Bank Royal Commission Update

Posted on | by Todd | Leave a Comment on Bank Royal Commission Update

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

 ANZ

Westpac

NAB

Higher Funding Costs To Weigh On “Big 5” Bank Shares

Posted on | by Todd | 2 Comments on Higher Funding Costs To Weigh On “Big 5” Bank Shares

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

 

 

ALGO Sell Signal For NAB

Posted on | by Todd | Leave a Comment on ALGO Sell Signal For NAB

Our ALGO engine triggered a sell signal for NAB into yesterday’s ASX close at $30.40.

This “lower high” pattern is relative to the November 8th high of $31.85.

NAB posted an 18-month low of $28.05 on February 8th. The banking sector, in general, has had a respectable recovery over the last three weeks.

However, the internal momentum indicators now suggest that the local banking names will trade lower over the near-term, taking out the February lows.

NAB

 

NAB – Resistance at $31.50

Posted on | by Leon Hinde | Leave a Comment on NAB – Resistance at $31.50

Australian banks have been oversold, and over the past two weeks we’ve seen capital flows reallocated towards the sector. 

NAB has now rallied $2.00 or 6% since the beginning of February.

Limited revenue growth has created a “shrink to grow” strategy among all of the major banks, along with a renewed focus on cost control.

Due to the delay in benefits from the strategy being passed through to shareholders, we believe the current share price rebound will be limited.

The NAB chart below perfectly illustrates the range where we expect selling pressure is likely to build.

NAB

Higher Funding Costs Weigh On The Banks

Posted on | by Todd | Leave a Comment on Higher Funding Costs Weigh On The Banks

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

 

 

Algo Buy Signal – ANZ, NAB & WBC

Posted on | by Leon Hinde | Leave a Comment on Algo Buy Signal – ANZ, NAB & WBC

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.

 

 

 

 

 

 

 

Bank Shares Roiled On Royal Commission Announcement

Posted on | by Todd | Leave a Comment on Bank Shares Roiled On Royal Commission Announcement

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

 

 

Major Banks Set To Report Earnings

Posted on | by Todd | Leave a Comment on Major Banks Set To Report Earnings

The ANZ will announce its annual results on Thursday as the first of the major banks to report over the next three weeks. NAB will report next Thursday and WBC will report the following Thursday.

ANZ is expected to announce a full year cash profit of $6.89 billion and a DPS of 83 cents on revenue of $20.7 billion. Much of this gain is based on stronger owner-occupied home lending.

Analysts are expecting ANZ to be the first of the major banks to return capital to shareholders given its pro-forma position outlined by APRA last month.

At this point, the NAB’s profit forecast is expected to be $6.6 billion with a DPS of 99 cents.

MQG will report their half-yearly results this Friday. The numbers on the street are reflecting a profit of $1.1 billion with a DPS of $2.10 per share.

ANZ

NAB

 

Westpac

MQG

Rotation Out Of Banking Stocks

Posted on | by Todd | Leave a Comment on Rotation Out Of Banking Stocks

Since Treasurer Scott Morrison announced a banking levy in the May 9th budget, banking stocks have been sold off across the board.

It’s become clear that a fair percentage of this investment flow has rotated into the local Insurance names with IAG and Suncorp both posting material gains since early May.

We hold both of these stocks in client portfolios and they are now up 12% and 8% since mid-May, respectfully.

With respect to the re-valuation in the banking shares, NAB has posted a fresh low at 29.00 in early trade today.

Both WBC and ANZ are approaching the lows posted in early June, while MQG and CBA have held up better but are still pointing lower.

On balance, we continue to expect to see rotation out of the banking names to the benefit of the insurance stocks.

IAG

Suncorp

NAB