Autumn is here, summer has come and gone and so too all the angst about our big banks.
In fact, did you hear the one about how the Hayne Royal Commission was going to damage the banks like no other inquiry and reshape the entire industry.
It’s only been a month since Hayne’s final report has been released, but far from driving a stake through the financial hearts of the Big Four Banks – Commonwealth, Westpac, ANZ and NAB – their position is returning to being as dominant as ever.
Don’t take my word, look at what investors are saying. The share prices of the big four rose by between 5% and 12% last month, meaning millions of Australians will find their monthly superannuation performances look much nicer than at the end of 2018.
By the close of trading on Thursday (the end of February) the big four bank’s shares had all enjoyed a fabulous rebound since the Royal Commission report was released on February 4. Commonwealth Bank shares rose 5.8% to $73.95 in February, ANZ shares surged 11.9% to $28.00 and Westpac climbed 9.8% to $26.96.
NAB’s shares managed a more modest 5.3% gain to $25.13 after it lost its chairman and CEO in the week after the royal commission’s final report was released at the start of the month. That means since the start of this year bank shares are in the green, with the ANZ up a massive 14.4%.
So much for all those illogical fears from analysts, media (especially the ABC), shareholders and others that the royal commission would destroy banking as we know it! The reality is that the market value of the four banks rose by more than $37 billion in February.
Even shares in AMP (the biggest casualty and with the NAB the subject of most negative comment) saw its shares up a modest 4.4% to $2.36, but shares in wealth manager IOOF (another wealth manager to be adversely mentioned at the Commission) surged more than 30% to $6.58 despite losing the chairman, CEO and three other senior executives late last year as ASIC launched legal action.
Its shares are up 27% in the first two months of this year. Scandal what scandal? The value of NAB, the bank the media loved to hate after the report’s release and loss of the chair and CEO, rose by $4.5 billion last month.
The surge by the banks (who account for 25% of the market’s value) helped Australian shares recorded their second large monthly gain in a row in February to be up nearly 9.3% after the first two months of 2019 after the 4.1% rise in the first month of the year.
That is considerably better and more than the 6.8% slide in the market over all of 2018.
Big rises in the prices of BHP (7%) and Rio Tinto (10.5%) helped, but it was the surge in the big banks that drove the market higher and away from the big losses in December as fears about the royal commission and falling house prices proved too much for investor confidence.
But there have been casualties among the also runs and would be rivals in banking and wealth management. The AMP heads the list but Freedom Insurance has been crippled. Freedom, for example, said yesterday it is not in a position to prepare accounts for the year to December and remains in talks with stakeholders.
For all intents and purposes, it’s on death’s door and the shares remain suspended. Shares in Mark Bouris’ Yellow Brick Road shares fell 11.5% to 5.4 cents yesterday ahead of the after the close of trading update which revealed the company was writing down its goodwill and still preparing its accounts. It asked for its shares to be suspended while this happens.
If anything the Hayne Commission has done the banks a big favour, exposing and flushing out the dud deals, stupid decisions and incompetent managers, executives and board members.
Investors are telling us they have more confidence in these giant banks, even if falling house prices are still the most popular analyst/media tip to damage them.
At the moment those alarmist reports and forecasts (from the same gang who brought us fear and loathing and the Hayne Royal Commission) are being ignored by investors large and small.
