Banks bashed by investors too

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The Commonwealth Bank has released a full-year cash profit of $9.45 billion.

Commonwealth Bank CEO Ian Narev unveiled a record $9.45 billion annual profit this month and the bank’s dividend was unchanged.

BATTERED by politicians and public opinion, Australia’s big four banks are now being shunned by their own investors.

Shareholders and investment funds have been selling down despite many years of healthy bank gains, and the big four’s share prices have fallen between 6 and 13 per cent over the past year while the overall Aussie sharemarket has climbed 4.5 per cent.

The Commonwealth Bank, Westpac, ANZ and NAB make up one-quarter of the value of Australia’s 200 largest companies, which means without them the overall market would have looked much better.

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Some sharemarket analysts say the “smart money” has been moving out of banks and being invested elsewhere, but others stay banks now offer good value and their high dividend payouts should continue.

Australian Unity Investments CEO David Bryant said the banks’ profits had been soft, bad debts were expected to worsen, and low interest rates were making it harder for them to hold onto deposits — potentially putting pressure on future dividends.

“What it means for investors is more uncertainty, and they should be looking at alternatives to banking stocks, particularly in areas such as commercial property,” he said.

Australian Unity Investments CEO David Bryant forecast more uncertainty around the banks’ performances. Picture: David Geraghy

Australian Unity Investments CEO David Bryant forecast more uncertainty around the banks’ performances. Picture: David GeraghySource:News Corp Australia

The banks failed to shine in this month’s profit reporting season, they have copped criticism about not passing on all of the Reserve Bank’s August interest rate cut, there are continuing calls for a Royal Commission from the Labor Party, they are battling scandals and lawsuits, and their strong dividend growth of recent years has stopped.

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Statewide Super chief investment officer Con Michalakis said bank bashing was a national sport, but said the big four’s future should be “fine” unless there was a housing crash.

“Even the banks are telling you that things are tougher now, but they’re still making money and will still find ways to make money,” he said.

“Have some exposure but be careful. They have underperformed a bit and, going forward, they will probably struggle.”

Statewide Super chief investment officer Con Michalakis said banks are still making money and will still continue to make money. Picture: Supplied

Statewide Super chief investment officer Con Michalakis said banks are still making money and will still continue to make money. Picture: SuppliedSource:Supplied

Mr Michalakis said bank bosses would “try as hard as possible” to keep the dividends flowing at current levels, where their income yield is between 6 and 7 per cent — well above savings account interest rates.

“I think in five years the banks will be trying to do the same things they are doing now, just more efficiently.”

Fat Prophets senior analyst James Lennon said he was “quite fond of the banks” at their current share prices.

“As it stands now, they’re quite good value. The yield is attractive,” he said.

Many investors were worried about bad debts but unless there was a debt spiral, the outlook remained solid, Mr Lennon said.

“They have proven through the GFC that they are pretty resilient.”

Bank Share price past 12 months Dividend yield

ANZ down 11 per cent 6.6 per cent

CBA down 6.4 per cent 5.7 per cent

NAB down 13.3 per cent 7.3 per cent

Westpac down 8 per cent 6.3 per cent

Source: Iress

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EMAIL:anthony.keane@news.com.au

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