CBA - Commonwealth Bank of Australia

[ROE]

I think that was a pretty tame response to a crap result, wait till the masses start defaulting on mortgages and business loans, then itll get Interesting.

Its a funny old world when you earn alot more in deposit with the bank than as a shareholder, and risk free

it's already started at least in the US

http://business.theage.com.au/subprime-crisis-spreads-to-prime-loans/20080212-1rue.html

 

[TMC19]

I think that was a pretty tame response to a crap result, wait till the masses start defaulting on mortgages and business loans, then itll get Interesting.

Its a funny old world when you earn alot more in deposit with the bank than as a shareholder, and risk free

Talk about spreading negativity!! Bloody hell...

You think shipping 7% of the stock price was a tame respones to coming in a little bit short on consensus numbers. CBA's first-half cash PROFIT rose 8 per cent to a record $2.385 billion, Ok so the shakedown in markets and the higher cost of borrowing from credit markets shaved $100 million from its expected pre-tax result. Its not going broke anytime soon and its not even a drop in the ocean to the write downs the American banks had to make.

As regards the masses defaulting on mortgages and business loans - mate your dreaming. This is an Australian bank that has iterated numerous times that it has no exposure to subprime, it has openly admitted that there will be higher costs in borrowing going forward but to state that masses are going to start defaulting on their mortgages is pure rubbish.

If this is the extent to which the biggest Australian bank has suffered during the subprime mess that has plagued the US banks then happy bloody days.

I'm sure your negativity would be welcome in other threads.

 

[nomore4s]

Talk about spreading negativity!! Bloody hell...

You think shipping 7% of the stock price was a tame respones to coming in a little bit short on consensus numbers. CBA's first-half cash PROFIT rose 8 per cent to a record $2.385 billion, Ok so the shakedown in markets and the higher cost of borrowing from credit markets shaved $100 million from its expected pre-tax result. Its not going broke anytime soon and its not even a drop in the ocean to the write downs the American banks had to make.

As regards the masses defaulting on mortgages and business loans - mate your dreaming. This is an Australian bank that has iterated numerous times that it has no exposure to subprime, it has openly admitted that there will be higher costs in borrowing going forward but to state that masses are going to start defaulting on their mortgages is pure rubbish.

If this is the extent to which the biggest Australian bank has suffered during the subprime mess that has plagued the US banks then happy bloody days.

I'm sure your negativity would be welcome in other threads.

lol, You'll get used to NC he's a bear through and through.

I am surprised at the sell down today, considering the stock is already well off its highs of a couple of months ago on the back of the sub prime mess. I would have thought prices might have dipped a little today, but 6.5% surprises me. But please bear in mind that I have a very limited understanding of Fundimentals.

Maybe the market has just been too used to the results of the bullmarket of the last few years. Things not looking good if any of the other banks actually release negative eps growth now.

From a chartists point of view most, if not all the major banks have now broken long term supports which doesn't bode well for the financials or the market in general.

With alot of companies now struggling to re-finance and cash flows tightening up the good times could well be over, especially with the market now being alot more critical of companies results.

 

[justjohn]

CBA isn't the only bank going backwards lately .Along with CBA , SGB & MQG reached 52 week lows today

 

[oldblue]

CBA's strength is its massive retail deposit base.
I'm not rushing in just yet but I'm picking that there'll be some good buying in this stock in the weeks/months ahead.

Disc: Hold ANZ/NBA but not CBA.

 

[Bill M]

A lot of you are thinking short term. I always ask myself where will CBA be in 5 years time? I think the smart ones know he answer.

So here we have the biggest and best bank in Australia posting an increased profit and an increased dividend in probably the hardest times since the Government sold it off but the profits are still there.

What I don't really understand is that the same people that were buying at $62 ex Div are now selling at $47 cum Div............... In my books, its "Absolute Blockheads".:headshake

Up to you guys and gals, I'll hold and collect my original (read earlier posts) outlay 24% dividends and current dividend of 5.5%.... oh yes and tax paid. My dividend is 8% grossed up, sorry the best deposit rate is only 7% so that doesn't run true.

Good luck with your investments, I'm happy happy happy.

 

[cuttlefish]

I'm short at the moment so don't mind if it slumps a bit further. Technically it looks like its fallen off a cliff today so tomorrow will be interesting. In the current credit climate I would have thought there are real risks to the banks both in terms of increased default rates, but also a slowdown in the housing market and possible margins squeezes as rates climb (not sure if the 'extra' rate rise on top of the RBA rises is just a blatant grab at profits, or an indication that things aren't as rosy as they'd like).

 

[vishalt]

The selloff is a great accumulation bargain.

Analysts always change their excuses and sentiment and defer market directions to what they feel like so fund managers get in more at lower prices.

$1.13 dividend @ $46?

Yes plz.

 

[dhukka]

Up to you guys and gals, I'll hold and collect my original (read earlier posts) outlay 24% dividends and current dividend of 5.5%.... oh yes and tax paid. My dividend is 8% grossed up, sorry the best deposit rate is only 7% so that doesn't run true.

Good for you Bill, it must be nice to sit and collect a 24% dividend yield on your intial outlay. I agree over the long term you can expect to continue to reap a nice dividend stream from the banks.

So here we have the biggest and best bank in Australia posting an increased profit and an increased dividend in probably the hardest times since the Government sold it off but the profits are still there.

However I think this stretching it a bit. The eighties nearly took the likes of Westpac down. All the banks were still in the process of repairing themselves when CBA listed on the ASX in 1991, which incidentally was right at the point of the last Australian recession. As you can see from the chart below, the banks drastically improved their balance sheets in the mid to late 90's.

Sure you could make the argument that funding has not been this restrictive since the eighties however this is hardly the toughest environment CBA has faced...at least not yet.

Also, looking at the graph below you can see that impaired assets have just started to tick up slightly and they will continue to go up. Even if Australia avoids a recession, you can expect that ratio to rise back to the spike level we saw in 2001, the peak of last credit cycle in terms of bad debts.

It's easy to forget what happens at cycle turning points, last time round the banks were well capitalized and absorbed higher levels of impaired assets well. At it's peak, news of bankruptcies happened every week and usually one or more of the major banks had exposure.

That is not to say this time round will be a repeat of 2001, it could be milder or much worse, but we are not hearing about elevated rates of corporate defaults that you usually associate with credit cycle peaks apart from the odd mob of hedge fund idiots that leveraged up too far. Again, at least not yet.

However you can't overlook two basic things that are happening now with the banks. Profits are being squeezed and provisions are being raised. IMHO we are much closer to the beginning of this process than the end. Therefore, even though all the major banks are now yielding over 6.0% based on 2008 forecast dividends, I don't think you need to rush in and buy the banks just yet, you'll get plenty of opportunity down the road at attractive prices.

 

[numbercruncher]

I think a household debt graph would compliment that

Worth pointing out that household sizes have been dropping as well




Looks like Peak Debt to me Might be why the Gov has been urging people to slow spending and save ?

 

[moneymajix]

Some quotes from the Eureka Report today.

CBA is one of the best-protected banks against the credit crunch with 54% of its funding coming from retail and business deposits. Other banks can be expected to face even bigger increases in funding costs.

The market took a dim view of the result, marking the stock down below $47.50, a 52-week low. CBA has had a steep fall from its recent high of $62.16 in November. Has the market been too hard on CBA? We will know in by early May. The rest of the banking sector operates on a different reporting cycle to CBA, with their financial year ending on September 30. The interim results for ANZ, NAB, St George and Westpac (for the six months to March) are not due for another three months.

The market didn't respond well today and the stock was down below $47.50, a 52-week low.

CBA recent high of $62.16 in November, 2007.

 

[ShareIt]

I think Technical Analysis reads into this well... As you can see, there was a desending triangle (making lower highs) with a support at around $48.50... that support was clearly broken on high volume, so I believe it will hit around the $44 mark over then next week or so before it finds some decent support...

 

[Buffettology]

I think Technical Analysis reads into this well... As you can see, there was a desending triangle (making lower highs) with a support at around $48.50... that support was clearly broken on high volume, so I believe it will hit around the $44 mark over then next week or so before it finds some decent support...

Definately agree, TA reads into the CBA case extremelly well! Support around $48 which was clearly broken and on high volume as you say and RSI is still above 30 which indicates its not completely oversold yet. Next support a bit above $44.

 

[Buffettology]

Definately agree, TA reads into the CBA case extremelly well! Support around $48 which was clearly broken and on high volume as you say and RSI is still above 30 which indicates its not completely oversold yet. Next support a bit above $44.

Though, I do note, it appears there is a bullish crossover on MACD.

Though the decending triangle and support broken is far stronger than this signal.

 

[ShareIt]

Though, I do note, it appears there is a bullish crossover on MACD.

Though the decending triangle and support broken is far stronger than this signal.

Quite right about the MACD crossover, it's a false signal because a bounded indicator fails to confirm it... RSI is not making higher highs, but rather lower highs.

 

[numbercruncher]

Falling share price is simply reflecting rapidly growing risk, imho.

THE country's leading banks are thought to have an exposure of almost $5.5 billion to five of the most debt-laden and financially troubled companies, in a sign of the growing pressures corporate borrowers are placing on lenders.

With the Commonwealth Bank still reeling from the market's reaction to the impact of increased bad debt provisions on its first-half profits, new estimates from industry analysts underlined the fallout from a potential loan failure by one or more of the prominent businesses.

The list includes Centro Property Group, which will unveil a short-term financing lifeline from its banks today, the fund manager MFS, the US mortgage lender Countrywide Financial, the investment combine Allco Finance and its offshoot Allco Principals Trust.

Of the $5.45 billion lent to those companies, Commonwealth has provided the most money, $1.7 billion.

http://business.smh.com.au/big-banks-face-55b-risky-debt-exposure/20080214-1sbu.html

 

[cuttlefish]

One of my reasons for shorting this (via puts now partly closed) is that, apart from the glaring technical situation, and inaddition to the risk of increased defaults, lack of ability to raise capital for lending, possible margin squeezes in rising rate environment and effect of housing/economic downturn on business volumes, the other factor to consider is that the high dividend yield in comparison to other investments is now not looking as attractive comparitively speaking. As interest rates rise there are safer places to put money for a high yield - thus stocks that are primarily yield based investments tend to come down in price the same way that bonds come down in price as rates rise.

Put simply - in the current environment banks are no longer a low risk, high yield investment - they are becoming a higher risk, lower comparitive yield investment as rates rise.

 

[TMC19]

Falling share price is simply reflecting rapidly growing risk, imho.



http://business.smh.com.au/big-banks-face-55b-risky-debt-exposure/20080214-1sbu.html

YAWN. Nothing new here. The SMH wheeled out the same story in January. Simple media manipulation - playing to the masses. CBA getting coverage for posting a subdued profit and the media jumping on the bandwagon.

 

[numbercruncher]

YAWN. Nothing new here. The SMH wheeled out the same story in January. Simple media manipulation - playing to the masses. CBA getting coverage for posting a subdued profit and the media jumping on the bandwagon.

Perhaps but combined with dissappointing profits, and with defaults probably rising at a faster percentage clip than new loans, combined with worldwide economic woes .....

CBA is in a great position considering its massive retail deposits (comparitive to others), hence why I bank with them, probably the safest out of all the banks in the land.

If rising interest rates start causing a tide of defaulting across the private and commercial sectors there will be tons more pain.imho.

 

[wavepicker]

This one has been battered of late. Looks like it maybe coming into a low in the next few days for it's biggest countertrend rally since the decline started. A clear 5 wave decline almost complete as well as a Fib turn date for 18th Feb and another critical one on the 11th March(along with the broader market)
Let's see how it goes the next coupe of days...