Bank Royal Commission Update

Posted on | by Todd | Leave a Comment on Bank Royal Commission Update

Local banking stocks have found a slight bid in early trade today. However, we expect more downside price pressure as the Bank Royal Commission proceeds.

So far, we’ve seen evidence of appalling behaviour by Australia’s major banks and financial planners from the past decade, including bribes, forged documents and repeated conflict of interest in insurance products.

It seems that the banks discovered long ago it was highly profitable to sell their customers financial advice and financial products.

If they could charge customers for financial advice, and if that “advice” consisted of purchasing their financial products, then they would enjoy a profitable feedback loop.

This model was called ‘vertical integration”, which is inherently a conflict of interest.

With earning season approaching, we believe there will be some buying interest from longer-term investors.

We will keep a close watch on banking shares and advise which names have met our ALGO price criteria to hold in investor portfolios.

CBA

 ANZ

Westpac

NAB

Higher Funding Costs To Weigh On “Big 5” Bank Shares

Posted on | by Todd | 2 Comments on Higher Funding Costs To Weigh On “Big 5” Bank Shares

Local banking stocks will be facing higher funding costs as LIBOR rates have surged higher over the last few weeks.

Considering the negative combination of the Royal Commission and lower margins on Mortgage lending, we have been urging caution to investors looking to buy the recent dips in the Big 5  banking names.

As illustrated in the chart below, the cost of local bank funding has posted the sharpest monthly rise in over 8 years.

As such, we don’t believe the local bank shares have found sustainable price support levels yet.

Phone in for more details on trading the local banking stocks on a cash basis and on the SAXO Go CFD platform

LIBOR

 

 

CBA Slips On Top-Line Profit Miss

Posted on | by Todd | Leave a Comment on CBA Slips On Top-Line Profit Miss

Shares of CBA  have traded in a wide range today as the bank’s cash profit, including provisions, was posted at $4.87 billion on expectations of $5.2 billion.

The bank announced that it would set aside $575 million to address the AUSTRAC AML accusations and costs related to the Banking Royal commission.

Our ALGO engine triggered a sell signal on CBA at $80.90 on November 13th.

Considering the headwinds facing the domestic banking industry in general, we see the next key support level for CBA at $75.80.

Commonwealth Bank

 

 

Commonwealth Bank Announces New CEO

Posted on | by Todd | Leave a Comment on Commonwealth Bank Announces New CEO

Shares of CBA have started the week with a firm tone as Australia’s biggest bank announced a replacement for outgoing CEO Ian Narev.

The current chief of Retail Banking, Matt Comyn, will take over as CEO on April 9th.

It’s worth noting that the retail section of the business has been hit with a series of problems, including Anti money laundering allegations which totalled close to $1 billion over 5 years.

The bank will announce its results for the half year ended 31 December 2017 on Wednesday, 7 February 2018.

Our ALGO engine triggered a sell signal for CBA on November 15th at $81.50.

With uncertainty growing in the domestic banking industry in general, we prefer a short bias for CBA and see price resistance in the $79.35 area and  the next downside support level near $77.20.

CBA

 

 

 

 

ALGO Update: Stay Short Commonwealth Bank

Posted on | by Todd | Leave a Comment on ALGO Update: Stay Short Commonwealth Bank

Our ALGO engine triggered a sell signal for CBA on November 13th at $81.55.

Since then, the share price has dipped to $78.00 but has lifted on year-end buying to $80.40.

The internal momentum indicators are pointing lower and we expect to see a break of the $78.00 level early in the new year.

Clients who are selling CBA short on the SAXO Go platform can place a stop in the $81.70 area, with an initial profit target near the November 3rd low at $77.20

Commonwealth Bank

 

CBA Admits To 53,000 AML Breaches

Posted on | by Todd | Leave a Comment on CBA Admits To 53,000 AML Breaches

In what could be described as the largest plea deal in Australian corporate history, CBA admitted it breached the AUSTRAC money laundering regulations over 53,000 times.

The bank’s lawyers argue that a “computer glitch” was the cause for the breach and they are proposing that AUSTRAC prosecutes all of the 53,000 breaches as one infraction, as opposed to each one separately.

CBA also said it will defend more than 100 more serious allegations regarding failure to disclose suspicious transactions.

Our ALGO engine triggered a sell signal on November 13th at $81.52.

The share price has traded down to $79.55 and is still under a “lower high” chart structure. The combination of negative internal momentum indicators and growing fundamental headwinds keeps our trading bias negative on CBA.

The next significant support area is near the December 7th low of $78.30.

 CBA

 

Higher Funding Costs Weigh On The Banks

Posted on | by Todd | Leave a Comment on Higher Funding Costs Weigh On The Banks

Shares of the major banks have traded on both side of the ledger since the announcement of the Banking Royal Commission last week.

There’s been plenty of articles written about what the impact will be and what investors can expect from the share price and dividends from these blue-chip companies.

However, one of the areas of the banking business which has not received much press is the negative impact from increased funding costs for the banks from overseas lenders.

Over the last two years, CBA, WBC and the NAB have issued over $145 billion in long-term wholesale debt to overseas lenders.

This is up from just under $110 billion in FY 2015 and reflects the increased reliance that the local banks have on overseas lenders

We would expect the increased in funding costs, combined with lower domestic loan margins, to cap any protracted rallies in the local banks over the next 12 months.

Our ALGO engine triggered a sell signal for the CBA on November 10th at $80.90. This is in addition to the ALGO sell signals in SUN at $14.20 and BEN at $12.30.

CBA

SunCorp

Bendigo BAnk

 

 

Algo Buy Signal – ANZ, NAB & WBC

Posted on | by Leon Hinde | Leave a Comment on Algo Buy Signal – ANZ, NAB & WBC

Following the recent sell-off in the major banks, we’re now seeing the Algo Engine flag the short-term “higher low” formation.

We’re cautious about entering these positions on the long-side due to the regulatory risks the banks face & the limited top-line revenue growth outlook for the sector.  However,  the search for yield may support another push higher in prices.

ANZ, NAB & WBC are buy signals, (place stop loss below signal low), CBA & SUN are showing sell signals.

 

 

 

 

 

 

 

Bank Shares Roiled On Royal Commission Announcement

Posted on | by Todd | Leave a Comment on Bank Shares Roiled On Royal Commission Announcement

Shares of the “big-4” banks are trading sharply lower as the Government announced a $75 million Banking Royal Commission before the ASX open today.

When making the announcement, PM Turnbull said it was a regrettable but necessary action.

The terms of the inquiry are wider than the market expected and will include the entire financial services sector. The final report will be due in February 2019.

We have been giving the banks a wide berth recently due to likely headwinds from slower loan growth and falling profit guidance. We’ll continue to watch the ALGO engine for trade updates and future levels to enter the market.

MVB Aussie Banking ETF