company's financial year / shareholders equity per share]
Are banks likely to see historical recession level Price to Book multiples return during the next recession?
Anything is posssible, But unless they start taking serious hits to cashflows or atleast are rumoured to be suffering huge losses I can't see it.
I mean at $20.60 CBA would be on an earnings multiple of 4.6 and paying a 16.6% fully franked dividend. So obviously the wheels have to be falling off for a permanent rerating to this level.
I can't see it happening even if there was a large property crash, It would take alot to turn cba into a junk bond, their loan book is on less than 50% LVR.
But offcourse fear can make it happen temperarily, such as in 2008,
I think $37 would be a fair price during a recession, So if it falls below that I will be buying some.
Interesting. One observation would be the state of banking in Australia during the last recession. There had been a string of high profile bank failures (Pyramid, State Bank of SA, State Bank of Vic), and WBC itself was being seriously considered as the next to fall. This was all started by the reckless lending of banks during the 1980s to corporate cowboys and severly strained balance sheets as new deregulated banks tried to claim as much market share as possible. ANZ lent Warwick Fairfax $1b over the phone without ever meeting him, because Laurie (Connell) told them to. Today banks are mainly reliant on mortgage lending and while this does have risks, especially in what I think is an overheated property market, I don't think it's quite the same as lending a couple of bill on negative pledge to a debt laden conglomerate.
If you want a great book about corporate 1980s Australia (with quite a bit about banking) then I suggest "The Bold Riders" by Trevor Sykes. Great read although it maybe out of print.
Are banks likely to see historical recession level Price to Book multiples return during the next recession?
It is beyond my research capabilities to determine this at any other time.
Sold this today after making around 40% return in 14 months.
I do not see any imminent trouble - but I am ever weary about our economy slowing. This is more a play it safe, wait and see, sell decision. I don't see much upside in their earnings in the next few years.
I can't understand how banks continue to grow and grow. CBA is now capped at about 8% of GDP. These banks are pretty much just mortgage lenders in Australia, so at these sort of levels they can't keep going up or they will end up outperforming Australia.
Well they do have some business overseas so it's not just domestic... And GDP is one-year P&L type number while market cap is present value of cashflow forever into the future. The "market cap" for Australia is probably something like 15x GDP I'd imgaine.
In June 2009, Australia's real national net worth was $6,899b, and real national net worth per capita was $314,200 (in 2007-08 prices). Between June 1999 and June 2009, Australia's real national net worth per capita rose by an average annual rate of 0.9%.
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