Australian Banking Shares Update

Submitted by Craig Strzelecki on 9 July, 2007 - 20:33

Australian banking shares have underperformed the market for a second week running from last week. Despite rising 0.4%, they still underperformed the market by 70bp. The two value plays, WBC and ANZ, rebounded strongly finishing the week up 2.9% and 1.4% respectively. However, partly offsetting this was NAB's underperformance. The bank’s recent UK analyst tour failed to turn sentiment around on the stock, which fell by 2.2% last week. Australian sharemarket analysts Macquarie Research Equities have the following major bank preferences: 1) CBA, 2) WBC, 3) ANZ, 4) NAB, 5) SGB. CBA remains their top pick in the sector with final results and final dividend being announced on 15th August 2007. CBA and WBC continued to dominate local debt market league tables: WBC and CBA continued to dominate the debt market issuance rankings in the June quarter, consistent with recent volume trends reported in their institutional division results. WBC maintained its number 1 position in the Australian syndicated loan market, with 15 issuances and 17.2% market share for the six months ending June. CBA improved its Australian debt market ranking significantly over the last six months, from fourth position a year ago to being number 1, though this partly reflects the large mortgage securitisation issue conducted during the period. This is consistent, though, with the message management put out recently that momentum continues to build within the bank’s institutional division. As a result, rejuvenation of CBA’s institutional banking is also likely to remain a key driver of CBA’s earnings growth in the short term. Personal bankruptcies deteriorate further: Personal bankruptcies in Australia deteriorated slightly further in the June quarter, with year to June bankruptcies increasing by 13% on pcp. Not surprisingly, NSW continued to be the key driver, rising 24% on a year-on-year basis. This is likely to continue to impact arrears levels for the banks in the near term, so far this has not translated into a significant increase in write-offs. The analysts believe that rising bankruptcy rates raise the risk that loss rates will increase more significantly, especially on unsecured personal lending, where these types of lending tend to account for a greater percentage of write-offs. NAB UK downgrades. Post NAB’s UK trip, the analysts have revised their UK forecasts leading to downgrades at the group level of 0.3% in FY07, and 1% in FY08. Their new price target for the Australian bank is $42.80.

CBA , WBC, ANZ, NAB, SGB were the Australian banking shares featured in this article. Commonwealth Bank of Australia Limited is listed on the Australian Stock Exchange (ASX) under stock code CBA. You can view their investor website here. Ralph J Norris is the CEO of CommBank and John Schubert the Chairman. The company offers banking, financial and related services. The Bank is one of the largest listed companies on the Australian Stock Exchange and is included in the Morgan Stanley Capital Global Index. The Bank is Australia’s largest life insurer and is Australia's largest manager in retail superannuation, allocated pensions and annuities by funds under management. Commonwealth Bank has an international presence: Retail banks in New Zealand (ASB Bank), Indonesia (PT Bank Commonwealth), Fiji (Colonial National Bank) and China (11% of Jinan City Commercial Bank and 19.9% of Hangzhou City Commercial Bank); Commonwealth Bank branches in London, New York, Tokyo, Singapore, Hong Kong and Auckland; Wholly owned life insurance operations in New Zealand (Sovereign Insurance and Fiji (Colonial Fiji Life); Joint venture life insurance businesses in Indonesia (Astra CMG); China (China Life CMG) and Vietnam (Bao Minh CMG); First State funds management business in Hong Kong, Singapore, London, Fiji, China and Indonesia; and Representative offices in Beijing, Shanghai Hanoi and Bangalore. Their brands include: Colonial First State, ASB (New Zealand), CommSec and CommInsure. Westpac Banking Corporation Limited is listed on the Australian Stock Exchange (ASX) under stock code WBC. You can view their investor website here. WBC was listed on the ASX on 18 July, 1970. Find out the meaning of the recommendations in this primer. Ted Evans is the chairman of Westpac and the Managing Director is Dr David Morgan. ANZ Banking Group Limited is listed on the Australian Stock Exchange (ASX) under stock code ANZ. You can view their investor website here. ANZ was listed on the ASX on 30 September, 1969. John McFarlane is the CEO of ANZ and Charles B Goode the Chairman. ANZ is involved in general banking, mortgage and instalment lending, life insurance, property development, leasing, hire purchase and general finance, international and investment banking, investment and portfolio management and advisory services, nominee and custodian services. National Australia Bank Limited is listed on the Australian Stock Exchange (ASX) under stock code NAB. You can view their investor website here. NAB was listed on the ASX on 1 January, 1974. John Stewart is the CEO of NAB and the Chairman is Michael Chaney. National Australia Bank provides banking, financial and related services. The Group are an international financial services organisation that provides a comprehensive and integrated range of financial products and services through our group of banks. Find out the meaning of the recommendations in this primer. St George Bank Limited is listed on the Australian Stock Exchange (ASX) under stock code SGB. You can view their investor website here. SGB was listed on the ASX on 2 July, 1992. John M Thame is the chairman of St George bank and the managing director is Gail Kelly. The bank provides banking and other financial services, in particular Retail Banking, Commercial Banking and Group Treasury and Capital Markets, and Funds Management. St.George is Australia's fifth largest bank and one of the top 15 publicly listed companies in Australia, employing over 8,500 people. Founded in 1937 as a housing based financial institution, St.George built a reputation as Australia's foremost building society, before achieving full banking status in July 1992. Its national operations span all aspects of the financial industry including retail banking, institutional & business banking, and wealth management.