The fallout from the Hayne royal commission continues to spread beyond the AMP which so far has been the main victim of disclosures of weak or possible criminal activity that has seen $4 billion wiped off its market value this year.
An estimated $9 billion has been wiped off the value of financial stocks since Friday and that silly rally after the interim report from the Hayne royal commission by now worried investors now, while last night Freedom Insurance revealed a wholesale revamp of its business (see separate story) and try and save the company.
Shares in AMP, Westpac and IOOF hit new multi-year lows yesterday, while shares in Freedom Insurance were suspended from trading, ahead of it releasing the results of a wide-ranging strategic review of its business.
The agony for AMP deepened with the shares falling to their lowest in 15 years at $3.03; Westpac shares hit their lowest in 5 years at $27.13 in trading before closing at $27.24, and shares in IOOF touched the lowest since June 2016 at $7.84, down 2.6% on the day.
In fact the banks were very much in the red. Commonwealth Bank fell shares 1.2% to $69.57, Westpac 1%, ANZ fell 0.9% to $27.49 and NAB dropped 0.7 % to $27.40.
The weakness in the sector helped push the ASX 200 down 46 points for a second day of big losses and a negative start to the quarter after the 0.2% gain in the three months to September.
Listed investment fund Janus Henderson also dipped down to its lowest price in 18 months at $36.25 after it released a fund update today showing its Australian Equities fund underperformed, returning negative 0.79% for September compared to a 1.4% rise in the ASX 200 and a 0.2% rise in the ASX 200.
Freedom shares plunged recently after a scathing report from the royal commission and ASIC.
Last night it revealed plans to suspend selling its products directly to consumers, halve staff numbers and that two of its most senior executives, CEO Keith Cohen, and chief financial officer, Jenny Andrews, were both leaving the company.
The embattled life insurance distributor, whose shares have plunged recently after a scathing report from the corporate watchdog and a grueling appearance at the banking royal commission, on Tuesday night said its chief executive, Keith Cohen, and chief financial officer, Jenny Andrews, were both leaving the company. Chief operating officer Craig Orton, who appeared before the royal commission last month, would become chief executive.
On Tuesday, it said it would immediately suspend new sales of direct insurance, but continue to service and renew existing policies. The company will slash staff numbers from about 200 to 90, incurring about $4.8 million in restructuring costs including redundancy payments.
Since the start of September, Freedom’s shares have fallen by more than a third, and year to date in 2018 the shares are down 78%, to 13 cents before Tuesday’s halt. The shares have been as low as 8.2 cents.
And Westpac shares have hit a five-year low of $27.285 yesterday as investors reassessed the damage to the big banks from the royal commission after Friday’s silly price surges when investors thought they would escape extra regulation.
That was a wrong reading of what Royal Commissioner Hayden said in his interim report about regulation when he made the obvious point that the existing rules, laws, and regulations were enough to control the banks, but needed to be enforced (more strongly and energetically).
Westpac’s long-term decline may be because investors think that because it has more interest-only loans on its books it is exposed to pressures when those loans are converted into variable rates.
But that analysis is wrong because many of these interest only loans are held by investors who like the idea of higher repayments and higher losses for negative gearing purposes.
More worrying was Westpac’s announcement last week that it has cut its 2017-18 profit by $235 million to compensate customers who received bad financial advice or were charged fees for no service, or for the impact of booking revenues that were not earned (fee for no service).
Westpac also warned that the review of its accounts would continue into the 2018-19financial year, meaning more losses are possible.
