Calls for an inquiry into misconduct in the banking industry have been coming for some time. If public confidence in the banks is shaken, that could be more damaging than the real potential for misconduct to be brought to light and punished. So, is this the end of the banks’ dominance in Australia? Are our favourite dividend-paying stocks in trouble?
The royal commission is likely to recommend increases in regulation, red tape and bureaucracy as the solution to the problems that arise. They are less likely to look at options like increasing market competition or mandating technological improvements. And funnily enough, that’s perhaps what the big four banks actually want in the current environment.
Bad debts are at historic lows, and it’s proving a big windfall for the big four. But you have to think, if house prices had gotten so high and had the consumer stretched to breaking point, you’d expect bad debts at the big four to be rising, not falling!
You can still profit in a market trending sideways. All you have to do is come up with an investment idea, identify growing trends and only invest in what you understand.
The Commonwealth Bank of Australia has potentially just turned its free ATM withdrawals announcement into a marketing disaster. The new ATM rollout is pretty underwhelming to a lot of people. And just at the time when customers from other banks can now freely use your ATMs for withdrawals.
ATM use is in decline. As technology sends transaction costs towards zero, banks will no longer be able to charge exorbitant fees for standardised, commoditised services. Growth will have to come from elsewhere. This is a sign of things to come for Aussie banks.
Yesterday, the Commonwealth Bank announced plans to sell off its life insurance business to AIA, as well as the intention to sell of part of its wealth management business. So why now? Why the urgency?
To move banks, you would have to re-invest time and energy into new research. And there’s a tonne of information to get your head around. But financial technology is looking to make the process of comparing and switching banks vastly easier.
Investors in Australia’s banks — who are likely homeowners as well — need to think carefully about how exposed they are to this sector. Bank profits are built on Australian property.
While CBA looks inviting with a grossed up yield of 8%, I’d happily watch how this plays out on the sidelines for now. In my view, the energy sector is now in the early stages of a new bull market. This may not be apparent immediately. After all, most bull markets start out with scepticism.