Hi Geoff,
You’re correct insofar as we don’t provide personal advice around an individuals holdings, however from our perspective, we view the banks as follows, with the overarching belief that 2-3 holdings is generally enough for us.
CBA (mkt cap of $154bn) is a housing focussed bank, the best in the sector by a large margin and our go too. It’s the most expensive however the returns they have achieved over time mean that its place at the top of the tree is well justified. They have the best technology and capital efficiency and these are important. We own CBA in our Growth & Income Portfolio – a core holding that we upweight / down weight but rarely sell.
WBC (mkt cap of $72bn) is also a housing focussed bank, however it has had challenges over a long period of time. That is reflected in the price and it can be argued that it’s cheap at current levels, our slight concern around WBC stems from their focus on cost reduction which is challenging to achieve in this type of environment. We would not be surprised to see them step back from their previously stated targets. That’s the main reason we are not more positive on WBC at the moment.
NAB (mkt cap of $90bn) is more of a commercial / business focussed bank. Has been the big improver in recent years and we have identified NAB as our No 2 pick in the sector , while viewing it as complimentary to a holding in CBA.
ANZ (mkt cap of $68bn) could be the wild card. They’ve spent a number of years now unwinding Mike Smith’s push into Asia, which didn’t work. They have now simplified the business but are sub scale – the smallest of the big 4 hence their desire to buy Suncorp’s banking division. This could work and ANZ could be a good performer as a result of being cheap and buying scale – just a higher risk proposition as they roll this out.
BOQ (mkt cap of $4bn) is the most differentiated, relying on an owner /operator model. It’s also the smallest and the cheapest but has challenges around it’s technology stack (which it is addressing). We have owned BOQ recently, however closed out for a loss at higher levels.
Our preference is for CBA & NAB.
