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With the banks paying good dividends, and CBA going ex div in August, are they a good buy, or do you feel the pressure on the banking sectors will cause their prices to drop. Thanks
A: Thanks for the question.
I am probably in the school that Banks aren’t a great buy yet. I think the market needs to be convinced that:
a) they won’t need to do further capital issues. The position of APRA on Basel IV won’t be known till much later in the year;
b) they have a path to increasing revenue ( difficult with interest rates and margins still falling); and
c) the bad debt cycle is not going to rear its head.
Most importantly, Australian banks are following leads from the US and Europe. We are starting to see sentiment improve marginally in those markets – and that might be the catalyst we need. Also, a strong report from CBA in August could be really important.
