Livewire Equities

The Australian Banking sector is attractive in part because of its valuation metrics and dividend yield but troubled in other areas where growing margin pressures, rising impairments and increasing capital requirements are making it a difficult investment proposition at present. Although credit growth is tracking at a reasonable rate, margins are being impacted by rising funding costs, low interest rates, and solid competition. Impairment charges are also moving up from a cyclically low base, and this was exacerbated by the effects of several single names, problem corporate exposures. In contrast to these issues, the valuation of the Banking sector relative to the 12-month forward PE of the other industrials is at a more than ten-year low, while the 12-month net dividend yield relative to the bond yield is the highest it’s been in more than a decade. And therein lies the dilemma. Read the full story to find out how we're positioned in the sector. (VIEW LINK)


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