Bank stocks

[ratkin]

I see that a certain broker had a bit to say about NAB etc and a sort of mention about if BNZ returned to NZX

Was that Chris's newsletter you are referring too?
I did not understand it. He started off saying their was going to be a float of BNZ.
Then said it would never happen, before saying it was widely expected in banking circles.

A google search did not reveal anything

[macduffy]

I would guess that any rumour about NAB selling the BNZ is speculation based on the Aussie banks having been directed to strengthen their capital positions. That seems to be happening by restricting dividends without the need for asset sales. Anything else is pure speculation perhaps coupled with wishful thinking.

[macduffy]

CBA increases profit - with a bit of help from asset sales.

https://www.abc.net.au/news/2020-08-...ction=business

[percy]

Australia’s big banks are eventually going to have to find an answer to the frozen loans festering away right down the back of their vaults, with 1 in every 9 Australians having now frozen their mortgages as a result of the COVID-19 pandemic.
https://smallcaps.us14.list-manage.c...4&e=6c1ad5cc63

[Snoopy]

CBA increases profit - with a bit of help from asset sales.

https://www.abc.net.au/news/2020-08-...ction=business

Talk about making the results opaque!

"CBA said 59,000 business loans worth $14 billion are still deferred, which is 15 per cent of total balances."

"The most affected sectors are commercial property (15 per cent of deferrals), hospitality and accommodation (12 per cent), agriculture and forestry (11 per cent), retail trade (10 per cent), business services (9 per cent) and property services (7 per cent)."

I can see a big problem with this information. Take 'retail trade' as an example. We are told that 0.1 x $14b = $1.4b of retail loans are in deferral But to judge whether this is 'good' or 'bad' we need to know the total number of retail loans on the books. If you look on p224 of CBA AR2020 "Impaired assets by industry and status" there is no breakdown of the total number of retail loans there are. So the percentage of total retail loans on the books that are in deferral (which is actually what bank shareholders should be worried about) is unknown.

There is a bit more about this subject in the annual presentation for FY2020 on slide 26. There we can see that the total in arrears for 'retail trade' was $541m. That represents 4.9% of the 'retail trade' loan book, So the total size of the retail trade loan book at balance date must be:

$541m/0.049 = $11.041b

So the $1.4b in deferred retail trade loans represent: $1.4b/$11.0b = 12.7% of all 'retail trade' loans. That figure is 27% higher than the '10%' headline figure that a casual reader might take from the article.

SNOOPY

[percy]

Warren Buffett's Berkshire Hathaway Inc said on Friday it has sold shares of some of the largest US banks, slashing its stakes in Wells Fargo & Co and JPMorgan Chase & Co and exiting an investment in Goldman Sachs Group .

[Waltzing]

if worst come to collapse im sure the RNBZ and RBZ will step in and buy bank bonds of various kinds. Im not an expert on banks but we do trade them since the BOJ moved to buys shares in there market listed companies. What the BOJ buys im not sure but even if that fails there is always MMT but that would be considered an automatic default to government bonds i think. Buffet is probably just rebalancing in light of the current situation in the US and of last month the FED has not as far as general statements on CNBC started buying bonds of listed companies on the US exchanges but that may be now old news.

[LAC]

Yeah and he is banking on gold.... unlike him. But I guess it just suggests how weird the market is atm

[percy]

Banks are very leveraged,Great when the economy is booming,but scary in recessions/depressions.
The following are NZ Banks' equity ratios as at 31st March 2020.
ANZ 13.9%....BNZ 14.1%....ASB 13.6% ....Westpac 15.9%....Kiwibank 13%....TSB 14.3%...SBS 13.8%...HGH 12.9%....CoOp 16.3%.

[Leftfield]

Banks are very leveraged,Great when the economy is booming,but scary in recessions/depressions.
The following are NZ Banks' equity ratios as at 31st March 2020.
ANZ 13.9%....BNZ 14.1%....ASB 13.6% ....Westpac 15.9%....Kiwibank 13%....TSB 14.3%...SBS 13.8%...HGH 12.9%....CoOp 16.3%.

'Scuse my ignorance Percy, but while I get the point you are making, when you talk 'equity ratios' and then detail percentages..... I struggle.

Could you please provide a source for your info' and/or perhaps more details on the debt:equity ratios or bank leverage positions you are basing your figures on? Thanks.

FWIW here is a link to RBNZ's May 2020 Financial stability report