Selling out of insurance, superannuation and wealth management businesses has left the Australian banks too exposed to mortgages, analysts say, as fears of a recession leave them with few options for growth.
“The trouble is there’s only so many businesses you can lend to, they’ve always been in that market,” he says. While the banks recovered ground in early trading against a gloomy market in morning trading on Friday, with ANZ Bank bouncing of a 12-month low and Commonwealth Bank, Westpac and National Australia also rebounding, concerns about their hefty valuations saw them surrender gains.
Analysts continue to stress that even if bad debts don’t spike, the years of strong earnings growth will be tempered by the downturn in housing markets, leaving their share prices with more room to fall.UBS, Morgan Stanley, JP Morgan and VanEck have all pointed out that CBA is the most overvalued of the Aussie banks. VanEck ranks it the third most expensive bank of 67 banks globally, with a forward price-to-earnings multiple of 17.85 times and a price to book of 2.32 times.
“It’s more the growth slowing story [than a potential for bad debts]. People are still fully employed, labour markets are still quite tight, wages aren’t going up a lot and inflation is, which is a slight negative,” he says.
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Source: FinancialReview - 🏆 2. / 90 Read more »