The share prices of Commonwealth Bank of Australia (ASX: CBA), National Australia Bank Ltd (ASX: NAB), Australia and New Zealand Banking Group (ASX: ANZ) and Westpac Banking Corp (ASX: WBC) are all up this morning.
Investors are getting the chance to respond to what the effects of the Royal Commission Report will be.
Bank shares rise
The market seems to strongly believe that the big banks are beneficiaries, or at least not losers, from the Royal Commission. In early trading:
The CBA share price is up 4.2%
The ANZ share price is up 5%
The Westpac share price is up 5.8%
The NAB share price is up 3.7%, the response is less likely because of the criticism of its CEO and Chairman.
What about the other Royal Commission participants?
The AMP Limited (ASX: AMP) share price is up 8.6%. AMP Chairman David Murray said: “AMP notes that the benefits of vertical integration remain available for customers while acknowledging that conflicts of interest need to be more effectively managed.”
The IOOF Holdings Limited (ASX: IFL) share price is up 11.5%.
The share price response of major insurers has been much smaller. The Suncorp Group Ltd (ASX: SUN) share price is up 0.6% and the Insurance Australia Group Ltd (ASX: IAG) share price is up 0.8%.
However, the mortgage broker industry could face widespread changes to their commission model, with the recommendation that trail commissions on new loans be banned. That’s why the Mortgage Choice Limited (ASX: MOC) share price is down 33% and the Australian Finance Group Ltd (ASX: AFG) share price is down nearly 30%. Ouch!
The smaller ASX listed banks are also seeing their share prices rise this morning. The Bank of Queensland Limited (ASX: BOQ) share price is up 2.4%, the Bendigo and Adelaide Bank Ltd (ASX: BEN) share price is up 1.8% and the MyState Limited (ASX: MYS) share price is up 0.85%.
Are financial industry shares buys now?
The market seems to think so. This is likely to be one of the best days this decade for the share prices of the big four ASX banks.
The Australian Financial Review has quoted UBS analysts saying in a note: “While we do not anticipate a loosening of underwriting standards or reacceleration of lending, the soft recommendations of the royal commission final report is a clear win for the banks.” I agree with that assessment.
However, what happens in the housing market is another story. House prices fell by an average of 1% nationally last month. It could be a dangerous move investing in the ASX banks whilst prices are still falling because higher bad debts may be reported over time.
I’d rather buy businesses that can keep growing strongly and that aren’t under the threat of class actions & political action.
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Disclaimer: Any information contained in this article is limited to general financial/investment advice only. The information has not taken into account your specific needs, goals or objectives, so please consider consulting a licenced and trusted adviser before acting on the information. Please read The Rask Group’s Financial Services Guide (FSG) for more information. This article is authorised by Owen Raszkiewicz of The Rask Group, which is a corporate authorised representative No. 1264179 of Strawman Pty Ltd (ACN: 610 908 211) (AFSL: 501 223).