A: I don’t agree with this being the time to sell out. That said, I have to admit that I have been wrong so far.

 

The positives for the banks are:

• Strong capital position
• Interest margins are relatively stable
• No sign of a pick-up in bad debts
• Opportunity to cut costs
• Dividends, with the possible exception of the NAB, are secure

 

Negatives  are:

• A surprise from the Royal Commission, which results in more punitive redress costs or seriously impacts the opportunity for future earnings;
• A material downturn in the housing market.

 

I don’t see a housing collapse, nor do I think that the Royal Commission will produce that “black swan” surprise. If anything, I think the latter will be more a case of “sell the rumour, buy the fact”.