Risks still skewed to the downside for banks

Livewire Exclusive

Livewire Markets

There are always downgrades occurring for a range of structural or cyclical reasons. Woolworths is an example of a shift in industry structure with the entry of a new competitor in Aldi with a strong business model. Looking for shifts in industry structure, regulation or the cyclical operating environment helps identify these earnings risks. We also use a range of quantitative tools to identify trends in earnings changes, which can give valuable insights in terms of which companies are at risk of earnings downgrades. The banking sector is currently going through a shift in the regulatory structure. After decades of strong credit growth and falling capital requirements, APRA has reversed the trend for the banking sector. Increased capital requirements are pressuring return on equity and tighter lending standards are slowing growth. Recommendations for further changes are due from the Basel committee at the end of the year. We are also moving into a Federal election, where if Labor wins and changes negative gearing rules there could be downside risks for the banking sector. (Sean Fenton, Portfolio Manager, Tribeca Investment Partners)


1 stock mentioned

Livewire Exclusive brings you exclusive content from a wide range of leading fund managers and investment professionals.

I would like to

Only to be used for sending genuine email enquiries to the Contributor. Livewire Markets Pty Ltd reserves its right to take any legal or other appropriate action in relation to misuse of this service.

Personal Information Collection Statement
Your personal information will be passed to the Contributor and/or its authorised service provider to assist the Contributor to contact you about your investment enquiry. They are required not to use your information for any other purpose. Our privacy policy explains how we store personal information and how you may access, correct or complain about the handling of personal information.