Australian Banks are Big Performers

Submitted by Craig Strzelecki on 23 April, 2007 - 19:13

Why put your money in a bank if you can own the bank? Australian banks are big performers especially in recent times. So, comparing term deposits versus investing in bank stocks, which is the better performer? Anyone who bought $10,000 worth of shares in 1992 in either: National Australia Bank (NAB), Commonwealth Bank (CBA), Westpac (WBC), ANZ, St George (SGB) or Adelaide Bank (ADB) is today sitting on at least $58,000 worth of shares. That's just in capital growth. If you add the income you would have received from that $10,000 of shares in the past 15 years, the extra benefit is between $27,500 and $26,600. And if all dividends were reinvested to buy more shares in the company, the total gains from a single $10,000 investment range from $131,000 to almost $180,000. In contrast, a $10,000 term deposit 15 years ago has had zero capital growth and $8318 of income, according to data from research firm CANNEX based on 12-month terms. The Commonwealth Bank has been the strongest performer since 1992 both in income and capital growth, closely followed by Adelaide Bank. A $10,000 investment in CBA shares was last week worth $73,194. The bank has also paid out $26,611 in dividends on that investment since 1992. If all dividends were used to buy more CBA shares, the total investment today would be worth $178,943. Adelaide Bank is a much smaller business but has performed just as well since its 1992 share market debut. The value of $10,000 worth of Adelaide Bank shares was last week $73,171. Income received was $24,746 and the total if reinvested was $171,539. But remember there are also investment advantages for term deposits: from the start you know what you will get out of the investment, less volatile and are convenient as you don't need a trading account and you can start one at a branch. So shop around if you're interested in investing in term deposits instead of putting in into Australian bank stocks. CANNEX says the current term deposit rates for $10,000 for one year range from 4.32 per cent to 7 per cent.