Month: November 2020

13 November 2020

• The ANZ, NAB and WBC results for the September half-year suggest that their bad loan problems will be smaller than expected, because loan deferrals are falling faster than feared.
• NAB had the best underlying result.
• Banking sector profits are likely to bottom in FY21, then recover at 10% to 15% pa for the next two years, taking dividends to about 4.5% fully franked.
• Risks to this scenario include more outbreaks in Australia and renewed economic downturns in the US and Europe.
• We continue to believe that, although the banks will recover over the next two years, they will underperform the market in the long term.

NAB had the best underlying earnings for the year ended 30 September 2020, in terms of a rising net interest margin and solid profits before provision charges… [read more]

15 November 2020

The Bank of Japan’s regular Financial Stability Report helps Arminius update our investment view on Japan. Because the country has suffered very few coronavirus deaths, the Japanese economy will recover very quickly from the lockdowns in the first half of this year. Consensus forecasts are for GDP to fall by -5% in 2020, but to rebound with +3% growth in 2021. Most importantly, the average Japanese company carries very little debt – many have a net cash position. Corporate Japan’s leverage to the East Asian economies will cause a sharp improvement in profits. Therefore we recommend maintaining a high exposure to the Japanese share market… [read more]