Banks are getting expensive! Stock broker Charlie Aitken was quoted in the Australian Financial Review last month as stating: "There are now better prospective risk adjusted total returns available in Australian equities than the big four banks."
It won't be the first time you've heard such a suggestion but if until now you've ignored it and you own bank shares perhaps it's time you seriously consider if you are over-exposed to the banking sector. While the sector may account for a large portion of the index the real question is whether they should make up more than say 20% of your portfolio? It's a question worth considering at least…
The banking sector obviously has its positives and has in the past provided some superb returns to investors. However there are risks and the following three stocks could be a smarter way to gain exposure to the banking sector.
Macquarie Group Ltd (ASX: MQG) is Australia's leading investment bank and is forecast to grow earnings solidly in the next few years. The company also has major offshore business units which provide shareholders with global growth opportunities too.
AMP Limited (ASX: AMP) operates a bank under the AMP Bank brand. This division delivered $42 million in operating earnings to the group in the six months to June 2014. The results were supported by a 6% increase in deposits and an increase in residential mortgages on AMP Bank's books.
Rubik Financial Limited (ASX: RFL) provides banking systems and technology to financial service institutions. Currently the group supplies around 200 banking organisations in 16 countries and its outlook for growth is good given the number of legacy banking IT systems which require updating in the coming years.
