Morning Report Tuesday 12 August 2014
Canadian Banks suffer after governments consultation paper, what locally?
A number of MarketMatters’ subscribers have asked me to clarify my thoughts on our banks, so here it goes. Recently, major global ratings agency, Standard and Poor lowered the outlook on Canada’s banks from stable to negative, after a government consultation paper was released, looking to protect taxpayers from potential bank failures. While I believe this is clearly a very good idea, it feels a little after the horse has bolted. Locally, the David Murray banking enquiry is examining similar measures to solve any “too-big-to fail” problems occurring again. It should be noted that the Canadian banks are rated like the Australian banks, some of the safest in the world and like us, they are taking measures to overhaul the system. A similar downgrade to Australian banks is said to be worth a very significant, negative 3-5% of earnings. Let’s simply stand back and look at CBA over the last 4 years:
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