MARKET TALK: Why banking stocks have been hit, earnings season round-up
'More mouths to feed with the same earnings' – analyst on ANZ. With Special Audio Feature.
ANZ Bank [NZX: ANZ] this week flagged global credit risk as a headwind for the banking sector, warning wholesale funding costs will probably increase.
However, there are other forces at play buffeting banking stocks.
Jeremy Sullivan, an analyst at Hamilton Hindin Greene, told NBR Radio’s Andrew Patterson he believes increasing regulation from across the Tasman is driving much of the negativity among investors.
“Essentially, as part of the Basel III accord, the Australian Prudential Regulatory Authority is asking the banks to hold a lot more Tier 1 capital so, with more shares on issue and relatively flat earnings-per-share, that’s leading to a lower share price.
“To give you an idea of these capital raisings, the Australian banks raised $A18 billion in the last 12 months and they are going to have to raise another $A12 billion from here to meet their obligations.
“So more mouths to feed with the same earnings has seen the share prices being sold off.”
ANZ’s share price has suffered more than other bank stocks possibly because of its greater exposure to Asia.
This week it said its provisions for soured loans will be higher than expected due to recent market volatility leading to a deterioration in credit quality in its business lending in southeast Asia.
ANZ shares are down about 25% over the past 12 months.
Meanwhile, Mr Sullivan says company reporting season has been steady so far with The A2 Milk Company [NZX: ATM] a clear standout.
Tune into the Special Audio Feature to listen to the full interview.
Want to listen to the day's hottest stories, plus interviews and panel discussions? Stream NBR Radio's latest free 40-minute podcast from iHeartRadio, Tunein, or iTunes.
NBR Radio
Fri, 19 Feb 2016
Fri, 19 Feb 2016
© All content copyright NBR. Do not reproduce in any form without permission, even if you have a paid subscription.
MARKET TALK: Why banking stocks have been hit, earnings season round-up
55666