Bank stocks

[Scrunch]

From across the ditch...

April 27 (Reuters) - National Australia Bank Ltd (NAB) on Monday announced plans to raise up to A$3.5 billion as it reported a 51% slump in first half earnings and booked A$1.04 billion in provisions,due to the coronavirus pandemic and customer compensation.
Australia's third-largest lender slashed its interim dividend as it also said it would increase forward-looking provisions to more than A$2 billion to bolster its cash position and guard against a hit to business from the outbreak. NAB surprised the market with the announcement, giving just a few minutes notice that it was bringing its earnings report forward from its scheduled May 7 date.
NAB said provisions made to offset a hit to business from the coronavirus, as well as to compensate customers after a series of missteps last year, led cash earnings to slump 51.4% to A$1.44 billion ($919.73 million).
The lender cut its dividend by 64% to 30 cents per share, following a nudge from the Australian Prudential Regulation Authority for banks to reduce or defer dividends and conserve cash amid virus-generated uncertainty.
"We are taking decisive action to manage the rapid and unprecedented upheaval caused by COVID-19 while at the same time being clear about our long term strategy for NAB," Chief Executive Ross McEwan said.
The bank planned to raise A$3 billion in a discounted share placement and about A$500 million through a share purchase plan.

Interesting. I guess they figured there was a good chance others like CBA / ANZ / Westpac may raise capital with their results and wanted to get in first.
Last year they were ANZ (1st May), WBC (6th May), CBA (15th May).

[whatsup]

Taste of things to come, what the betting that all of the Aust banks big and small will follow ?

[Balance]

Taste of things to come, what the betting that all of the Aust banks big and small will follow ?

A dead certainty.

[zacman]

Interesting. I guess they figured there was a good chance others like CBA / ANZ / Westpac may raise capital with their results and wanted to get in first.
Last year they were ANZ (1st May), WBC (6th May), CBA (15th May).

I find this quite interesting. I generally don't worry about Aussie banks, no franking credits etc, but based on the above they may all be seeking over $10 billion. Where will it come from when credit risks for clients are increasing and dividends are reducing. Sure, share prices seem to have dropped significantly so room for growth but still 10 billion is a lot

[Tomtom]

NAB divident cut and capital raising where flagged by Morgan Stanley back in December, I don't recall the exact amount for dividends but the capital raising looks close to what was forecast. NAB is the least efficient of the big four Australasian banks by many metrics, I suspect that Ross McEwan was hired from RBS for that reason.

The entire industry will need to make cuts. Lending margins will be far lower in the future, credit growth slowed for a couple of years and NPLs will blow out. Luckily large banks tend to have a lot they can cut without touching revenue generating operations.

[macduffy]

I find this quite interesting. I generally don't worry about Aussie banks, no franking credits etc, but based on the above they may all be seeking over $10 billion. Where will it come from when credit risks for clients are increasing and dividends are reducing. Sure, share prices seem to have dropped significantly so room for growth but still 10 billion is a lot

Aussie super funds have a lot of bank shares and won't take kindly to seeing their investments being diluted, or alternatively, stuck for capital. I'm picking that there's a lot of cash prepared to subscribe for cut-price bank shares if there's anything left over from the expected capital raisings.

[Beagle]

Some Aussie banks now trading at quite a big discount to NTA, e.g. :-
Bank of Queensland BOQ $4.63, last reported NTA $7.26 = 64% of NTA
Bendigo Bank BEN $5.69, last reported NTA $8.10 = 70% of NTA
ANZ $15.65, last reported NTA $19.59 = 80% of NTA

We know banks do not do well in a recession but HGH is currently trading at 107% of NTA - Something to ponder, is that warranted in the circumstances ?

[peat]

half a billion in extra software amortization for NAB this half. but even including that they still only 'charged' a similar amount against earnings to last half and yet the profit is down a lot.

[Snow Leopard]

Some Aussie banks now trading at quite a big discount to NTA, e.g. :-
Bank of Queensland BOQ $4.63, last reported NTA $7.26 = 64% of NTA
Bendigo Bank BEN $5.69, last reported NTA $8.10 = 70% of NTA
ANZ $15.65, last reported NTA $19.59 = 80% of NTA

We know banks do not do well in a recession but HGH is currently trading at 107% of NTA - Something to ponder, is that warranted in the circumstances ?

I put my Aus Super to 100% cash a while ago. But the above seems tempting.

As for HGH it is not a bank, just owns one.

[macduffy]

For an insight into why Barramundi have increased their weighting of Australian banks, see Pennypicker's post on the BRM thread.