LOVE THY BANK
It was only a few weeks back that I wrote the Blog titled “Bastard Banks” explaining how the banks so cleverly manipulated the outcome of the Royal Commission. It looked like they were finally going to be held accountable, but nothing really changed as they shifted all the blame onto your loveable Mortgage Broker – who also now looks to have wiggled out of a close call with their beloved commissions bruised but mostly in tack.
NEVER underestimate the level of motivation or extremes in behaviour when one’s Government Granted Licence is threatened!
It’s all about the money.
Think here of the push back from the TAXI industry and I can tell you that this is an industry that’s not nearly as big, powerful or as well-resourced as our Banks.
The Aussie banks would take a huge hit should their position of privilege ever be diminished, or heaven forbid rescinded altogether. There are billions of dollars at stake and I can assure you that will not easily be taken from their tills.
The Royal Commission Is Over
Now that the Royal Commission is over what will we agonise over at news time… BREXIT anyone? God forbid we must listen to the election commentary!
So, the 4th of February 2019 saw Commissioner Haynes hand down his damming report with some recommendations – 76 in total. It makes for some ugly bedtime reading.
However, even with all the disgraceful, distasteful and heart wrenching stories of the abhorrent behaviour of the banks, the demise of the banks never quite came about.
Termination of the parasitic banking industry hasn’t quite occurred either.
Instead the banks are still lending, or should I say more correctly extending credit – maybe not quite at the rates of 2007, but they are still greasing the wheels of progress (and speculation).
Just two days after the handing down of the Royal Commission ironically the Commonwealth Bank announced a first-half cash profit of $4.68 billion.
Sure, compliance and remediation costs rose a little, but business is booming for the banks.
Maybe booming is a stretch but given the beating they took through the submissions to the Royal Commission it goes to show just how strong their titanium plated Government Granted License actually is.
Not many industries could weather such a vicious public beating as their dirtiest laundry was aired (or was it…?)
Regardless of your view of the moral or immoral standards or lack of standards our banks established for themselves – BANKING IS A HIGHLY PROFITABLE BUSINESS.
Our view at Calnan Flack is get amongst the banks. Rather than kicking them while they are down, “BUY ‘em while they’re down”
Many punters and analysts are bearish on the banks. They just can’t see how they could possibly redeem themselves in the public’s eye.
But you know what – they don’t have to. ‘Cos if you want to borrow some serious money where are you going to go?
Sure, there has been massive growth in the FinTech space, but as it stands at the moment these companies are not going to make a dent on the banks. And if or when they do, you can bet your bottom dollar the banks will just buy them – and either use their technology, or just shelve it!
I never said the banks were nice.
But now is a great time to be adding banks to your portfolio!
Well maybe not NAB but there are some decent banking buys out there.
Mid Jan 2019, credit ratings agency Fitch downgraded its outlook for National Australia Bank, warning “that the need to deal with problems exposed by the Royal Commission could dampen shareholder returns.”
Both chief executive Andrew Thorburn and chairman Dr Ken Henry announced their resignations after Hayne’s report singled them out saying they had not learnt the lessons of past misconduct in its wealth management arm.
Its been a rough period for NAB and its certainly not one of our favourite banks, but I don’t foresee quite the doom and gloom many are predicting.
Meanwhile, Westpac’s first-quarter update recently revealed a 6.8% rise in cash earnings to just over $2 billion.
Want to know just how powerful and influential this sector is?
Well the Federal Government has backed away from the banking Royal Commission’s recommendation that all commissions in the mortgage broking industry be abolished.
“The abolition of trail from July 2020 won’t proceed as first announced,” Josh Frydenberg 14th March 2019.
Just days after the Royal Commission was publicly released a rattled Liberal party feeling the public pressure categorically said that “trail commissions on lending products will be terminated in 2020”. But the lobby groups have won and both sides of politics are now saying it’s not a recommendation they will be implementing…. No one said that political views were not fluid!
Don’t be fooled by the media. Or by the political posturing.
Each cycle is “Same Same, But Different” The banks and the credit they create will have an ENORMOUS impact and influence on this cycle.
The Bastard Banks are NOT dead.
But in fact, they are offering some terrific value and great opportunity in my mind.
So, in the immortal words of Ian “Molly” Meldrum, “Do yourself a favour” and buy some banks!
Oi, and don’t forget to vote……