Is it time to get on the banks?

Discussion in 'Shares & Funds' started by Brisbane04, 4th Mar, 2020.

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  1. Brisbane04

    Brisbane04 Well-Known Member

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    Thanks to all those knowledgeable people out there I have enjoyed reading all your comments about shares. I’ve started to invest in shares and have a very small portfolio. I would like to invest in safe shares that provide a good dividend return. The banks have taken a hiding over the last week, and it will affect their dividend possibly. What I’m keen on hearing is what others think of the banks at the moment? Can the share price go lower?
    Cheers
     
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  2. Realist35

    Realist35 Well-Known Member

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    I think it's perfect timing to load up on banks :) I'll buy wbc these days.

    isn't this exactly what Thornill did during GFC?

    My plan is to load on cba and wbc in bad times, sell in 10yrs or so to buy LICs. Quicker way to buy my future dividend income :)
     
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  3. Trainee

    Trainee Well-Known Member

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    But is this 2008, or 2009?
     
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  4. The Y-man

    The Y-man Moderator Staff Member

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    It *may* go lower - so don't go spending everything at once (like I did early on when the first dip happened :D:eek::eek::eek:)

    IMHO The questions to ask yourself ultimately is:
    1. Will the big 4 go out of business due to this outbreak (and reactions)
    2. Will they make substantially less money in the coming year(s)

    I've taken the bet that they will continue to find innovative ways to make money out of borrowers.

    The Y-man
     
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  5. Brisbane04

    Brisbane04 Well-Known Member

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    The dividends look good at present even if they do lower them it’s still a good return on your money. Thanks for your response
     
  6. Brisbane04

    Brisbane04 Well-Known Member

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    This is what I would like to do. Where else can you get get 7% return fully franked. I would consider banks a pretty safe haven.
     
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  7. Blueskies

    Blueskies Well-Known Member

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    Just a thought, a lot of people seem to like to buy one or two individual bank stocks. I think the recent Austrac WBC scandal has shown that lack of diversification could lead to less than optimal returns. Have you considered buying an Australian financials etf like QFN for example, similar yield to holding direct bank shares but much better from a risk management perspective.
     
  8. Trainee

    Trainee Well-Known Member

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    Liquidity is a concern. 16m market cap and daily vol worth 35 thousand dollars? What this says is that if you buy a $50k parcel you move the price off fair value. Buy 6 or 8 banks are youre set. Brokerage will offset the management fees.

    even average volume is only about $200k worth.

    Cba does 350 million dollars in trades a day.
     
    Last edited: 4th Mar, 2020
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  9. Momentum

    Momentum Well-Known Member

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    Buy VAS which is 24% made up of bank stocks.
     
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  10. Shady

    Shady Well-Known Member

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    CBA is back to where it was in August last year, If you didn't think they were cheap then and buy some then why do you think it's cheap now?
    Westpac on the other hand is half of what it was 5 years ago, it's been on a downward trend since 2015, If you bought stock in 2015 the dividend has been little comfort as you've lost half your capital. It hasn't been this low since July 2012.
    Stock prices that I didn't buy 6 months ago is not enough for me to jump in now...another 10% and i'll be very keen
     
  11. sfdoddsy

    sfdoddsy Well-Known Member

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    In recent years, the banks have been going through a perfect storm of tinier interest rates, Royal Commissions, and now Coronavirus.

    But I can't see any actual long-term disruption to their business model.

    Fintechs may nibble away at their lending because some people don't mind borrowing from a new/unproved company.

    But they will not get deposits and thus a low-cost source of funding because no-one likes lending their own money to a new/unproved company.

    This is why all the new entrants failed to deliver when the sector was deregulated a while back.

    If you believe low interest rates, Royal Commissions and Coronavirus are not long-term issues, the banks seem good value.

    I have a tilt towards them through satelliting QOZ to my core VAS holding. VHY would have a similar effect.

    So far QOZ performance is disappointing, but given the banks performance that is to be expected.
     
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  12. cberg86

    cberg86 Active Member

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    You’re starting backwards looking at current dividends and projecting them forward. You want growing future profits to support a growing dividend.

    I’m not saying banks are a bad buy at this level if you done some decent research that says their profits will grow to support the current dividend and future potential rises.

    To my mind they have or are divesting of other business lines such as insurance and wealth management. Brokerage businesses are coming under pressure from small startups offering flat fees or no fees. Paying big fines for not following the rules.

    At the right price I like banks, are they there yet I’m not so sure.
     
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  13. sash

    sash Well-Known Member

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    You like a good spankin' now is the time to get more bank shares.....;)
     
  14. mtat

    mtat Well-Known Member

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    Why don't you look at investing in a globally diversified portfolio via cheap ETFs instead? Then you don't have to worry about any of this.
     
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  15. sfdoddsy

    sfdoddsy Well-Known Member

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    Perhaps. But since the mid-seventies, the big four have increased their share of home loans, for example, from 50% to 90%.

    They are more dominant than ever.

    I can't see this changing when inflation/interest rates/margins increase.

    Which they will.
     
  16. marty998

    marty998 Well-Known Member

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    The financial pain is not over for Westpac - they still have not taken a provision for any potential AUSTRAC penalties on that matter...
     
  17. Brisbane04

    Brisbane04 Well-Known Member

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    This is why I’m putting it out there to hear other views I’ll look into this ETF
     
  18. Brisbane04

    Brisbane04 Well-Known Member

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    How much lower can they go? That’s the question
     
  19. sash

    sash Well-Known Member

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    10-20% on the ASX index...lets see....
     
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  20. Illusivedreams

    Illusivedreams Well-Known Member

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    I dont think their is blood in yhe streets yet.

    I believe situation will develop further.

    I think yhe next few weeks will be key.
    Vuroys spread in the US will drive prices on Wall st.
    Imagine they close the Subway?
    Prices will drop like lead.

    Lets see.
     
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