Sunday, 24 March 2013

Beware of Oz banks!

That is the message coming from a couple of articles looking at work that has been done in analysing the overvaluations and high exposures to risk of some of Australia's largest banks.  As has been mentioned before it is not a good sign.

...The Reserve Bank's financial system guru says Australia's banks and wealth managers are probably past their growth heydays....Speaking at a financial sector leadership luncheon, the RBA's assistant governor (financial system) Malcolm Edey told the gathered heavy hitters that the days of spectacular growth in their sector most likely finished with the fall of Lehman Brothers, and the global financial crisis that ensued....
...."While it is difficult to specify what that might mean in numerical terms, a return to financial sector growth rates consistently higher than the growth of nominal GDP seems unlikely for the foreseeable future."...(here)
Similarly for those considering investments in Australian banks, there were words of caution from one analyst.
...Mott ends up scorning the new paradigm theory, cautioning that investors choosing to treat banks as yield plays is a dangerous approach given that they represent 19-times leveraged plays to the economy...."Valuing any bank as an annuity is courageous; just look overseas," he says. "Aussie banks are good -- but they are not infallible." (here)

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