NAB & ANZ now "dogs with fleas"!

[MoneyNeverSleeps]

Professional investors that I know dumped their NAB and ANZ stock months ago whilst another acquaintance closed his term deposits as soon as the NAB announced it's sub prime exposure last week; which was previously talked down to the point of being inconsequential!

Today Wayne Swann called a press conference to say that both banks were safe...... last time a treasurer did that was here in Victoria with Pyramid; not long after the press conference Pyramid collapsed and depositors and share holders lost nearly everything.

The problem is that if NAB and/or ANZ collapse, after all the sub-prime crises according to numerous US experts going to get a lot worse before it gets better, these investors and depositors will lose a lot and blame everyone except themselves! Indirectly the economy then suffers further as many of these people then draw on social security and and/or spend a lot less.

WHY THE HELL DO PEOPLE CONTINUE TO HOLD STOCK IN COMPANIES WHEN THEY CLEARLY HAVE PROBLEMS WHICH THEY HAD PREVIOUSLY ALMOST DENIED?

AND WHY WOULD ANYONE LEAVE MONEY IN A BANK WHICH HAS MAJOR PROBLEMS AND WHICH MAY CLEARLY BECOME WORSE?

IF YOU'RE ONE OF THESE PEOPLE, PLEASE, I IMPLORE YOU, HAVE A GOOD LONG THINK ABOUT WHAT A REASONABLE PERSON SHOULD DO? SURELY YOU DON'T BELIEVE THAT THE GOVERNMENT WILL GUARANTEE YOUR LOSSES!

If a few incompetent companies are subsequently removed from the corporate gene pool, all the better!

Gekko would be calling ANZ and NAB more than dogs with fleas, he'd be looking for a throat or two to rip out!

 

[brettc4]

This appears a little over the top.

I do not deny that there are some issues. ANZ has now made provisions for about 2 billion in bad debts, but are still making billions in profit. This is different from the US where a number of the banks are recorded losses, out big 4 will still make a billion plus per half.

I wont preach they are out of the woods, but I cannot see them going under. Maybe my imagination isn't good enough but time will tell.

 

[michael_selway]

Professional investors that I know dumped their NAB and ANZ stock months ago whilst another acquaintance closed his term deposits as soon as the NAB announced it's sub prime exposure last week; which was previously talked down to the point of being inconsequential!

Today Wayne Swann called a press conference to say that both banks were safe...... last time a treasurer did that was here in Victoria with Pyramid; not long after the press conference Pyramid collapsed and depositors and share holders lost nearly everything.

The problem is that if NAB and/or ANZ collapse, after all the sub-prime crises according to numerous US experts going to get a lot worse before it gets better, these investors and depositors will lose a lot and blame everyone except themselves! Indirectly the economy then suffers further as many of these people then draw on social security and and/or spend a lot less.

WHY THE HELL DO PEOPLE CONTINUE TO HOLD STOCK IN COMPANIES WHEN THEY CLEARLY HAVE PROBLEMS WHICH THEY HAD PREVIOUSLY ALMOST DENIED?

AND WHY WOULD ANYONE LEAVE MONEY IN A BANK WHICH HAS MAJOR PROBLEMS AND WHICH MAY CLEARLY BECOME WORSE?

IF YOU'RE ONE OF THESE PEOPLE, PLEASE, I IMPLORE YOU, HAVE A GOOD LONG THINK ABOUT WHAT A REASONABLE PERSON SHOULD DO? SURELY YOU DON'T BELIEVE THAT THE GOVERNMENT WILL GUARANTEE YOUR LOSSES!

If a few incompetent companies are subsequently removed from the corporate gene pool, all the better!

Gekko would be calling ANZ and NAB more than dogs with fleas, he'd be looking for a throat or two to rip out!

Hm i doubt that the four Australian major banks would go under even in these tough times, maybe just a drop in profit for the next few years, thats all. Plus Rudd could bail them out like the US have, except that the Australian Government has alot more cash (budget surplus)

ANZ - Earnings and Dividends Forecast (cents per share)
2007 2008 2009 2010
EPS 204.8 193.6 212.8 223.9
DPS 136.0 136.0 144.0 151.5

NAB - Earnings and Dividends Forecast (cents per share)
2007 2008 2009 2010
EPS 268.4 288.6 301.3 320.3
DPS 182.0 196.0 206.0 222.0

WBC - Earnings and Dividends Forecast (cents per share)
2007 2008 2009 2010
EPS 185.3 199.9 210.0 222.8
DPS 131.0 142.3 148.5 158.0

CBA - Earnings and Dividends Forecast (cents per share)
2007 2008 2009 2010
EPS 339.7 359.5 375.7 399.0
DPS 256.0 269.0 280.5 297.0

Date: 28/7/2008
Author: Eric Johnston
Source: The Australian Financial Review --- Page: 51
The ANZ Bank may shortly announce $A200 million in write-downs. However, thereis speculation that the bank, which has been exposed to losses from ABC LearningCentres, Centro and Opes Prime, could opt to take "aggressive" actionwith regard to its exposure to complex credit protection instruments. Suchaction could potentially push the bank's write-downs to $A1 billion. InFebruary 2008, the ANZ announced a provision of $A226 million. Furtherwrite-downs may cause investors to believe that the global credit woes are finally having an impact in Australia. Meanwhile, the NAB, which on 25 Julyannounced it would have to make $A1 billion in provisions, has suffered itsworst one-day share price fall since the stock market crash of 1987

Date: 28/7/2008
Author: Marc Moncrief
Source: The Age --- Page: B1
Other Australian banks may adopt the defence of National Australia Bank. On 25July 2008, the bank announced that it would set aside $A830 million asprotection against possible losses in the US housing market. It revealed thatits sponsorship of US conduits gave it a $A1.2 billion exposure tocollateralised debt obligations. Credit Suisse said that other Australian banksdo not have the same exposure but may also improve their defences by settingaside earnings, which will affect shareholder returns


Date: 28/7/2008
Author: Andrew Cornell
Source: The Australian Financial Review --- Page: 51
The National Australia Bank's (NAB) move to increase write-downs on USmortgage assets wiped 13 per cent off the bank's shares on 25 July 2008.The group indicated that spreads on credit default swaps are widening, but thereare indications that other spreads, such as the key short-term funding spreadfor Australian banks, have settled. Moody's Investors Service has describedthe NAB's decision to almost fully provide for its collateralised debtobligations as "prudent", while Deutsche Bank has informed investorsthat the NAB provisions mean the issue has most likely been "dealtwith"

http://business.smh.com.au/business/its-not-over-yet-20080728-3m21.html

thx

MS

 

[MoneyNeverSleeps]

FACTS:

1. Should a professional investor/depositor rely on the government covering their losses as part of their investment plan? Talk to a pyramid investor/depositor about this.

2. By many accounts the sub prime crises is potentially only about US$500B into losses of perhaps US$1.5T.

3. Both NAB and ANZ had previously denied exposure or any significant exposure until the last few days, what else are they yet to disclose?

In my investment plan 1 + 2 + 3 = and NOT

 

[white_goodman]

they should be buying into Anacot steel or Bluestar lol

the 2 Pillars of banking doesnt quite have the same ring to it....

 

[wayneL]

Both have seriously underperformed the xjo in the last two to five years and are below their prices of two yaers ago...

..in a time when they should have been kicking serious butt (even if somewhat illusory).

Yep, definite flea infestation there.

 

[bassmanpete]

I'm with you, MoneyNeverSleeps. For years the big 4 banks have been working together as a virtual monopoly ripping off the Australian public. Now two of them (for now) have admitted stuffing up. What's their solution? Raise interest rates!

So what they're saying is "We made a balls up, but we're not going to pay, our shareholders aren't going to pay (if we can help it), YOU'RE going to pay - because we know that you may whinge & complain but you won't DO anything about it."

I know from experience with banks that if you stand up to them & say "I'm not paying this fee", you can get away with not paying that fee! And if the branch that you're with insists that you pay the fee - go to another bank. In fact, go to another branch of the same bank. They'll try to fob you off with "It's the bank's policy" but if you insist you'll get away with not paying, because they know that the vast majority of people will just pay up without a murmur and that giving in to the insistent few means bugger all to their bottom line. Do it guys, the money's better in your pocket than in theirs!!!

 

[Wysiwyg]

136 c.p.s. fully franked dividend is 8.5% at $16.00 per share.Getting a good shake (what isn`t) at the moment so could get an even better low down the track.God bless America.

 

[wayneL]

136 c.p.s. fully franked dividend is 8.5% at $16.00 per share.Getting a good shake (what isn`t) at the moment so could get an even better low down the track.God bless America.

Grossed up, that makes a nice dividend.

Can they maintain that div without dipping into reserves though, that is the question.

 

[GreatPig]

136 c.p.s. fully franked dividend is 8.5% at $16.00 per share.

But the first 62 cents of that was paid at $29+, with the price dropping $1.38 when it went ex-div. It's dropped around $14 since then.

That leaves 74 cents as the final dividend (if they can still manage it). Not such a great dividend if it drops another $1.50 when that goes ex-div.

GP

 

[Wysiwyg]

But the first 62 cents of that was paid at $29+, with the price dropping $1.38 when it went ex-div. It's dropped around $14 since then.

That leaves 74 cents as the final dividend (if they can still manage it). Not such a great dividend if it drops another $1.50 when that goes ex-div.

GP

Yes pig the interim has gone with the Dec. left this calender year.It does pay to sell around the top and buy around the lows doesn`t it.I`ll remember next time.

 

[gfresh]

For years the big 4 banks have been working together as a virtual monopoly ripping off the Australian public. Now two of them (for now) have admitted stuffing up. What's their solution? Raise interest rates!

Well we're a small population, it's no different to the airlines, utilities, phone companies and others, where it's a small number of local companies dealing with a (relatively) small customer base. It tends towards either an duopoly or oligopoly perfectly and I'm not sure there is any conspiracy here. It's just business under the "free" market we have been so led to believe is a great thing.

While deregulation has actually bought more players / competitors onto the scene in the last decade, just as they were starting to get a good foothold, they're now getting squeezed big time. Unfortunately these smaller institutions are unable to borrow direct from the RBA like the bigger ones can, and have to go to expensive overseas funding sources.

The cost of this is large, making them unable to access any cheaper forms of funding, and pass on lower costs to the consumer. This has effectively killed competition right now. Not good for the consumer, but it's the way the system goes towards under the current structure when times get tough.

One possible solution I read was having a Fannie Mae/Mac style mortgage backer here in Oz, who provides finance funding to not just the big banks, but the smaller ones as well. An even playing field at the source, so that everybody is drawing off the same source of funding. It does actually seem like a reasonable idea in theory, unless of course you get major mortgage catastrophe (e.g. US)

 

[MoneyNeverSleeps]

Wait until the banks make public that Australia has a sub-prime problem no less dramatic than the US. All over Australia, in areas like Melton and Rowville in Melbourne, banks are considerably exposed. In recent years:

1. Most mortgages were for 90-110% of the value of the property.
2. Values having dropped 10-30% in outlying suburbs.

The banks, and possibly, government, must be colluding to keep this information out of the media. They are probably hoping to ride out the storm, however there is little hope this happening now. The problem is once the foreclosures start they will severely impact on property values of all outer suburb areas.

According to an OECD report about 2 years ago, property values were about 30% higher than they should be in Australia and so it looks like the market is about to correct this.

 

[michael_selway]

Wait until the banks make public that Australia has a sub-prime problem no less dramatic than the US. All over Australia, in areas like Melton and Rowville in Melbourne, banks are considerably exposed. In recent years:

1. Most mortgages were for 90-110% of the value of the property.
2. Values having dropped 10-30% in outlying suburbs.

The banks, and possibly, government, must be colluding to keep this information out of the media. They are probably hoping to ride out the storm, however there is little hope this happening now. The problem is once the foreclosures start they will severely impact on property values of all outer suburb areas.

According to an OECD report about 2 years ago, property values were about 30% higher than they should be in Australia and so it looks like the market is about to correct this.

Hm yes Australian houses price will drop and bank profits also, but its hard to say it will be a "disater". Australia has a trade and budget surplus (currently anyway), unlike the US. What are your thoughts on this?

thx

MS

 

[brettc4]

Does the US has Mortgage Lenders Insurance?

If what I have read is correct, Australia has a very small % of low or no doc loans, around 1%, not the 15% in the US.

For all loans where the equity is less than 20%, you pay LMI to protect the bank. So for the bank to loss out, the insurance companies would have to not be able o pay.

Does the US has LMI?

Brett

 

[MoneyNeverSleeps]

Australia has a trade and budget surplus (currently anyway), unlike the US.? MS

Australia runs a current account deficit of about AUD$2B per month on average, currently adding about AUD$25B per year to our gross foreign debt which is now over AUD$1T (Fraser left $20B, Keating $160B and Howard $600B) the budget surplus is peanuts by comparison.

 

[gfresh]

Our account deficit is -6.3 % x GDP (IMF World Economic Report, April 08 - page 67), making it one of the worst of all the advanced economies. Even the US as a share of GDP is better off at -5.3%.

Yes, the US does have mortgage insurance, just that the insurers are in dire straights

So, that's the US right, why should we care? Well unfortunately our banks use the same insurers, AMBAC (NYSE:ABK) , PMI (NYSEMI), Genworth (NYSE:GNW) to underwrite our local mortgages.. Pull their charts up to get a current market snapshot of the current state of their business. So in another 12 months, given a continuing US train-wreck, it's possible they will crumble.

If (still if, even I will admit) we suffer large-scale falls in property, higher unemployment, where do our banks fall back on to recover the value of mortgages when people default and are forced into bankruptcy? That's your doomsday scenario.. remote, but possible.

 

[MoneyNeverSleeps]

For all loans where the equity is less than 20%, you pay LMI to protect the bank. So for the bank to loss out, the insurance companies would have to not be able to pay. Does the US has LMI?

I don't know (they must?) but there is still the question of how the banks get away without declaring their exposure regardless of who ends up footing the bill?

 

[MoneyNeverSleeps]

Our account deficit is 9.x % x GDP (IMF figures).. making it - one of the highest in the world Even the US as a share of GDP is much better off.

In the medium to long run I never worry about the US, they control just about all technologies and industries worth controlling including IT and even space etc. How can they lose?

Australia it appears, thanks to Fraser, Hawke, Keating and Howard has quarries........we're simply copying Nauru and look where they ended up.

 

[OK2]

Wait until the banks make public that Australia has a sub-prime problem no less dramatic than the US. All over Australia, in areas like Melton and Rowville in Melbourne, banks are considerably exposed. In recent years:

1. Most mortgages were for 90-110% of the value of the property.
2. Values having dropped 10-30% in outlying suburbs.

The banks, and possibly, government, must be colluding to keep this information out of the media. They are probably hoping to ride out the storm, however there is little hope this happening now. The problem is once the foreclosures start they will severely impact on property values of all outer suburb areas.

According to an OECD report about 2 years ago, property values were about 30% higher than they should be in Australia and so it looks like the market is about to correct this.

You are not for real comparing Rowville with Melton are you, did you do any research on the two suburbs? Prices in Rowville are up almost 10% in the previous quarter with the opening of Eastlink and good properties (not cheap properties) are selling within a week. Have a look at the last Census and I recall the majority of residents been self-employed in Rowville with most of them in the trades industry and almost half the homes in Rowville having no mortgage. I can vouch that most of the toffee nose mothers that I have to fight with for a parking space before and after school each day are driving European tractors with all of the options.

Please stick to losing your money with shares if you are not able to get your property markets right!!!