{"id":12416,"date":"2015-10-16T21:53:04","date_gmt":"2015-10-17T01:53:04","guid":{"rendered":"http:\/\/goldstocksforex.com\/?p=12416"},"modified":"2015-10-16T21:53:04","modified_gmt":"2015-10-17T01:53:04","slug":"aussie-big-four-banks-overpriced","status":"publish","type":"post","link":"https:\/\/thepatientinvestor.com\/index.php\/2015\/10\/16\/aussie-big-four-banks-overpriced\/","title":{"rendered":"Aussie big four banks overpriced"},"content":{"rendered":"

Australia’s big four banks have raised significant amounts of new capital as the realization finally dawned on regulators that they were highly leveraged and likely to act as “an accelerant rather than a shock-absorber” in the next downturn.<\/p>\n

Chris Joye writes in the AFR<\/a> that the big four have raised $36 billion of new capital in the 2015 financial year:<\/p>\n

Before Westpac’s $3.5 billion equity issue this week, the big banks had, through gritted teeth, accumulated $27 billion of extra equity over the 2015 financial year through “surprise” ASX issues, underwritten dividend reinvestment plans, asset sales and organic capital generation via retained earnings. If you add in “additional tier one” (AT1) capital issues (think CBA’s $3 billion “Perls VII”), total equity capital originated rises to about $32 billion, or almost $36 billion after Westpac’s effort this week. <\/p><\/blockquote>\n

The effect of deleveraging is clearly visible on the ASX 300 Banks Index [XBAK].<\/p>\n

\"ASX<\/p>\n

Having broken primary support, the index is retracing to test resistance at 84. Bearish divergence on 13-week Twiggs Money Flow, followed by reversal below zero, both warn of a primary down-trend. Respect of resistance at 84 would strengthen the signal, offering a (medium-term) target of 68* for the next decline.<\/p>\n

* Target calculation: 76 – ( 84 – 76 ) = 68<\/p>\n

Matt Wilson, head of financial research at the $10 billion Australian equities shop JCP Investment Partners, says the bad news for those “long” the oligarchs is that “we are still only halfway through the majors’ capital raising process at best”.<\/p><\/blockquote>\n

Chris calculates the remaining shortfall<\/a> to be at least $35 billion:<\/p>\n

Accounting for future asset growth, I calculated the big banks will need another $35 billion of tier one capital if the regulator pushes them towards a leverage ratio of, say, 5.5 per cent by 2019, which is still well below the 75th percentile peer.<\/p><\/blockquote>\n

One of the big four’s most attractive features is their high dividend-yield and attached franking credits, but Chris compares this to the far lower dividend payout ratios of international competitors and quotes several sources who believe the present ratios are unsustainable.<\/p>\n

JCP’s Wilson does not think payout ratios are sustainable and accuses the big banks of “over-earning”. “Bad debts of 0.15 per cent are running at a 63 per cent discount to the through-the-cycle trend of 0.40 per cent,” he says. “Should we see a normal credit cycle unfold, then payouts will be cut significantly due to the pro-cyclicality of risk-weighted assets calculations and bad debts jumping above trend.”<\/p><\/blockquote>\n

He concludes:<\/p>\n

Aboud [Stephen Aboud, head of LHC Capital Fund] reckons artificially high yields also explain why the big banks’ “2.5 times price-to-book valuations are miles above the 1-1.5 times benchmark of global peers”, which he describes as “a joke”.<\/p><\/blockquote>\n

Plenty of food for thought. <\/p>\n

Read more from Chris Joye at Hedge funds that shorted the big banks | AFR<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Australia’s big four banks have raised significant amounts of new capital as the realization finally dawned on regulators that they were highly leveraged and likely to act as “an accelerant rather than a shock-absorber” in the next downturn. Chris Joye writes in the AFR that the big four have raised $36 billion of new capital … <\/p>\n

Continue reading “Aussie big four banks overpriced”<\/span><\/a><\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_mo_disable_npp":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[40,31,57],"tags":[209,756,2395,3667],"class_list":["post-12416","post","type-post","status-publish","format-standard","hentry","category-australia-nz-countries-regions","category-the-fed-banks-interest-rates","category-stock-markets","tag-anz-bank","tag-commonwealth-bank","tag-nab","tag-westpac"],"yoast_head":"\nAussie big four banks overpriced - the patient investor<\/title>\n<meta name=\"robots\" content=\"noindex, follow\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Aussie big four banks overpriced - the patient investor\" \/>\n<meta property=\"og:description\" content=\"Australia’s big four banks have raised significant amounts of new capital as the realization finally dawned on regulators that they were highly leveraged and likely to act as “an accelerant rather than a shock-absorber” in the next downturn. 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The target was much\u2026","rel":"","context":"In "Australia & NZ"","block_context":{"text":"Australia & NZ","link":"https:\/\/thepatientinvestor.com\/index.php\/category\/countries-regions\/australia-nz-countries-regions\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":12751,"url":"https:\/\/thepatientinvestor.com\/index.php\/2015\/12\/18\/cba-big-four-to-raise-another-32-billion-of-equity-afr-com\/","url_meta":{"origin":12416,"position":1},"title":"CBA: big four to raise another $32 billion of equity | afr.com","author":"ColinTwiggs","date":"December 18, 2015","format":false,"excerpt":"From Chris Joye at AFR: On the question of whether the majors are done and dusted on capital raising, investors need go no further than CBA's chief credit strategist, Scott Rundell, and CBA's head of fixed-income strategy, Adam Donaldson, who on Thursday published a report arguing the big four are\u2026","rel":"","context":"In "Australia & NZ"","block_context":{"text":"Australia & NZ","link":"https:\/\/thepatientinvestor.com\/index.php\/category\/countries-regions\/australia-nz-countries-regions\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":17736,"url":"https:\/\/thepatientinvestor.com\/index.php\/2019\/01\/14\/big-four-banks-protest-against-higher-capital\/","url_meta":{"origin":12416,"position":2},"title":"Big four banks protest against higher capital","author":"Colin Twiggs","date":"January 14, 2019","format":false,"excerpt":"\"The big four banks are trying to convince the prudential regulator to reconsider its proposal to force them to raise an additional $75 billion of so-called Tier II bonds to meet \"too big to fail\" capital requirements.\" ~ Jonathan Shapiro, Australian Financial Review What is APRA thinking? They are deluding\u2026","rel":"","context":"In "Australia & NZ"","block_context":{"text":"Australia & NZ","link":"https:\/\/thepatientinvestor.com\/index.php\/category\/countries-regions\/australia-nz-countries-regions\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":10341,"url":"https:\/\/thepatientinvestor.com\/index.php\/2014\/07\/16\/australia-ubs-eyes-23b-capital-hit-to-big-banks\/","url_meta":{"origin":12416,"position":3},"title":"Australia: UBS eyes $23b capital hit to big banks","author":"ColinTwiggs","date":"July 16, 2014","format":false,"excerpt":"Chris Joye at AFR reports on a recent study by UBS banking analysts Jonathon Mott and Adam Lee. The two believe that David Murray's financial system inquiry is likely to recommend an increase of 2 to 3% in major banks tier 1 capital ratios. Based on an extra 3 per\u2026","rel":"","context":"In "Australia & NZ"","block_context":{"text":"Australia & NZ","link":"https:\/\/thepatientinvestor.com\/index.php\/category\/countries-regions\/australia-nz-countries-regions\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":17973,"url":"https:\/\/thepatientinvestor.com\/index.php\/2019\/03\/14\/aussie-banks-get-a-wake-up-call-from-across-the-tasman\/","url_meta":{"origin":12416,"position":4},"title":"Aussie banks get a wake up call from across the Tasman","author":"Colin Twiggs","date":"March 14, 2019","format":false,"excerpt":"I have long called for Australian banks to increase their equity capital in order to withstand a potential banking crisis in Australia. The Murray Commission found that banks, in a crisis, would act as \"an accelerant rather than a shockabsorber\". Now the RBNZ has announced plans to force the big\u2026","rel":"","context":"In "Australia & NZ"","block_context":{"text":"Australia & NZ","link":"https:\/\/thepatientinvestor.com\/index.php\/category\/countries-regions\/australia-nz-countries-regions\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":11405,"url":"https:\/\/thepatientinvestor.com\/index.php\/2014\/12\/08\/australian-banks-rally-on-murray-report\/","url_meta":{"origin":12416,"position":5},"title":"Australian banks rally on Murray Report","author":"ColinTwiggs","date":"December 8, 2014","format":false,"excerpt":"The ASX 200 Financial sector (ex-REITs) responded well to release of David Murray's report into the financial services industry. As the largest constituent of the ASX 200 index, comprising more than one-third of market capitalization, sector performance is critical in determining future direction of the broader index. Breach of resistance\u2026","rel":"","context":"In "Australia & NZ"","block_context":{"text":"Australia & NZ","link":"https:\/\/thepatientinvestor.com\/index.php\/category\/countries-regions\/australia-nz-countries-regions\/"},"img":{"alt_text":"ASX 200 Financial ex Property","src":"https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2014\/2014-12-08-xxj.png?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2014\/2014-12-08-xxj.png?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2014\/2014-12-08-xxj.png?resize=525%2C300&ssl=1 1.5x"},"classes":[]}],"_links":{"self":[{"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/posts\/12416","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/comments?post=12416"}],"version-history":[{"count":0,"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/posts\/12416\/revisions"}],"wp:attachment":[{"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/media?parent=12416"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/categories?post=12416"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/tags?post=12416"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}