Fund managers participating in a panel session about the domestic banking sector at the recent Australian Shareholders Association 2017 Conference have confirmed their conviction these financial institutions remain good investment prospects.
Panel members were asked to share their sentiments toward investing in the banking sector in light of the new banking levy announced in the recent federal budget as well as issues such as more onerous capital demands and the current state of the housing market.
Yarra Capital Management head of Australian equities Dion Hershan said: “We remain positive about the banks. The way we’d characterise it is that there is resilience in the Australian banking sector which shouldn’t be under-estimated.”
He pointed out bank structures were sound and were experiencing solid productivity gains.
In addition Hershan recognised there were some tailwinds for the sector among the well reported headwinds of recent times.
“Our view is bad debts will remain low all around for an extended period of time,” he said.
“We also believe the most formidable headwind for the Australian banking sector for the last nine years has been the capital build which has been enormous and probably underestimated and we’d like to believe we’re in a pretty late innings of that.
“So with some of those headwinds moderating we think it’s an attractive time to invest in banks,” Hershan concluded.
Argo Investments managing director Jason Beddow concurred regarding the resilient nature of the banks, which made the sector attractive for investors.
“Post the GFC (global financial crisis) there has been a little tailwind but there have been some headwinds such as regulatory imposts and costs and compliance really for the past 10 years,” he noted.
“And if you look at what’s been absorbed by the banks they’ve done a pretty good job.”
Beddow further acknowledged the Australian banks had some of the most robust capital positions in the world and said he was expecting house prices to moderate in the short-term, not collapse, meaning the effect on the strength of local banks would be minimal.