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The Banks
Does It Get Any Better For The Big Four?
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nipper
post Posted: May 14 2021, 03:11 PM
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In Reply To: early birds's post @ May 14 2021, 02:47 PM

but that is going to bring out the yip yaps about banks being bastards (how dare they raise rates, maintain a margin , make a profit)

There will be a modest increase in bank funding costs after the RBA's term funding facility expires in June (which could be the perfect tonic to help cool the heated housing market ahead of bigger increases later on ).

QUOTE
In conjunction with the RBA's three-year yield target of 0.1 per cent, the RBA's term funding facility (which allows banks to borrow north of $180 billion for three years at an incredibly low annual cost of 0.1 per cent) has been the key driver of the record low three- to five-year fixed home loan rates. Whereas fixed-rate mortgages used to account for only about 15 per cent of all new home loans, that has leapt to about 40 per cent since the pandemic.

[Commentators] have forecast for some time that fixed rate home loan costs would have to start climbing, and the banks have obliged with many recently lifting these rates by 0.2 percentage points or more.
This will help normalise the banks' cost of funding back to pre-coronavirus levels, which will give them an incentive to push borrowing rates back up.

It could be a very elegant solution to the risk of excessive ebullience emerging in the housing market, which should nevertheless remain robust for years to come. Nobody should be fretting about a 50 to 100 basis point increase in the cheapest fixed-rate mortgage rates in history, which are almost 200 basis points below their January 2019 levels....

Once the term funding facility expires in June, projections are for a big increase in traditional wholesale debt issuance by Aussie banks, which should be between $150 billion and $350 billion over the next few years (something they have held off doing because of the term funding facility).



To me, the fun times will be 2024, when the TFF will be but a distant memory, and the yield curve restored to a more natural shape. Of course, markets be forward looking, yields will be a-building prior to that time.



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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

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early birds
post Posted: May 14 2021, 02:47 PM
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In Reply To: nipper's post @ May 14 2021, 01:41 PM

MY THOUGHTS ONLY

now we have another little property boom, witch is good for banks.

if economy is too hot they start to raise rate----then yield curve gonna go a lot steepen than now---we all know steepen yield curve is really good for bank's profits



 
nipper
post Posted: May 14 2021, 01:41 PM
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In Reply To: early birds's post @ May 9 2021, 10:08 AM

Finance & Lending

QUOTE
We have seen a pipeline of business lending opportunities develop that we have not experienced for many years
Ross McEwan, CEO, National Australia Bank Ltd


QUOTE
The recent growth in lending to investors is what the banks are now needing to watch carefully as it is generally higher risk and more speculative
Matt Comyn, CEO, Commonwealth Bank of Australia Ltd




... mmm, which one is more prudent??




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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: May 9 2021, 10:08 AM
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Judging by the negative reaction to the interim profits from the ANZ and NAB this week, it was a disappointing half way reporting season.

ANZ and NAB shares got the thumbs down from investors and the shares fell after the results were released even though they were better than expected.

Westpac saw a more positive reception with a 5% rise on Monday after the result was released but that was undermined by the latest allegations from ASIC against the bank about insider trading in the way a big finance deal was to be protected in money markets.

But in reality the three results – and that from industry leader, the Commonwealth in February – were good – not as upbeat as say four years ago, but certainly better than the Covid-damaged interims a year ago.

And they had to be because of the amount of stimulus and support for banks and the economy from governments and regulators.

If the results had not revealed significant improvements and higher dividends than a year ago, then all the tens of billions of dollars in support would have been for nothing.

And the banks have had some significant support – they have borrowed $100 billion from the Reserve Bank under its Term Funding facility with another $100 billion on offer until June 30 (and these are three-year loans that expire in 2024 which is the year when we will see some real pressures on the banks and some of the customers).

The cash rate is 0.10% and will be maintained until 2024 at least. That will protect net interest margins for the next three years.

Cash profits of the big four jumped 62% in the March half year to $13.8 billion.

The Commonwealth led the way with cash earnings for the half year of $3.89 billion and an interim dividend of a large $1.50; Westpac had cash earnings of $3.54 billion and an interim dividend of 58 cents a share; NAB reported cash profits of $3.34 billion and a 70 cents a share dividend and the ANZ’s cash earnings were $2.99 billion and the dividend was 60 cents a share.

In its usual end of reporting season assessment of big bank profits, accounting firm EY said that the Australian major banks’ half year results “reflect a more positive operating environment than might have been expected this time last year.”

“Fears of large-scale defaults on housing and business debt have eased with the steady economic recovery. While the banks still face an increase in nonperforming loans as a result of the economic downturn, it appears at this stage that the rise will be modest.

“Aggregate cash earnings improved, following the significant credit provisioning undertaken in the first half of 2020. Organic capital generation and a reduction in risk-weighted assets (RWA) have further strengthened the banks’ capital position and have ensured substantial buffers against potential future shocks.”

EY said however bank earnings and profitability “remain under pressure in an environment of ultra-low interest rates and aggressive mortgage competition.”

“Net interest margin (NIM) was declined 6 bps. NIM is expected to remain an ongoing challenge for the banks, given low interest rates and highly supportive monetary conditions that are likely to continue over the medium-term. Average return on equity (ROE) improved to 10.4%, from 6.5% pcp.

(For 2019-20, the big four banks cash earnings totalled $17.4 billion and return on equity was 6.7%, the lowest for 30 years).

And looking to the future, EY said that despite the stronger economic outlook (the RBA revised growth, jobs and inflation forecasts higher this week), “risks are still elevated.”

“The full impact of the economic downturn on asset quality is still playing out, with forbearance programs and income support measures only recently drawing to a close.

“Uncertainty remains around the impact of domestic COVID-19 outbreaks, new variants of the virus and a delayed vaccination rollout that could prolong the pandemic and slow down the economic recovery,“ EY wrote in the report.

EY said the banks’ immediate priorities continue to be managing credit risk and capital and continuing their simplification and digitisation strategies to boost efficiency (ie cut costs).

“They also have a heightened focus on the environmental, social and governance (ESG) agenda, with the pandemic concentrating attention on sustainability.”

------------------------------------------------- from our own share cafe

look at this
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NAB reported cash profits of $3.34 billion and a 70 cents a share dividend and the ANZ’s cash earnings were $2.99 billion and the dividend was 60 cents a share.

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most of peoples whom focus on banks knew that should be

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ANZ reported cash profits of $3.34 billion and a 70 cents a share dividend and the NAB 's cash earnings were $2.99 billion and the dividend was 60 cents a share.

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

knida mistake i should be made by someone like me, not these "pro-- analysts" right???? lmaosmiley.gif

joke aside , i reckon ANZ , NAB just caught with " sell on good news" saga given they both SP run up a lot till before their earning release . nothing to worry about it

i reckon..... if they keep low rate for longer then there is property boom. witch is good for the banks

if they gonna raise rate sooner ... then banks profit margin will increase-----good for banks

so one way or the other-----------good for banks for one or two years IMHO though!! tongue.gif


 
plastic
post Posted: Apr 30 2021, 08:49 AM
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Headline in todays NBR. Does anyone recognize the simarities between current climate and conditions and Japan post eighties bubble economy?

Blows the theory underpinning the Phillips J curve out of the water. Everyone is talking inflation, I wouldn't mind betting on deflation with decreasing land prices leading the way.

Any adherents of free market theory are on the losing team. This tide of change is too powerful.

QUOTE
Conditions are perfect for a bank demerger – or two
Westpac’s potential NZ spin-out should be a model for others.




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What did Uncle Mel do to us?
 
nipper
post Posted: Apr 22 2021, 12:57 PM
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In Reply To: early birds's post @ Apr 22 2021, 10:45 AM

QUOTE
i guess a lot of you guys hold one or more big 4 banks stocks for yield

with many of the top spots, by market cap, taken by Big 4 + 1, anyone with a conventional Super Fund that hold funds and shares would have to have a weighting towards Banks:

ASX Top 20 by Market Cap
CBA ... BHP ... CSL ... WBC ... NAB ... ANZ ... FMG ... WES ... MQG ... WOW

... RIO ... TLS ... TCL ... GMG ... APT ... ALL ... NCM ... WPL ... COL ... XRO



--------------------
"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

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early birds
post Posted: Apr 22 2021, 10:45 AM
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Aussie Bank Results Loom Large on the Horizon

The interim earnings releases for Westpac, NAB and ANZ are now around two weeks away and analysts have started rubbing their crystal balls, with Westpac popping up in some as one to watch.

Westpac is first cab off the rank with its results out May 3, ANZ releases on May 5, NAB, May 6 and Macquarie releases its full year figures on May 7.

Not because its first to release but some analysts think Westpac will reveal cost cuts or rather a plan to chop costs over the next year or so.

Speculation about the Westpac result and possible cuts emerged as bank shares came under pressure yesterday (as did much of the wider market).

Fears about an upturn in Covid cases in Asia and parts of Europe (and a surprise case in New Zealand) worried investors.

But the bank shares got caught up in that weaker sentiment.

Westpac shares fell 1%, NAB shares were down 0.3% and ANZ lost 0.8%, while Commonwealth Bank shares bucked the trend to finish 0.5% higher.

Analysts say that after Westpac’s profits were hit last year by costs from a money-laundering scandal the bank is on track to boost its reputation by starting a cost-cutting campaign.

CEO Peter King flagged a “re-set” of the bank’s cost base at its most full year results in November and analysts reckon these will appear next month

Citi’s Brendan Sproules said in a note he believed the bank should slash its cost base of $10.2 billion to $8.8 billion in the next three years.

Hee argues Westpac could slash its branch network by 45% – closing 440 branches – and that risk and compliance spending will fall by $540 million over the next few years.

“The underperformance of the last 18 months has left WBC needing to provide hard commitments and quantifiable targets to close the gap to major bank peers,” Sproules claimed in his note to clients, ignoring the uproar that sacking staff and closing so many branches will cause.

His claim that Westpac will spend more on compliance costs goes against the intense oversight key regulator, APRA is maintaining over the bank (and over Macquarie for that matter)

Morgan Stanley’s Richard Wiles claims bank’s plan on costs will be a key influence on the bank’s share price in coming months.

He favours a scenario in which the bank gets its target cost base to $8.5 billion, excluding non-core businesses that are likely to be sold.

Wiles estimates such cost cutting would lift earnings forecasts for the bank by 5%

“Westpac will announce details of its ‘Cost Re-set’ plan at its first half 2020-21 result on Monday, May 3,” Mr Wiles said.

“This is an important catalyst because Westpac’s cost performance has been disappointing in recent years and we believe a credible medium-term cost reduction strategy is an important driver of the recovery in earnings, return on equity and dividends.”

Big calls, so let’s see what happens on May 3 and if Westpac can withstand the pressure if big cuts are revealed.

Earlier this month Fitch ratings upped its ratings on the big banks.

It lifted their outlook from negative to stable.

“Fitch Ratings’ revision of the Outlook to Stable from Negative on the ‘A+’ Long-Term Issuer Default Ratings (IDRs) of Australia’s four largest banking groups reflects a meaningful and sustainable improvement in the economic prospects in the banks’ core markets since the onset of Covid-19.

“This also points to less downside risk to the operating environment,” Fitch said.

“We expect Australian GDP to recover to end-2019 levels by mid-2021, and by 4.7% in 2021 following a 2.4% contraction in 2020.

“This outcome is much stronger than the 5% decline we had expected in April 2020, and we now believe that the operating environment will remain consistent with the current score even under a scenario that is weaker than our base case.

“The better-than-expected economic performance in 2020 and improved outlook for 2021 mean risks to asset quality have also eased, and we now expect performance to remain consistent with the current factor score of ‘A+’. We have revised the asset-quality outlook to stable from negative as a result,” Fitch said.

By the way, the CBA releases its third quarter trading update on May 12.

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from our own sharecafe. i guess a lot of you guys holds one or more big 4 banks stocks for yielding. tongue.gif


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nipper
post Posted: Mar 18 2021, 06:08 AM
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In Reply To: early birds's post @ Mar 16 2021, 10:48 AM

QUOTE
as long bond yields shooting up , that is really good for banks to earn more on wide spreads


You got it in one, Prof EB, and if the yield curve is flattened at 0.1% out to 2024 as our RBA says, in unlimited amounts, then our big building societies are in a sweet spot for a few years.



--------------------
"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  
 
early birds
post Posted: Mar 16 2021, 10:48 AM
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as long bond yields shooting up , that is really good for banks to earn more on wide spreads between central banks rate and long end rate [10 years eg]

that is the main reason for most of the bank price went up a lot these days, seems it will keep going for a while for few other reasons, divys yields eg......




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nipper
post Posted: Mar 10 2021, 07:53 PM
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The Australia and New Zealand Banking Grp share price jumped 2.2% to $29.34, its highest since August 2018. Meanwhile, the Commonwealth Bank of Australia share price, Westpac Banking Corp share price and National Australia Bank share price have jumped to a one year high.

Morgan Stanley believes that ASX bank stocks can keep outperforming thanks to economic growth and central bank action. The reason and it's to do with rising bond yields, particularly longer-dated bonds. Yields have been rising due to the improved economic outlook and rising inflation expectations.

QUOTE
While central banks have remained resolute in fixing low short end yields, the messaging around long end rates has been one of managing the pace rather than the level of yields ... particularly as driven by expectation of fiscal stimulus," said Morgan Stanley. This has put some pressure on valuations, with the market [12-month forward price/earnings] multiple derating from 19.6x to 18.3x through February.


but if banks can borrow at 0% (which essentially they can) and lend at 1.6 or 2% and it is unlimited access, then I guess they will. Party isn't over.... another 10 to 20% upside, especially if they can pay juicy dividends



--------------------
"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
 
 


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