Stock Rocommendation - Big 4 Australian Banks
- Submitted by: saolao89
- Views: 692
- Category: Other
- Date Submitted: 10/17/2011 01:53 AM
- Pages: 8
- Report this Essay
Question 1
You are a bank analyst for a Mutual Fund with $6 billion under management. The portfolio manager wants to allocate $500 million for purchases of banking stocks and bonds. Your task is to prepare a report making a recommendation as to which of the 'big four' Australian banks the portfolio manager should allocate her $500 million to.
Whilst countries such as the United States and the United Kingdom with weak banking systems experienced a severe downturn in economic activity, the Australian banking industry has emerged from the global financial crisis in a stronger position. Historically the big four banks – Commonwealth Bank (CBA), ANZ, Westpac and National Australia Bank (NAB) – have delivered profits that rise consistently and are in a stable position to continue doing so in the post global financial crisis (GFC) environment thanks to unprecedented government support and regulation implemented during the GFC. In fact, the most recent annual reports show the big four banks have posted combined record profits of $28.5billion, a 26% jump from the previous financial year. Note however that this profit growth is expected to slow by many analysts in the post GFC era with changes in the regulatory environment and the rising cost of debt. Still, as Australian banks continue to be amongst the most highly rated banks in the world and the Australian financial system continues to outperform the global market, the big four remain an attractive investment.
Taking an empirical analysis of the big four using historical data (Appendix 1), we can see that in terms of owner return on equity, CBA ranks first followed by Westpac and ANZ with NAB in 4th rank. On the surface it may seem most appropriate to declare CBA as the forerunner of the group. CBA’s large deposit base, its big funds management operation and the cost benefits from its technology upgrade make it appear to be a standout amongst the Australian banks in terms of profitability.
However what is not...
You are a bank analyst for a Mutual Fund with $6 billion under management. The portfolio manager wants to allocate $500 million for purchases of banking stocks and bonds. Your task is to prepare a report making a recommendation as to which of the 'big four' Australian banks the portfolio manager should allocate her $500 million to.
Whilst countries such as the United States and the United Kingdom with weak banking systems experienced a severe downturn in economic activity, the Australian banking industry has emerged from the global financial crisis in a stronger position. Historically the big four banks – Commonwealth Bank (CBA), ANZ, Westpac and National Australia Bank (NAB) – have delivered profits that rise consistently and are in a stable position to continue doing so in the post global financial crisis (GFC) environment thanks to unprecedented government support and regulation implemented during the GFC. In fact, the most recent annual reports show the big four banks have posted combined record profits of $28.5billion, a 26% jump from the previous financial year. Note however that this profit growth is expected to slow by many analysts in the post GFC era with changes in the regulatory environment and the rising cost of debt. Still, as Australian banks continue to be amongst the most highly rated banks in the world and the Australian financial system continues to outperform the global market, the big four remain an attractive investment.
Taking an empirical analysis of the big four using historical data (Appendix 1), we can see that in terms of owner return on equity, CBA ranks first followed by Westpac and ANZ with NAB in 4th rank. On the surface it may seem most appropriate to declare CBA as the forerunner of the group. CBA’s large deposit base, its big funds management operation and the cost benefits from its technology upgrade make it appear to be a standout amongst the Australian banks in terms of profitability.
However what is not...