Banks

The very large value dispersion between Aussie banks continues, with CBA trading at a premium to both domestic and international peers, arguably, unjustified, to our mind.

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We continue to prefer the highly similar, yet markedly cheaper, ANZ and WBC, having switched out of NAB recently on valuation grounds.

By highly similar, we’d suggest the below (gearing)…

By NSF ratios…

Sticky deposit holders…

By credit quality…

On a variety of frames…

So, not identical, but fairly highly correlated, both by share price performance, and by operating performance, and if you are there for a common macroeconomic component (higher interest rates) you probably want the ones that are slightly cheaper (acknowledging that they might be slightly lower quality) and assuming that the ex-ante return is more favourable, given broadly the same set of risks, over a similar time frame (i.e. the short run, in which higher rates lead to better banking profits, but haven’t yet triggered a meaningful rise in bad and doubtful debts).

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