Banks are really being overly talked down at present. It's an advantage being an Ausi because we don't have to worry about the currency height with respect to stock decisions. We can buy em at these great levels and sit back, take the franked dividends and wait for the sun to come out. It will. If the best banks in the world don't get back up life will not be worth living anyway so what the hell!!
Having read many articles and listened to several economist in the media discussing the strengths and weaknesses of the Australian banks versus the international banks (not just wbc) I would have to say most of them are supportive of our banks. Nothwithstanding they have confirmed that Australian banks have an exposure to Italian Government Bonds. This is possibly linked to their sourcing credit from the European banks that the Aussie banks need to have European Government Bonds as security for the lines of credit.
The Ratings agencies like Moodies; Standard and Poor and; Fitches down graded Australian Banks (which the banks duly reported to the ASX as required under the disclosure laws). The down grade was on the basis that:
1. Australian Banks source funds from Europe to finance their mortgage books (which could get more expensive or difficult to get if a default in Greece etc occured);
2. Australian Real Estate prices are at inflated levels:
3. That the property price bubble is about to burst, causing a collapse of our real estate market like that which occured in the u.s.a.; and
4. Our banks will have exposure to losses due to defaulting martgagees.
The reality is that aussie banks have been sourcing funds from Europe for over 19 years to finance mortgages, it is not something new. Also, since the gfc, aussie banks have significantly reduced their reliance on overseas banks for funding, being able to access funds from increased savings pools of aussie customers as well as being able to tap bond markets arround the world.
Australia doesn't have the "ninja" problem the u.s.a. had. Our unemployment is below 5% and the mortgage default situation in Australia is minimal. In some areas residential prices are dropping but in others they are holding or continuing to increase. If there is a bubble the pop will have minimal impact across Australia (except maybe the Gold Coast and Sunshine Coast in Qld).
Foreign hedge funds talking down our banks and real estate, simply demonstrates their lack of knowledge of the Australian economy. While the hedge funds have the financial resources to push prices down, eventually they will wake up to the fact that Australia is not about to have a depression. If things got really bad here the RBA would step in to assist the local banks and the goverment will guarantee the major banks. Glen Stevens has already said as much.
The push down does provide entry opportunities for investors prepared to take a long term view, benefiting in the short term from dividends and franking credits while yields are at 8% plus and benefiting in the long term from capitial gains when things return to normal.
IMO It is unlikely that the Euro member countries will let Italy go to the wall. However while they dicker about what they can do, the markets will probablt jump up and down like it did when the Euro members dickered about Greece. This could provided trading opportunities for the stout hearted. As always do your own research and good luck.
I apologise in advance for any spelling errors in this post.