![Finance & Fury Podcast artwork](https://is4-ssl.mzstatic.com/image/thumb/Podcasts113/v4/d6/66/98/d66698a9-b70e-c128-d05b-3e53915ac028/mza_5993262276312428467.png/100x100bb.jpg)
Is it time to jump ship? Should you sell your bank shares?
Finance & Fury Podcast
English - May 09, 2018 00:04 - 13 minutes - 12.8 MB - ★★★★ - 4 ratingsInvesting Business Education wealthhappinessfinance Homepage Download Apple Podcasts Google Podcasts Overcast Castro Pocket Casts RSS feed
Previous Episode: Why work your whole life just to have nothing left over?
Today’s question comes from Jake. He asks “should I sell my bank shares, given the recent fall out from the royal banking commission?”
IMPORTANT: This episode comes with a general advice warning! I’m not telling you to buy or sell... Instead I’m going to run through what the future of banking might look like given what we have seen so far.
But let’s break it down.
The nature of the beast – Where profits come from Banks are diversified revenue models – out of top 5, they make up top 4 Lending and banking – CBA 45%, NAB 92.8%, ANZ 49%, WBC 39% Wealth Management – CBA 9.3%, NAB 7.1%, ANZ 3.2%, WBC/BT 10.6% Banks are now selling off all the wealth management parts of their businesses. AMP (a diversified financial service company) generates 72.8% of their revenue from wealth management/financial services
So, what does this mean? ... Prices are down
Banks are at their 52-week low, CBA at a nearly 3-year low AMP – steady decline since 2015 from $6.83 to $4.15 – 37%
What will happen to profits?
Big 4 – getting out of selling financial advice Nab – MLC is being sold CBA – CFS is being sold WBC – still will have BT ANZ got out mostly in 2013, so likely the least effected. AMP – Obviously will be hit. may lose license if can be proven they have been criminal If they lose their financial services licence – 70% of revenue goes.
Price: Supply and demand
The takeaways:
Just because prices drop, doesn’t make shares great value to buy, especially if the inherent value (which is what’s important) is dropping also. AMP might be forced to change their revenue model and be regulated out of the market. Remember – Ratios stay the same until the update in earnings/dividends come out. There is a lag in information and therefore ratios may not be accurate. The future depends on what the banks decide to do with the gains made in the sale of the wealth management parts of their business, and that is up to management …
Thanks for listening to another episode of Finance & Fury. These questions have been great! Keep them coming….go to https://financeandfury.com.au/contact/