CBA - Commonwealth Bank of Australia

[burglar]

Gee, there's a bit of over-analysis going on here perhaps? ...

I don't know who it is, or how much cash they have to inject into the equities market.
But I read somewhere that enormous amounts are looking for a home.

Trying to figure out why banks are going well would be a wasted exercise until this resource dries up.

Just my take

 

[McLovin]

Gee, there's a bit of over-analysis going on here perhaps? Bank share prices rose on the back of their mortgage books and the credit boom, sure. But the current environment and the outlook is for very modest growth in earnings currently driven by cost cutting efficiencies more than anything else.

Which is my point. You can only increase profits through cost-cutting so much. Over the last 25 years the size of the finance sector has doubled as a % of GDP. That occurred in the midst of once in a lifetime credit boom and a massive change in technology that carved out costs. That is completely unsustainable, unless we become some sort of international banking centre. It doesn't seem like over-analysis to me, just a simple observation.

This is a mega-trend that is only going to continue. Just think that if bank like CBA that are a bit ahead of the curve in their IT strategy, can get their IT and marketing strategies right how much upside potential there is in integrating financial services and in cross-marketing to their clients.

In a former life I use to train bank staff (twenty years ago). Even with the IT systems and the right strategies in place there would still need to be a complete cultural/generational shift of branch/customer support staff required to transform banks along the lines I envisage but it is the direction surely they must take.

What sort of things are you thinking?

FWIW, I own CBA shares. I don't they're going broke any time soon but I wouldn't be buying them because of past performance.

 

[tinhat]

What sort of things are you thinking?

FWIW, I own CBA shares. I don't they're going broke any time soon but I wouldn't be buying them because of past performance.

I agree with most of your observations but just think there are big opportunities in financial services that can be driven by technology. I think that CBA have definitely made great leaps in terms of integrating a lot of business offerings into the NetBank system; for example insurance. There is a lot more that they can do (and probably will) to offer customers tools to manage their finances:

- manage household budget. Set budgets and track them against real-time bills as they are paid through the online banking system so that customers can know how they are spending their money.
- manage savings goals, financial planning/wealth management.
- manage the entire portfolio of financial services most people use such as home insurance, car insurance, health insurance, credit cards and be able to dynamically tailor offerings to specific individuals.
- Data mine client data to analyse and create sophisticated actuarial studies of risk based on financial behaviour, demographics and so on.
- Create fine-grained actuarial risk profiles on individual clients to tailor specific financial and insurance products to them.
- Cross-market finely targeted third party offerings to customers.
- Manage all your financial transactions with organisations easily. For example, a "supplier" should be able to provide a customer with a biller code and customer reference code (like bpay) that sets up a whole payment system with an organisation. For example, a school. Once set up in your online banking you can agree to pay ongoing things such as school fees, tuck-shop account, text-book bills, etc automatically and also be able to log into online banking and pay for one off items like a school excursion. The supplier should also have a gateway to the bank's system so that transactions can also be initiated at the supplier's end; for example, through the school website.

There are just some quick random thoughts, but there is still so much that can be done and no doubt will be done.

 

[mattyRK]

I'm just waiting for the right time to jump onto the bandwagon

 

[mr. jeff]

Is anyone shorting the banks yet on the almost parabolic move that has occurred over the past few months? Looks like the time could have arrived. If the global economy keeps putting out good news then money will start retracting from the banks and heading back overseas. I would guess the best indicator for this happening would be the dollar falling.
Will watch keenly. The banks themselves have signalled that there is not much of a prospect for growth in the next few years, however they could have said this purely to stop all the criticism they deserve regarding their record profits when they were apparently struggling with borrowing costs. BS!!!

 

[burglar]

I'm just waiting for the right time to jump onto the bandwagon

I believe the bandwagon departed last November! JMO

 

[Lee85]

Massive drops taking place across banking in general last two weeks. Anyone have thoughts on when / where it might bottom out, or is this correction likely to continue? I'm aware how detailed a question that is, but keen to get the perspective of some stockies who follow financials.

- Lee

 

[coolcup]

Too early to jump in yet. Falling knife and all that.

 

[Sharkman]

i took on a pairs trade involving CBA a couple of weeks ago, on the basis that as of may 30, CBA is the next of the big four due to pay out a divvy and the other three have already gone ex-div

i opted for a diagonal risk reversal on CBA - sold the may $68 puts, bought the june $70 calls. as it was rallying into the close last thurs (and in fact ended up on the day's high), i opted to let the short puts get assigned, took delivery @ $68 and sold back the june calls. the other side of the pair is june $30-$28.50 put spreads on NAB, as NAB is the last of the 3 who report in may to go ex-div (180 day EMA at the time was around $28.50 that's why i chose that as the lower strike)

a little above neutral so far - the june CBA calls didn't really decay that much while i held them, and NAB has fallen by slightly more percentage wise than CBA since the time of the trade, as of the close today - but will see how it goes over the next few weeks til june expiry. though in hindsight maybe i should have slapped a collar around CBA after taking delivery... the market gave me the opportunity, it was around the $68 level in the morning of the day after expiry, i didn't take it for whatever reason (probably distracted by work )

honestly i expect to get called out on this as a) it's pretty much a punt purely on the basis of the timing differences between the div dates of the two banks, not much more rhyme or reason than that, and b) i have an unlimited risk unlimited reward position on one side of the pairs trade and a limited risk limited reward position on the other. but you live and learn. constructive criticism welcome

 

[tinhat]

I sold out of my WBC shares (after having bought more a few days ago - got stop lossed). Today I put that money into CBA @ 66.30 with a stop loss at 66. We are now inside the 45 days before ex-dividend date so I would expect CBA to hold up a bit better than the other banks which went ex-dividend more recently. Who knows - thus the tight stop loss.

 

[Sharkman]

I sold out of my WBC shares (after having bought more a few days ago - got stop lossed). Today I put that money into CBA @ 66.30 with a stop loss at 66. We are now inside the 45 days before ex-dividend date so I would expect CBA to hold up a bit better than the other banks which went ex-dividend more recently. Who knows - thus the tight stop loss.

that is very tight IMHO, given the recent volatility, heck it's daily trading range of late has been 2-7 times that distance

are we inside the 45 days? CBA usually goes ex-div mid august, have they given an indication it will be different this year which i've missed?

agree with your reasoning though

 

[tinhat]

that is very tight IMHO, given the recent volatility, heck it's daily trading range of late has been 2-7 times that distance

are we inside the 45 days? CBA usually goes ex-div mid august, have they given an indication it will be different this year which i've missed?

agree with your reasoning though

Crap - you are right. I mis-calculated the ex-div date. That means my argument doesn't hold. I've got a feeling my stop loss will get triggered. I mentioned in a recent post that a price under $67 is bearish, but if it holds above $66 it might reverse. I just though we were closer to ex-div which would give the impetus for a reversal.

My stop loss is tight because I entered the trade "calling" a bottom but because there is a good chance I am wrong I don't want to risk too much on the call. At some stage I had planned to buy back these CBA shares, which I sold in three trades a few weeks ago, on a pull-back.

 

[faddishworm]

Looks like CBA got hit hard with the rest of the ASX today because of the US fed bond buying decision.

I think some of the new CBA products like that mywealth thing has got to count for something.

they are sticking by their projections for the AUD - I think they will do well.

 

[ROE]

time to short and short I did at $79 bucks

 

[herzy]

time to short and short I did at $79 bucks

Any reason other than (you feel) it's overpriced?

 

[ROE]

Any reason other than (you feel) it's overpriced?

Over price and law of large number, two things most business cant over come

They have to deliver over $8b profit at this price without failed and it is possible
but the year after that they have to deliver close to $9bn profit.

basically at this price everything is price is
house price keep going up, business keep booming and there will be little bad debt...

Price to perfection and you know what more likely to happen

 

[Uncle Festivus]

time to short and short I did at $79 bucks

Might blow off on Monday after Dow lead so looking to short then...............at these prices a lot of promises priced in as well as funny stuff goin on with accounting eg lowering loan loss reserves and presto new record profits, then paying out higher divs from that 'profit'.

They may have been golden up til now, bit just too many eggs in the one basket.......

 

[TikoMike]

Over price and law of large number, two things most business cant over come

They have to deliver over $8b profit at this price without failed and it is possible
but the year after that they have to deliver close to $9bn profit.

basically at this price everything is price is
house price keep going up, business keep booming and there will be little bad debt...

Price to perfection and you know what more likely to happen

Hi ROE, do you mind deleting some of your personal inbox? Just have a quick message I want to send you. Will edit/delete this post once sent.

 

[ROE]

Might blow off on Monday after Dow lead so looking to short then...............at these prices a lot of promises priced in as well as funny stuff goin on with accounting eg lowering loan loss reserves and presto new record profits, then paying out higher divs from that 'profit'.

They may have been golden up til now, bit just too many eggs in the one basket.......

View attachment 55201

Yeah AFR has a good article on banks profit they are a actually down if you stripped all the manipulation they been doing for the last 12-15 months on reserve ratio and provision for bad debt etc....

Sound like American banks during their good time parties but how much our banks play with their books it is hard to know until something happen and the dust settles.

Law of large number now comes in play ...not many business can over come this problem...I say probably 100% of the business can't...it like defined the Newton law of motions...iapple can't
The only thing they can play is their books or report the real deal with is profit decline or stand still

 

[Uncle Festivus]

Might blow off on Monday after Dow lead so looking to short then..............

Banks getting creamed today - keeping shorts on........nearly $2 in 2 days now.....