Discussion in 'Shares' started by AsxBroker, 27th Jan, 2009.
Kicking off the 2009 dividend drop is Westfield...
Westfield cuts dividend forecast, asset value
What do you think about health of our baking sector profits? Naturally they never have “direct” exposure to all the bad things happening but I think something is brewing there.
Our baking sector?
Could be yeasty and profits always rising
There is always things brewing in the alcohol sector...
Oh Banking it will be interesting to see as most banks reported late last year so it'll probably be a few months till we find out.
Saying that the last time banks in Australia went bankrupt was 1931 and a Building Society was in 1990 (Pyramid Building Society). Last time a bank went bankrupt in the US was 2009 (already two hit the wall).
Saying that, there are 7,538 banks in the US and 150 banks, building societies and credit unions in Australia...
PS Before investing in baking, alcohol or banking, speak to your FPA registered Financial Planner.
Let's not mention the State Bank of South Australia shall we
(I'm not actually aware of the full circumstances around that collapse and subsequent bailout in 1992, but I do know it cost South Australian tax payers billions of dollars and I think took nearly 20 years to pay off the debt from the bailout ... destroying any real economic growth for the state during that period).
A bit more info here: State Bank of South Australia - Wikipedia, the free encyclopedia
I expecting that their profits will definitely be down, but they will all still be in the black.
That said, they do have a degree of "direct exposure" to the bad things that are happening. My understanding is that many of the major banks have already made provisions for bad debts based out of the US, plus most Australian banks still draw money from overseas markets. So the sharp hikes seen in the LIBOR over the last 6 months will have no doubt added to costs, though with so many Australians on variable rates I'm sure most of that would have been offset by their non-RBA prompted rate hikes last year.
Also I imagine their revenues from fees and credit cards will be down significantly this year based on smaller numbers of transactions in the slowing economy, as well as fewer new loan approvals.
I'm more interested to see what the response will be from the market if the banks produce results above expectations, because at the moment they are getting smashed left right and center based on international concerns, and most of the major banks are sitting between 5 - 10 year lows.
I am of different opinion. I think banks can potentially go lower. There are more and more companies writing off their assets or simply going belly up. Banks are trying to recover as much as they can but still loosing a lot.
As of market in general, I have seen it before with .com bust. Some of the blue chip IT companies had no “reason” to be so under valued. It was more of the sentiment rather than figures at that time. Having the .com bust always on my mind I hold buying CBA last year at $28. I even got spooked when I noticed it started slow recovery. Now I know holding my nervs wasn't bad decision. Just a bit longer and will will snap it at around $20
Well most of the majors seem to be sitting at a PE ratio of 6 - 8. My point was that if earnings reports aren't as bad as many expect and push PE ratios to 8 - 10, I think you will find that many investors will jump at that oppurtuntiy to buy the major Australian banks at a PE ratio of 10 or less.
Obviously the opposite is also true, being that if there are big earnings drops I'd expect given the current climate there will be few who are willing to hold banks with a PE ratio higher than 15.
I guess time will tell.
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