Speaking at a roundtable in Sydney yesterday, Credit Suisse banking analyst Jarrod Martin said the market will “look through” the Senate Economic References committee into the performance of ASIC (in relation to its monitoring of Commonwealth Financial Planning).
“[As] a specific event and from a potential earnings impact, the market would look through that event,” said Mr Martin.
But the market will certainly pay attention to any developing issues around potential misselling by financial planners, as well as “customer redress costs” and operation risk management, he said.
“The market here has dismissed it as being an issue. [But] if there are signs of more systemic problems within the Australian banks from that perspective, then that becomes a key concern,” said Mr Martin.
Credit Suisse senior banking analyst James Ellis noted that misconduct issues have not been a key feature in Australia, which has been “a testament to good management generally”.
“Where there have been issues such as Storm Financial if you go back a few years ago, they have been dealt with pretty openly and to the satisfaction of securities regulators,” he said.
Speaking about the banking sector in Australia more generally, Mr Ellis said Credit Suisse is “fairly cautious”.
“We see the valuations as fairly full. The earnings growth levers are all delivering about as much as they can possibly deliver, and we say the top and bottom line earnings growth … is sub trend,” said Mr Ellis.
Earnings momentum is more skewed to the downside in the sector, and it is “hard to be very positive on banks”, he said – although he acknowledged dividends are “very attractive”.
“There is no burning platform per se with the banks – everything is in good shape. But it’s hard to be positive on a 12-month view from here,” said Mr Ellis.
