Anyone holding bank shares?

You may find out today why I don't like them.

To expand on this would be too much like giving unqualified advice, so I will refrain. :)
 
We were just about to jump in and buy some. The one we were looking at had pretty good metrics, with a PE well below the rest of it's peers.


I was reading the other day Sunfish that any investor who didn't have big bank stocks in their portfolio over the past 15 years has missed out on massive advantages.


Why do you dislike them so much ?? To my way of thinking, they seem to be the only companies that have one sole focus, and hence are pretty good at it. For example ;

Woolworths have to be good with food and money.
Woodside has to be good with oil and money
Telstra has to concentrate on telecommunications and money
Channel Seven has to concentrate on keeping Mr Stokes happy....nah just joking.
Banks on the other hand just have to focus on money. Seems easy to me.
 
Buying into them (well one actually) the last couple weeks. Nice dividend, great tax credits, good business expansion plans - I like.

Days like today can present good opportunities to top up, "oh no, Goldman Sachs is going to get a slap on the wrist - sell sell sell!" :D
 
Interestingly, the mining sector is down as much as the banks today.

Until the GFC the perception has always been that the banks could possibly go broke. Early in the GFC the RBA guaranteed the banks along with other countries. Last month they said they would do the same again if necessary. That huge risk has been factored into their P/E for a long time. Now that that risk has disappeared maybe the banks should be trading on a higher P/E to reflect the lower risk ? ....and still have some upside still to go ?

There's not many businesses around that are guaranteed by the RBA, have a cosy little oligopoly, have just had all their 2nd tier competitors wiped out and pay 7%+ divs, with growth.
 
Interestingly, the mining sector is down as much as the banks today.

Same ol, same ol. The banks get into trouble so the miners get kicked.

Dazz, when Comm Bank floated I was still "working for a living" and didn't get involved, and wouldn't have had any money anyway.

No bank will match this though and I do own some:



For some reason I can't get this chart to show but it is a 5 year for NAB

http://asx.netquote.com.au/chart.as...XCycle=Year&Cycle=Day15&His=0&SV=0&BMargin=10
 
Yes and I am very happy with their performance to date. Today is just a blip in a very nice curve from the time we bought them.

Others have highlighted their advantages already. A very cosy oligopoly and money spinner in a growing market. And they actually pay their shareholders instead of wasting their money like BHP, Rio et al (think Ravensthorpe, HBI, etc etc).

With those features (particularly the divs) I am happy to leverage and buy large holdings of them - something that can't be done with small cap miners. The LVR differential for margin loans speaks for itself...
 
My take on banks is that you don't get much in the way of assets, you're buying a revenue stream.
At present their revenue stream is about as good as it should get for a while.

These are the present risks for the banks as I see them.

  • Bad debts increasing (due to higher interest rates)
  • Competition heating up (smaller players regaining market share, new entrants ie Aust post)
  • LVR's tightening , ie less new loans being written
  • Global liquidity issues not yet resolved

IMO banks are almost priced for perfection, meaning they are fairly priced as long as conditions remain perfect for them. Any hits to potential revenue stream and bank shares will get hammered.

For me, there is insufficient upside for the potential negative surprise so I feel there are better options at the moment.
 
Today is a bit of a shocker across the board, but we haven't had any kind of a decent pullback for some weeks now, so had to come sooner or later. I don't expect today will be the last of this correction...
 
You may find out today why I don't like them.

To expand on this would be too much like giving unqualified advice, so I will refrain. :)

Sunfish you dont like them full stop, regardless of price.
If price is low, then the environment must be risky, so nope
If price is high, environment more stable, then nope too expensive.
 
These are the present risks for the banks as I see them.

  • Bad debts increasing (due to higher interest rates)
  • Competition heating up (smaller players regaining market share, new entrants ie Aust post)
  • LVR's tightening , ie less new loans being written
  • Global liquidity issues not yet resolved

One could argue:
* Bad debts (from the last couple reports I remember reading) no longer increasing - yes, if they've written much more residential business over the last year then the $'s involved may go up, but not necessarily % of the book.
* Competition almost obliterated during the GFC; Aussie, Wizard, GE, Macquarie (although they're coming back aren't they), ING, Bank West, St George. Yes competition will always return, but they're all the more stronger in the mean time.
* LVR's starting to loosen again on some reports eg. ANZ going back up to 95%, low doc products emerging again etc.
* True and it's still a problem, but it's also more a pricing issue which is passed onto the customer, banks just the intermediary and take their cut.

Personally, I'm of the opinion banks will still do well for the foreseeable future and prices now whilst no longer GFC levels are still reasonable.
 
My take on banks is that you don't get much in the way of assets, you're buying a revenue stream.
At present their revenue stream is about as good as it should get for a while.

These are the present risks for the banks as I see them.

  • Bad debts increasing (due to higher interest rates)
  • Competition heating up (smaller players regaining market share, new entrants ie Aust post)
  • LVR's tightening , ie less new loans being written
  • Global liquidity issues not yet resolved

IMO banks are almost priced for perfection, meaning they are fairly priced as long as conditions remain perfect for them. Any hits to potential revenue stream and bank shares will get hammered.

For me, there is insufficient upside for the potential negative surprise so I feel there are better options at the moment.

actually this couldnt be further from the truth. Their NET revenue stream (ie net income after borrowing costs) is getting much better.

bad debts are DECREASING

competition is NOT heating up

LVR tightening is good not bad, coupled with higher margins this will make the big four banks MORE profitable.

Note however that i am not suggesting to buy at these levels. Reasons:
1) they are caught in the international carry trade (long AU$ with bank shares being one of the destination investment assets). This position has yet to be unwound.
2) EPS growth for 2010 should be very good, but the market is starting to price in good EPS growth for 2011. I am not sure if this can be maintained (ie the growth rate).

In regards to which of the big 4:
CBA and WBC are the best run, with the lowest level of risk, but are priced accordingly.

NAB: 'cheapest' but has the lowest historical ability to grow EPS.

ANZ: i dont like its strategy so dont follow it.
 
I mostly agree with the comments on the two posts above. I just feel these things are already priced in at current levels, which means they need to maintain their position just to maintain their price. CBA's market cap is higher than its ever been, despite a weaker balance sheet.

Its true, bad debts are currently decreasing, but again, this is factored in. With interest rates rising, I expect bad debt provisions will once again increase. Too many small businesses are operating on -ve cash flow.

That said, (and this is just gut feel) but I think there is still some strenth in the overall market and banks will continue to rise with this in the near term - as long as someone can put that volcano out soon.
 
Bought them YEARS ago when they
first came out at $5.40 i think CBA shares
Still have them they have not done me any harm
 
Bought them YEARS ago when they
first came out at $5.40 i think CBA shares
Still have them they have not done me any harm


let me give you one piece of advice, they will do you harm, if australia goes into a serious recession.

I LOVE australian big 4 banks, they are unique in the developed world, but that doesnt change the fact that they are also a cyclical type of stock.

For those saying that the big 4 have outperformed over the last 15 years? well when was the last time australia was in a recession?
 
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