“Economic booms cannot run indefinitely,” Aird wrote. “But not all booms are followed by busts. Our expectation is that Australia’s current economic boom has a little further to run and the labour market will remain tight so we don’t foresee a bust.
Westpac fell 3.7 per cent on Thursday, and is now down 12.3 over the last five days. NAB was down 2.3 per cent, to take its five-day fall to 10.4 per cent. And ANZ fell 2.3 per cent on Thursday, with its five-day fall standing at 6.9 per cent. UBS bank analyst John Storey, who now has neutral ratings on CBA, Westpac and NAB, and a buy rating on beaten-up ANZ, still believes the banks are in a good position to weather any economic slowdown and/or pick-up in bad debts.Not only are consumers in good shape, but the major banks carry a total of $15 billion in collective provisions; that equates to 53 basis points of their gross loans, higher than the five-year pre-COVID-19 average of about 40 basis points.
And he’s even willing to argue the banks deserve to trade at a 40 per cent premium to their foreign peers. “Australian banks offer investors a unique value proposition, underpinned by above-average returns on equity, attractive dividend yields and a supportive, concentrated market structure.”
CBA: Over $80 and it’s over priced.