Buy regional banks, sell major banks

Complex new banking rules released on Thursday night will provide a powerful tailwind for the major banks' rivals after 2016 by cutting capital needs, increasing returns and significantly enhancing their capacity to compete with the oligopolists. The latter's returns of over 15 per cent will go the way of the dinosaurs unless they can re-invent themselves a la Macquarie. Whereas this is a real fillip for smaller bank stocks, I don't think the majors have a role to play in an equities portfolio given the striking downside risks, chief of which is a share price re-rating back towards 1 times book value. CBA trading at 2.45 times book while Bank of Queensland prices at 1.4 times certainly makes no sense given my base case that their respective returns on equity will swing 180 degrees...Read my AFR analysis for free here (VIEW LINK)