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?
If oil prices go above US$60 and stay there, the flow on effects of higher prices and higher wages increases the rate of inflation. If this effect is large enough the RBA will have to increase rates to keep a lid on inflation.
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.
The prudent course of action for mortgage holders right now is to pay down debt as fast as they can. If nothing major happens then an economic recovery will come along at some stage and interest rates will — eventually — revert to more normal levels.
The main thing holding the RBA back from moving right now is weak household spending. That’s largely because of the huge debt burden households are carrying.
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.
It’s OK to be wrong in the market. After all, we’re trying to predict the future here. But, it’s not OK to keep being wrong in the face of overwhelming evidence to the contrary.
In today’s Money Morning…an incredible failure by one of Australia’s largest banks…regulators also to blame…government reaching for more power, as always…it’s dangerous to go alone, take a guide…and more…