Don't jump ship as bank shares tumble, investors told
Australian investors, particularly those like SMSFs with a high concentration of bank shares, are being told not to react to the sensational events of the royal commission by ditching their holdings.
In a statement on the Morningstar website, the research house's senior equity analyst David Ellis put out flames caused by the royal commission revelations, cautioning investors not to overreact to grandstanding politicians’ comments.
"The major banks seem to be operating in a parallel universe. On the one hand, it’s all doom and gloom with investors facing a daily avalanche of negativity.
“But on the other hand, capital levels are strong, loan quality is pristine, the economy continues to chug along at a respectable 2-3 per cent growth rate, employment growth is strong, credit growth is solid, inflation is low, and the housing market is stabilising,” Mr Ellis said.
The Morningstar analyst did acknowledge in the article that the royal commission was a “key risk” and “cast a long shadow over major banks and their share prices”.
But, despite the magnitude of the issues uncovered so far, the number of problem cases are not a true representation of the major banks' entire customer base.
“Major banks are likely to tighten lending standards, though not to the point of instigating a credit crunch and unleashing disastrous consequences.
“Increased regulatory oversight restricts cross-sell opportunities, future business growth, investment and innovation,” Mr Ellis said.