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The Banks
Does It Get Any Better For The Big Four?
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nipper
post Posted: Jun 9 2020, 10:32 AM
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one case, and a couple of reasons, for buying banks
QUOTE
"I believe there is a powerful confluence of forces that could see investors shift their attention to bank stocks.

First and foremost they have significantly under-performed the broader market and the hot growth stocks, particularly the so-called FAANG stocks.

Institutional investors have been underweight financials for some time, and for good reason.

In addition, and very importantly, we are seeing a steepening in yield curves as central banks powerfully anchor short term rates at zero.

The avalanche of government bond issuance and the reopening of economies will, all things equal, lead to a rise in long-term bond yields.

Financials as you know are a major beneficiary of a steepening in bond yield curves as it boosts their net interest income (borrow short, lend long.)

Bank are cheap in absolute and relative terms and hence have a cushion or margin of safety."




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"Every long-term security is nothing more than a claim on some expected future stream of cash that will be delivered into the hands of investors over time. For a given stream of expected future cash payments, the higher the price investors pay today for that stream of cash, the lower the long-term return they will achieve on their investment over time." - Dr John Hussman

"If I had even the slightest grasp upon my own faculties, I would not make essays, I would make decisions." ― Michel de Montaigne
 
nipper
post Posted: Jun 6 2020, 09:25 AM
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COVID-19 through the lens of Major Bank 1H20 results

Summary

QUOTE
The underlying performance for the major banks was solid for the first six months of fiscal 2020 (1H20). Operating income was broadly stable half-on-half as largely flat net interest margins were met with soft, yet still positive, volume growth.

Performance will soften in the near-term as mortgage and other loan deferrals take effect in response to a rising number of furloughed individuals, although government support to date appears to be filling the gap left by a loss of income due to a lower number of hours worked. Provisions (credit losses) rose sharply in an attempt to reconcile with an uncharted outlook-a government-enforced shutdown, which is temporary in design, but whose impact will likely persist for years.

Further provisions may indeed be required as current levels are well-below those raised in the early 1990's when unemployment was last in double-digits. However, the composition of unemployment and unprecedented levels of forbearance and support from both lenders and the government is likely to temper that need, somewhat.

Capital preservation was the main focus as ANZ and Westpac took the unprecedented step of deferring payment of ordinary dividends to shareholders (NAB reduced its dividend by more than 60%). Although we expect dividends to resume in 2H20, we would not view as a base case that shareholders will recoup the deferred component. We would also not rule out further capital raisings, which would clearly benefit creditors.

The major banks provided base case and downside economic scenarios (year-end estimates for unemployment, output and house prices) and the impact of those scenarios and estimates on their respective regulatory capital ratios (a measure of their solvency).

The scenarios and estimates provided are not designed to provide a false sense of precision. However, they do provide us with a view of the capacity to absorb further provisions, if required. On this basis, we believe the major banks would have sufficient levels of capital to absorb a further increase in provisions as envisaged in modelled downside scenarios.

Given the capital headroom above the point at which an issuer would be required to either write-off or convert some or all of its subordinated debt to common equity, we believe the more severe risk to creditors of either deferred coupons (in the interim) or conversion/write-down of principal at a later point is very low. As such, we remain comfortable with major bank debt-Tier 1 hybrids and Tier 2 subordinated debt.
http://thewire.fiig.com.au/article/2020/06...nk-1h20-results



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"Every long-term security is nothing more than a claim on some expected future stream of cash that will be delivered into the hands of investors over time. For a given stream of expected future cash payments, the higher the price investors pay today for that stream of cash, the lower the long-term return they will achieve on their investment over time." - Dr John Hussman

"If I had even the slightest grasp upon my own faculties, I would not make essays, I would make decisions." ― Michel de Montaigne

Said 'Thanks' for this post: early birds  
 
nipper
post Posted: May 28 2020, 02:39 PM
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Last few days have been amazing
QUOTE
JP Morgan financial sector analyst Andrew Triggs says the impressive surge in Australian bank share prices this week is "long overdue", with the sector having underperformed the S&P/ASX 200 by 19 per cent from February 21 to May 25.

After a further rise of between 3.8pc and 6.1pc today, the four majors are currently up almost 20pc this week, so it could be said that its underperformance versus the index has been broadly corrected.

Mr Triggs says reasons for the recent strength include:
... reduced tail risk on the domestic economy;
... positioning is light, with domestic institutional investors net sellers of the banks in the three months to March 31 and heavily underweight financials;
....valuations are "undemanding" with unprecedented discounts to book value; and
... Quant fund rotation (from Growth to Value).

"Whether the recovery continues remains to be seen but 1x price-to-book value may be a "ceiling" in the short-term (ex-CBA) given ongoing uncertainty and structural headwinds the sector faces," Mr Triggs says.

In his view NAB is best positioned to benefit from a "less bad" domestic economy, he has an overweight rating on the stock. Westpac is preferred over ANZ in his major bank pecking order, with CBA the bottom pick at Underweight.

... wow, no-one banging on about 'overweight mums and dads"

....
QUOTE
It's been a long time since the financial media in Australia have used words like stunning, staggering and astonishing in the same sentence as Australian banks.

[Yester]day's Chanticleer column in the Australian Financial Review used all three of these adjectives.





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"Every long-term security is nothing more than a claim on some expected future stream of cash that will be delivered into the hands of investors over time. For a given stream of expected future cash payments, the higher the price investors pay today for that stream of cash, the lower the long-term return they will achieve on their investment over time." - Dr John Hussman

"If I had even the slightest grasp upon my own faculties, I would not make essays, I would make decisions." ― Michel de Montaigne
 
nipper
post Posted: May 4 2020, 07:45 PM
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Tricky times, but so far so good
QUOTE
The banks are battening down the hatches for a hard slog out of the crisis and boards have had to delicately balance the interests of retiree shareholders reliant on dividend income with banking regulator's demand that they maintain capital strength.

Ratings agencies have backed the banks' focus on stability and strength. After the Westpac result, S&P Global Ratings said a “strong capital base, its decision to defer its interim dividend and the strength of its domestic banking franchise provide a good buffer for the Australian major bank to absorb higher loan loss provisions".




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"Every long-term security is nothing more than a claim on some expected future stream of cash that will be delivered into the hands of investors over time. For a given stream of expected future cash payments, the higher the price investors pay today for that stream of cash, the lower the long-term return they will achieve on their investment over time." - Dr John Hussman

"If I had even the slightest grasp upon my own faculties, I would not make essays, I would make decisions." ― Michel de Montaigne
 
nipper
post Posted: Apr 11 2020, 10:12 AM
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Lower dividends and no capital management look very likely in 2020 and beyond for banks, listed insurers and other financial groups for the rest of 2020

QUOTE
APRA, the financial regulator, has told banks, insurers, and other financial groups to think carefully about deciding whether dividends can be paid to shareholders over the rest of this year and into 2021.

Companies will have to be sure that paying a dividend won’t damage the company’s financial strength and when a decision is made to greenlighted a payout, it will have to be lower and dividend reinvestment plans will have to be used to lower the cash outflow wherever possible

The statement means APRA has joined the Reserve Bank of New Zealand, the Bank of England and European Central Bank in telling banks and financial groups to limit or suspend dividends and capita management plans such as buybacks.

The RBNZ, Bank of England and ECB have gone as so far to tell banks not to payout dividends, while APRA’s advice is less firm, but it is obvious that it is directed at the major banks, three of which ... NAB, ANZ, and Westpac .... balanced their half years on March 31 and would now be starting to look at interim dividends.

Those banks will now either not pay dividends, or reduce current payout levels and try and encourage shareholders to take up the DRPs.

Macquarie Group balanced its 2019-20 financial year on March 31 as well and would fall into the same target group, while the Commonwealth doesn’t escape even though its 2019-20 financial year doesn’t balance until June 30 with the final dividend set in August.

Bendigo and Adelaide is a regional bank in a similar position, while Bank of Queensland, Suncorp (with Metway Bank), and insurers such as QBE, IAG and Suncorp’s brands are all in a similar target group to the bigger financial groups.

In a letter to ADIs, general insurers, life companies, and private health insurers, APRA outlined its expectations that these institutions limit discretionary capital distributions in the months ahead, including deferrals or prudent reductions in dividends.

APRA said in its letter that because banks and other financial groups play an important part in the economy, it “expects ADIs and insurers to limit discretionary capital distributions in the months ahead, to ensure that they instead use buffers and maintain capacity to continue to lend and underwrite insurance.”

“This includes prudent reductions in dividends, taking into account the uncertain outlook for the operating environment and the need to preserve capacity to prioritise these critical activities.”

“Decisions on capital management need to be forward-looking, and in the current environment of significant uncertainty in the outlook, this can be very challenging. APRA is therefore providing Boards with the following additional guidance.

“During at least the next couple of months, APRA expects that all ADIs and insurers will:
- take a forward-looking view on the need to conserve capital and use capacity to support the economy;
- use stress testing to inform these views, and give due consideration to plausible downside scenarios (periodically refreshed and updated as conditions evolve); and
-initiate prudent capital management actions in response, on a pre-emptive basis, to ensure they maintain the confidence and capacity to continue to lend and support their customers.

During this period, APRA expects that ADIs and insurers will seriously consider deferring decisions on the appropriate level of dividends until the outlook is clearer.

However, where a Board is confident that they are able to approve a dividend before this, on the basis of robust stress testing results that have been discussed with APRA, this should nevertheless be at a materially reduced level. Dividend payments should be offset to the extent possible through the use of dividend reinvestment plans and other capital management initiatives.

APRA also expects that Boards will appropriately limit executive cash bonuses, mindful of the current challenging environment.

https://www.sharecafe.com.au/2020/04/08/apr...s-to-dividends/



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"Every long-term security is nothing more than a claim on some expected future stream of cash that will be delivered into the hands of investors over time. For a given stream of expected future cash payments, the higher the price investors pay today for that stream of cash, the lower the long-term return they will achieve on their investment over time." - Dr John Hussman

"If I had even the slightest grasp upon my own faculties, I would not make essays, I would make decisions." ― Michel de Montaigne
 
early birds
post Posted: Apr 2 2020, 09:24 AM
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https://www.afr.com/companies/financial-ser...20200402-p54g9p

The Reserve Bank of New Zealand ordered Australia's big four banks, which dominate the banking sector there, to stop paying dividends back to their parent banks in Australia, to build up more earnings to protect its economy from the COVID-19 crisis.

The move by New Zealand regulators, which have taken a hard line on the Australian owned banks, follows similar moves by regulators overseas to restrict distributions to shareholders to ensure banks are strong enough to withstand growing losses as businesses shut down due to the coronavirus struggle to repay debts.

================================================

thumbdown.gif where we living???????????



 

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nipper
post Posted: Mar 23 2020, 07:41 PM
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QUOTE
.....balance sheets of the banks are viewed as better positioned than before the global financial crisis.

"Clearly the banks are not immune to what's going on. They're at the epicentre of the current crisis due to the critical role they play in the economy," said portfolio manager Brett McNeill. "We don't know where earnings will land and by extension dividends, although our base case is that both will be cut but we don't know the extent just yet."

He said more would be known when three of the big four banks – which account for four of Djerriwarrh's six biggest holdings – report in May, though "a lot has to play out between now and then".

The big four banks and Macquarie Group were better able to withstand the current pressures on their balance sheets than past crises.

"Banks are in a much better position in terms of their capital and their liquidity versus heading into the GFC," Mr McNeill said. "We think this will limit to some extent the downturn in the banks, but it remains a very challenging sector."
Brett McNeill of Djerriwarrh



--------------------
"Every long-term security is nothing more than a claim on some expected future stream of cash that will be delivered into the hands of investors over time. For a given stream of expected future cash payments, the higher the price investors pay today for that stream of cash, the lower the long-term return they will achieve on their investment over time." - Dr John Hussman

"If I had even the slightest grasp upon my own faculties, I would not make essays, I would make decisions." ― Michel de Montaigne

Said 'Thanks' for this post: early birds  
 
nipper
post Posted: Mar 14 2020, 05:52 PM
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In Reply To: early birds's post @ Mar 14 2020, 04:56 PM

Spot on, eb, well done. I understand margin calls happen at 11am for some; this could help

But, and I look at these things daily, by the minute (miss my live Iress stream now I'm pulling back), each day is different.

Traders' rules while volatility persists.



--------------------
"Every long-term security is nothing more than a claim on some expected future stream of cash that will be delivered into the hands of investors over time. For a given stream of expected future cash payments, the higher the price investors pay today for that stream of cash, the lower the long-term return they will achieve on their investment over time." - Dr John Hussman

"If I had even the slightest grasp upon my own faculties, I would not make essays, I would make decisions." ― Michel de Montaigne

Said 'Thanks' for this post: early birds  
 
joules mm1
post Posted: Mar 14 2020, 05:36 PM
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In Reply To: early birds's post @ Mar 14 2020, 04:56 PM

kudos, Eb





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. . . . . . . . everything has an art.....in the instance of the auction process, the only thing, needed to be listened to; price

Said 'Thanks' for this post: early birds  
 
early birds
post Posted: Mar 14 2020, 04:56 PM
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In Reply To: nipper's post @ Mar 14 2020, 02:08 PM

i know everything you bought in the morning all had huge turning around with the big arvo rally

but for our major 4 banks to be down around 12% in the morning and finished day up over 1%............that gonna be writing in the history books for our stock market i reckon. smile.gif

glad i did heavy buying in the morning. it's not just luck about timing, i did see "forced selling" happened and take the action.

i deserve a pat at my back as i did calling hear. ohmy.gif


Said 'Thanks' for this post: nipper  
 
 


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