A common investment theme running through each of our model portfolios has been a deliberate underweight position in the Australian major banks. This has supported our significant performance against the ASX 200 benchmark over the last twelve months, yet challenging headwinds continue to warrant a cautionary stance. A recent paper published by the Australian Prudential Regulation Authority (APRA) underpins our caution. The most recent Financial System Inquiry concluded: "…although Australian Authorised Deposit-taking institutions (ADIs) are generally well capitalised, further strengthening would assist in ensuring capital levels are, and are seen to be, unquestionably strong". It is clear that the Australian banks are in the process of strengthening their respective capital bases. Already we have witnessed a number of capital raisings by the major banks. However, it is arguable that further bolstering of capital will be required. It is pleasing to observe Australia’s banking system moving towards becoming ‘unquestionably strong’ ... It does, nonetheless, dilute earnings per share, and dampens the potential of dividend growth. Read in full in our Canaccord Genuity Wealth Management quarterly investor review attached.