Australian (ASX) Stock Market Forum

Time to look at the banks again?

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gfresh said:
Yup.. Residential loans will be the one that will show it's hand this year. Doesn't even have to be the doomsday 20-30% falls in residential property, and we're not far away from the US and UK situation. Even a few % fall is already tightening up the banks' lending standards, if it gets worse that tightening will increase. If less and less people able to take out those expensive loans for mid-to-upper level property then the banks are stuck between is stuck between a rock and a hard place between taking on more risk, or foregoing risk and contributing to a market implode.

Such a situation will quickly show who has the dodgiest loans on their books.
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The famous Buffett quote comes to mind again,

"Only when the tide goes out do you discover who's been swimming naked."

I think it's fair to say that most banks and pretty well swimming naked at the moment.
 
noirua said:
A bit of a warning. I notice all the UK quoted banks did poorly last week, Barclays -45%, Royal Bank of Scotland -34%, Lloyds TSB -25% and HSBC -15%.
Anglo Irish Bank was nationalised by the Irish Government as confidence was increasingly being eroded.

Aussie banks have too many ifs and buts and are only for the brave.
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I tend to agree - not enough clarity on the bad debt exposure and some may be still working its way through to a bad debt because of the deteriorating economy. CBA's capital raising was a prime example... Plus no one could have thought the ways things panned out for Bank of America and RBS recently, when both looked in much much better shape only recently...

Also, has anyone thought what would happen to the big 4 Banks if the Australia housing bubble were to burst?
 
Time to look at banks in a personal way and particularly, if you have a business account with large sums held.

Losers in Europe and America have lost big time and quite large companies have collapsed. Spread your money around amongst the best banks, take no risks, as you MAY have fearful problems if you don't.

Take care of your most important asset, money.
 
Bank shares here in the UK are trading more like an option than a stock. Lloyds just hit 34p, Barclays at 76p (180p just a week ago). Essentially, owning a bank stock here is a bet that the entire system won't be nationalised.

How are governments at running banks? :)
 
DowJones said:
Also, has anyone thought what would happen to the big 4 Banks if the Australia housing bubble were to burst?
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The bubble will and is actually in the process of bursting now, the banks have factored in huge amounts of bad loans.
They will protect themselves and with the help of the Govt will get through somehow.
 
Extract from today's SMH:

Back on December 9 when Westpac announced the $500 million SPP and raised $2.5 billion from institutional shareholders, $16 was a handy discount to the market price. Even last week Westpac shares were worth $16.75, which meant existing retail shareholders at least had the opportunity for a little arbitrage - they could keep their exposure steady but make a profit by subscribing for new shares while selling the same number of existing shares.

But now there are only a few cents in it. If the share price is below $16, the SPP will be set at the average price in the five trading days up to January 30. That line was crossed in morning trading, with Westpac shares sinking recently to $15.52.

That price is saying more strongly than ever that the market thinks Westpac and our other banks aren't telling the truth about maintaining dividends.

Extraordinary returns, maybe

At $16 a share, Westpac's fully franked current dividend is nudging a 13% pre-tax yield - an extraordinary return when Reserve Bank cash rates starting with a 2 are in prospect, nevermind the likelihood that the Big Four banks will eventually come out of the slowdown with greater market share and reduced competition.

Westpac's rhetoric has already softened from the bullishness of increasing the dividend at the AGM to "hoping'' to sustain the current payout.

Given the fall in domestic business lending and the worsening international economic news, the question arises whether Westpac and its peers are guilty of misleading the market by leaving their current guidance in place while seeking money from shareholders.

The Commonwealth Bank copped plenty of stick for its bumbled handling of a capital raising and increased bad debt provisions, but Westpac's sin would be far more grievous if the CEO and board are keeping shtum now about the likely reduction in dividends. Plenty of market watchers think they are.

Ugly picture


I recently joined a conversation with a prominent stockbroker, an economist/funds manager and a financial spinner (PR, not cricket) and was amazed at the vehemence of their unanimous opinion about the banks' current capital raisings.

Admittedly alcohol had been taken in a social setting, perhaps lubricating their bile glands, but they painted an ugly picture of our banks already anticipating reduced dividends in private while publicly saying otherwise as they rush to raise capital.

If that is the case, the four private pillars of the Australian financial system would be little better than confidence tricksters and ASIC would be better served by dragging the chairmen in for the third degree than pursuing the odd journalist over some highly selective cases of alleged rumourtrage.

If, as the market seems to believe, the banks are forced to reduce dividend payments, the CEOs and chairmen will have an invidious choice: either to plead incompetence for not knowing how their business is going, or dishonesty.

In either case, a halving of their rich remuneration would be a reasonable starting point in trying to rebuild relations with misled shareholders.

On the other hand, the market could yet be wrong. Are the CEOs prepared to bet their salary on it, in the same way they are asking their shareholders to bet their money?

Disclosure: A Wesptac share purchase plan form sits on the Pascoe family super fund desk, awaiting a decision.

Michael Pascoe is a BusinessDay contributing editor.
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doctorj said:
Bank shares here in the UK are trading more like an option than a stock. Lloyds just hit 34p, Barclays at 76p (180p just a week ago). Essentially, owning a bank stock here is a bet that the entire system won't be nationalised.

How are governments at running banks? :)
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With this and the renewed downtrend in global equities generally it will be interesting to see if the ban on shorting financial stocks here is extended.
 
Who would've thought you could purchase a share each in Barclays, Lloyds and RBS for under 2 quid?
 
:jump:
Dezza said:
Who would've thought you could purchase a share each in Barclays, Lloyds and RBS for under 2 quid?
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What the hell are you talking about?...If it wasn't for Obama this world wouldnt have to worry about the banks getting re-capitalized? Not that its any great solution. But again thanks Mr.Bush for your warm piece of lettuce effort at insulting our REAL enemies!
:jump:

JUST REMEMEBER, DONT BLAME OMABA FOR THE GARBAGE HAND OFF FROM GEORGE "KNOW-IT-ALL" BUSH.

BUSH SCREWED the economy not Barack Obama!
 
GumbyLearner said:
:jump:


What the hell are you talking about?...If it wasn't for Obama this world wouldnt have to worry about the banks getting re-capitalized? Not that its any great solution. But again thanks Mr.Bush for your warm piece of lettuce effort at insulting our REAL enemies!
:jump:

JUST REMEMEBER, DONT BLAME OMABA FOR THE GARBAGE HAND OFF FROM GEORGE "KNOW-IT-ALL" BUSH.

BUSH SCREWED the economy not Barack Obama!
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I think you're on the wrong thread GumbyLearner. Dezza hasn't mentioned Barack Obama in anyway whatsoever. Very odd response to a very fair comment.
 
Haha...think he drank too many Red Bulls to stay up and watch his inuguration. But yeah, his swearing in hasn't 'ignited' the markets as some were hoping for. Banks and Financials dragging everything down again...not looking too good for the Aussie Banks.
 

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