We expect the major banks to begin forming “lower high” patterns in the near-term and the Algo sell signals should be observed.
We advise holders of bank stocks to either sell covered call options and enhance the yield, or take the opportunity to rebalance portfolios from any overweight exposure to the sector.
ANZ posted a 4.1% rise in its half-year cash profit to $3.49 billion, boosted in part by a fall in its credit-impairment charge following the sale of a range of assets.
The bank held its H1 dividend unchanged at 80 cents per share as its impairment charges fell to $408 million from $720 million a year ago.
However, ANZ warned last week of a $620 million loss from the previously announced sale of a pensions and life insurance unit, as well as, a further $80 million in restructuring charges, some of which are related to the banking royal commission legal fees.
The technical picture for ANZ remains soft with daily chart resistance seen in the $27.40 area. 
ANZ
Local banking stocks have found a slight bid in early trade today. However, we expect more downside price pressure as the Bank Royal Commission proceeds.
So far, we’ve seen evidence of appalling behaviour by Australia’s major banks and financial planners from the past decade, including bribes, forged documents and repeated conflict of interest in insurance products.
It seems that the banks discovered long ago it was highly profitable to sell their customers financial advice and financial products.
If they could charge customers for financial advice, and if that “advice” consisted of purchasing their financial products, then they would enjoy a profitable feedback loop.
This model was called ‘vertical integration”, which is inherently a conflict of interest.
With earning season approaching, we believe there will be some buying interest from longer-term investors.
We will keep a close watch on banking shares and advise which names have met our ALGO price criteria to hold in investor portfolios.
CBA
Westpac
NAB
Local banking stocks will be facing higher funding costs as LIBOR rates have surged higher over the last few weeks.
Considering the negative combination of the Royal Commission and lower margins on Mortgage lending, we have been urging caution to investors looking to buy the recent dips in the Big 5 banking names.
As illustrated in the chart below, the cost of local bank funding has posted the sharpest monthly rise in over 8 years.
As such, we don’t believe the local bank shares have found sustainable price support levels yet.
Phone in for more details on trading the local banking stocks on a cash basis and on the SAXO Go CFD platform
LIBOR
ANZ announced a $1.5bn on-market buyback, which is expected to commence in January 2018.
Our Algo Engine triggered a buy signal in ANZ on the recent higher low price formation.
ANZ
ANZ announced the divestment of its Life Insurance business for $2.8bn.
We see the transaction as incrementally positive for ANZ and maintain the holding, along with NAB & WBC in our ASX 50 model.
CBA and Suncorp remain our preferred short banking/insurance exposure.
ANZ
Shares of the major banks have traded on both side of the ledger since the announcement of the Banking Royal Commission last week.
There’s been plenty of articles written about what the impact will be and what investors can expect from the share price and dividends from these blue-chip companies.
However, one of the areas of the banking business which has not received much press is the negative impact from increased funding costs for the banks from overseas lenders.
Over the last two years, CBA, WBC and the NAB have issued over $145 billion in long-term wholesale debt to overseas lenders.
This is up from just under $110 billion in FY 2015 and reflects the increased reliance that the local banks have on overseas lenders
We would expect the increased in funding costs, combined with lower domestic loan margins, to cap any protracted rallies in the local banks over the next 12 months.
Our ALGO engine triggered a sell signal for the CBA on November 10th at $80.90. This is in addition to the ALGO sell signals in SUN at $14.20 and BEN at $12.30.
CBA
SunCorp
Bendigo BAnk
Following the recent sell-off in the major banks, we’re now seeing the Algo Engine flag the short-term “higher low” formation.
We’re cautious about entering these positions on the long-side due to the regulatory risks the banks face & the limited top-line revenue growth outlook for the sector. However, the search for yield may support another push higher in prices.
ANZ, NAB & WBC are buy signals, (place stop loss below signal low), CBA & SUN are showing sell signals.
Shares of the “big-4” banks are trading sharply lower as the Government announced a $75 million Banking Royal Commission before the ASX open today.
When making the announcement, PM Turnbull said it was a regrettable but necessary action.
The terms of the inquiry are wider than the market expected and will include the entire financial services sector. The final report will be due in February 2019.
We have been giving the banks a wide berth recently due to likely headwinds from slower loan growth and falling profit guidance. We’ll continue to watch the ALGO engine for trade updates and future levels to enter the market.
MVB Aussie Banking ETF
Despite meeting the street’s expectations on top line profits and earnings, shares of ANZ are down over 1% to $30.00.
The bank’s chief executive, Shayne Elliott, warned that forward revenue growth in the banking industry will be constrained due to increased regulation and the banking tax.
Net profit was announced at $6.4 billion, which was up from $5.7 billion over the previous year. Cash earnings rose 18% to $6.9 billion, which was inline with expectations and the full-year dividend was unchanged at $1.60 per share.
From a technical perspective, ANZ has traded as high as $32.40 in January before slipping to $27.35 in early June. Within the measure of a “lower high” pattern, we consider the recent bounce to $30.80 to be corrective in nature and not a reversal of trend.
We see the next key chart point near the October 5th low of $29.05.
ANZ
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