Daily ShareChat: Major Banks

By Jenny Ruth

Wednesday 25th November 2009

The results of three of the four major Australasian banks show similar themes in that balance sheet growth was good, margins improved, markets income was strong and cost growth was tightly managed, says Aegis Equities Research.

"The major Australian banks have more than withstood the fallout from the financial crisis: they have surprisingly benefited from the global market turmoil and dislocation, emerging from the crisis in a much stronger financial and market position," Aegis says.

That's despite a significant increase in bad debts and the large amounts of new capital raised during the year ended September which have resulted in substantial cuts in earnings per share across the sector, it says.

The banks are now in a much more powerful position to compete against the regional banks, offshore banks and non-bank competitors.

"The Australian banking sector is truly in a sweet spot."

Nevertheless, the major banks still face risks. "Whilst risk management is supposed to be a core competency of the banks, there is plenty of evidence that things can go wrong, and at times horribly wrong."

Other risks include stricter regulatory requirements, rising interest rates jeopardising Australia's economic recover, a slower and weaker New Zealand recovery and a further deterioration in bad debts.

A substantial increase in unemployment could also lead to a collapse in residential property values.

Comments from our readers

No comments yet