Australia | May 29 2006
By Greg Peel
While the banks fell along with everyone else last week, at an average of 2.2% to the ASX200’s 2.8% it would seem banks still provide a defensive quality, notes ABN Amro. Banks have fallen some 7% since reporting season, and although ABN believes PE’s of 13.6x are still elevated, the analysts suggest increasing yields should underpin.
SB Citigroup believes banks continue to provide "outstanding" profitability in the face of ongoing competition. Moves to return to a respectable level of customer service are also paying off. The analysts suggest an opportunity is shaping up in banks.
Citi prefers Westpac (WBC), believing it to be the cheapest bank but has now upgraded National Australia Bank (NAB) to Buy, suggesting the early signs of recovery are good. ANZ (ANZ) remains expensive, says Citi, and Commonwealth Bank (CBA) has still not made its strategy clear. St George (SGB) suffers from over-exposure to a weak market in NSW.
ABN is also a fan of NAB, now rating it as first choice ahead of ANZ, but the analysts don’t share Citi’s enthusiasm for Westpac. It rates Westpac next along with St George, and once again CBA is least preferred.
Credit Suisse has also gone off Westpac, switching to ANZ as the new top pick, which just goes to show the only consensus we appear to have amongst analysts is to stay out of CBA and be wary of St George.
Citigroup believes sector fundamentals remain sound. Business credit is strong, and housing credit has picked up again. New Zealand hasn’t gone completely to the dogs just yet, although ANZ and CBA are likely to come off better than Westpac. The budget tax changes will help super, and thus provide some underpinning to the market, and cost pressures remain under control.
